Document:

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                                                                    EXHIBIT 10.9

                           TRADEMARK LICENSE AGREEMENT

         This Agreement is made and entered into as of May 1, 2000, by
andbetween HALLMARK LICENSING, INC. ("Hallmark") and ODYSSEY HOLDINGS L.L.C.
("Odyssey").

         WHEREAS, Hallmark is the owner of the trademarks "Hallmark
Entertainment" (the "Entertainment Mark") and "Hallmark Hall of Fame" (the "Hall
of Fame Mark") (collectively, Entertainment Mark and Hall of Fame Mark shall be
the "Licensed Marks") in the United States; and

         WHEREAS, Odyssey desires to use the Licensed Marks on the terms and
subject to the conditions specified herein; and

         WHEREAS, Hallmark desires to permit Odyssey to use the Licensed Marks
subject to the terms and conditions herein provided, and not otherwise.

         NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, the parties hereto agree as follows:

         1. Service. The "Service" shall mean the distribution of a channel (or
a network presenting a channel) of high-quality family oriented television
programming of a characteristic, nature and quality consistent with the image of
Hallmark Cards, Incorporated ("Hallmark Cards"), including that programming
acquired pursuant to that certain Program License Agreement dated as of November
13, 1998 by and between Odyssey and Hallmark Entertainment Distribution Company
(the "Program Agreement").

         2. Grant. Subject to the terms and conditions of this Agreement,
Hallmark hereby grants to Odyssey:

                  a. The non-exclusive, royalty-free license to use the
         Entertainment Mark as part of the tag line, "A Henson and Hallmark
         Entertainment Network," adjacent to the Odyssey brand in connection
         with the promotion, sale and distribution of the Service, so long as
         Hallmark Cards directly or indirectly has voting control of Odyssey and
         provided that the Service continues to consist of high-quality family
         oriented programming.

                  b. The non-exclusive, royalty free license to use the Hall of
         Fame Mark in the United States solely in connection with the program
         title "THE COLLECTION - from the library of the Hallmark Hall of Fame"
         or such other title as may be approved by Hallmark from time to time
         for a time period regularly showing pictures previously broadcast as
         Hallmark Hall of Fames.

                  c. The non-exclusive royalty free license to use the
         Entertainment Mark in the United States in connection with the
         promotion and distribution of

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         movies acquired by Odyssey pursuant to the Program Agreement and
         constituting part of the Service.

         3. Limitations.

                  Licensee agrees that it will not use the Licensed Marks other
         than as specifically set forth in Section 2. In no event shall Odyssey
         be permitted to use the name "Hallmark" alone or combined with any
         other name except as herein provided or approved in advance in writing
         by the Branding Committee (hereinafter defined) or to abbreviate,
         shorten or otherwise alter the Licensed Marks nor shall it be permitted
         to emphasize "Hallmark" in different size, format, or boldness than the
         balance of the Licensed Marks. Odyssey agrees to that it will not use
         the Licensed Marks in its corporate name. Odyssey further agrees that
         it shall not enter into any agreements with third parties committing
         Odyssey to use the Licensed Marks beyond the term of this Agreement.

         4. Standards.

                  a. Odyssey acknowledges its familiarity with the high
         standards of quality and guidelines maintained by Hallmark for the use
         of the Licensed Marks and the name "Hallmark," and Odyssey agrees to
         faithfully maintain these same standards in connection with its
         programming of the Service, including but not limited to complying with
         the broadcast standards set forth on Schedule A, as amended by Hallmark
         from time to time and to provide high-quality family oriented
         television programming. Furthermore, Odyssey agrees to comply with any
         guidelines or rules for use of the Licensed Marks as Hallmark may in
         its sole discretion, from time to time, promulgate in order to protect
         the quality image and reputation which the Licensed Marks and the name
         "Hallmark" presently enjoy and such guidelines or rules shall be
         incorporated herein as a part of this Agreement.

                  b. Odyssey acknowledges that Hallmark Cards was founded in
         1910, is a privately owned company which enjoys a stellar reputation
         for excellence, quality, adherence to high ethical and moral values,
         and whose brand "Hallmark" consistently rates in the top ten brands in
         the U.S. for consumer recognition, consumer trust and quality. Further,
         "Hallmark Hall of Fame" productions have won 78 Emmys over the past 40
         years. Odyssey further acknowledges that Hallmark would not grant this
         trademark license (i) if its parent company, Hallmark Cards did not
         control Crown Media Holdings, Inc., the parent company of Odyssey and
         (ii) unless Hallmark Cards also controlled its wholly owned
         subsidiaries, Hallmark Entertainment, Inc., Hallmark Entertainment
         Productions, LLC and Hallmark Entertainment Distribution, LLC, which
         produce and distribute the pictures provided under the Program
         Agreement in connection with which this license is granted.

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                  c. Odyssey agrees to designate an individual at Odyssey's
         expense who will be responsible for monitoring the use of the Licensed
         Marks and ensuring that the Licensed Marks are utilized in accordance
         with this Agreement and that all required requests for approval are
         properly submitted to Hallmark.

         5. Approval. Odyssey agrees to comply with the brand identity standards
of the branding committee established by Hallmark ("Branding Committee") which
standards shall include, but not be limited to, logo, program headers,
visual/verbal standards, uses and positioning of logo, application of logo to
any marketing materials and uses in other media such as print advertising.
Further, Odyssey agrees that programming on the Service shall also comply with
the broadcast standards on Schedule A as amended by Hallmark from time to time.
Odyssey shall, at the request of Hallmark, submit to Hallmark pictures,
programs, film credits, press releases, advertising and promotional materials,
and other materials utilizing the Licensed Marks or broadcast on the Service for
Hallmark's approval, which may be withheld for any reason. Submissions shall be
directed to the attention of Jan Murley, or such other person designated by
Hallmark from time to time.

         6. Trademark Protection.

                  a. Hallmark will use its reasonable efforts to maintain
         existing registrations for the Licensed Marks for use by Odyssey
         pursuant to the terms and conditions herein contained.

                  b. Odyssey agrees to cooperate with Hallmark in obtaining and
         preserving for Hallmark trademark protection for the Licensed Marks and
         the name "Hallmark," to execute all documents which in Hallmark's
         judgment are necessary therefor. Odyssey agrees to recognize Hallmark's
         trademark rights in the Licensed Marks and to do nothing in derogation
         or dilution thereof, either during the term of this Agreement or at any
         time thereafter. Odyssey, for itself, its successors and assigns, does
         hereby absolutely grant, convey, and assign to Hallmark any and all
         legal and equitable right, title and interest, both tangible and
         intangible, which it has or may hereafter acquire in the Licensed
         Marks, including, but not limited to, any goodwill hereinafter
         generated or created by it or anyone acting or claiming under it.

                  c. Odyssey, upon prior written approval from Hallmark, shall
         have the right to enforce, at Odyssey's sole expense, its rights in the
         Licensed Marks granted hereunder against third parties that are or may
         be infringing the Licensed Marks so as to affect Odyssey's rights
         granted hereunder.

                  d. Except as expressly set forth herein, Hallmark shall have
         the right to take any action without regard to the effect of such
         action on the rights granted in Section 2 hereof.

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         7. Term. The term of this Agreement shall be one (1) year from the date
hereof, provided that it is not terminated sooner in accordance with the terms
and conditions set forth herein. No course of dealing, lack of notice of intent
not to renew, implied consent or other doctrine of law or equity shall be deemed
to give Odyssey the right to continued use of the Licensed Marks beyond the
stated term of this Agreement, or to create any duty (fiduciary or otherwise) on
Hallmark to permit any such use beyond the term of this Agreement.

         8. Default. It shall be a Default hereunder in the case of the
happening and during the continuance of any of the following:

                  a. Odyssey distributes any program or picture in connection
         with the Service which in Hallmark's sole discretion fails to comply
         with the standards set forth in Section 4 hereof and Odyssey fails to
         remove and stop the distribution, exhibition and broadcast of such
         non-complying program or picture within 10 days of written notice from
         Hallmark;

                  b. A Default occurs pursuant to Section 8(a) hereof three or
         more times in any given 12 month period, regardless of whether Odyssey
         has removed or stopped within 10 days of written notice from Hallmark.

                  c. Odyssey uses the Licensed Marks other than in accordance
         with the terms of the grant herein or Odyssey fails to comply with any
         term or obligation of this Agreement (other than 8(a) above) and, if
         curable, fails to cure such unapproved use or breach within 10 days of
         the date of written notice from Hallmark specifying such breach.

                  d. An event occurs (other than that described in 8(a) above)
         which with the passage of time or the giving of notice, or both, would
         constitute an event of default under the Program Agreement and, if
         curable, Odyssey fails to cure such event within 10 days of written
         notice from Hallmark.

                  e. Odyssey fails to make any payment when due under any loan
         agreement with any financial institution and fails to make such payment
         within 5 days thereafter.

                  f. Auditors determine that Odyssey is no longer an ongoing
         concern.

         9. Termination.

                  a. This Agreement shall terminate immediately and
         automatically without notice in the event that

                           i. Odyssey attempts to assign, sublicense, pledge,
                  transfer or otherwise convey by operation of law or otherwise,
                  all or any interest in, directly or indirectly ("Transfer")
                  its rights hereunder;

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                           ii. Odyssey is adjudicated bankrupt, becomes
                  insolvent, makes any assignment for the benefit of its
                  creditors, has its assets placed in the hands of a receiver,
                  files a petition in bankruptcy, has filed against it a
                  petition in bankruptcy which is not discharged within 60 days
                  after its filing, or is dissolved or liquidated (in which
                  case, Odyssey, its receivers, representatives, trustees,
                  agents, or successors shall have no right to exploit or in any
                  way utilize the Licensed Marks).

                  b. This Agreement shall terminate upon 90 days written notice
         in the event that Hallmark Cards no longer directly or indirectly has
         voting control of Odyssey.

                  c. This Agreement shall terminate immediately and
         automatically without further notice upon the occurrence of an event of
         Default pursuant to Section 8 hereof.

                  d. Upon the termination or expiration of this Agreement, or
         the Program Agreement, Odyssey agrees to immediately and permanently
         discontinue the use of the Licensed Marks, including any adaptations
         thereof.

                  e. Odyssey hereby acknowledges that its misuse of the Licensed
         Marks or failure to cease the use of the Licensed Marks upon the
         termination or expiration of such rights or this Agreement will result
         in damage to Hallmark and to its parent, Hallmark Cards for which there
         is no adequate remedy at law. Accordingly, in the event of such misuse
         or failure, Hallmark and Hallmark Cards shall be entitled to equitable
         relief by way of temporary and permanent injunctions and such other
         relief as any court of competent jurisdiction may deem just and proper.

         10. Additional Agreement. Odyssey hereby agrees that Hallmark and its
affiliates shall not have any liability or obligation to Odyssey on account of
the exercise of any of Hallmark's rights or remedies hereunder. Odyssey hereby
waives and releases any right to commence or pursue any legal action (whether
suit, counterclaim, cross claim or other action) against Hallmark or any of its
affiliates challenging the termination by Hallmark of the trademark license
granted herein based on a theory of breach of fiduciary obligation or conflicts
of interest of Hallmark or any of its affiliates or similar theories or premised
on the exercise of control or influence over management by Hallmark or its
affiliates.

         11. Third Party Infringement. Odyssey shall promptly notify Hallmark of
any apparent infringement of any rights granted by Hallmark to Odyssey
hereunder. Hallmark shall have the exclusive right to institute legal action (at
its own expense) against the infringer or to otherwise terminate such
infringement. Odyssey shall have no right to make any demands or claims, bring
suit, effect any settlements or take any other action with respect to such an
infringement without the prior written consent of Hallmark.

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Odyssey agrees to cooperate at its cost with Hallmark with respect to any suits
or other action taken under this paragraph and that all recoveries for such
infringements shall belong to Hallmark. Hallmark may name Odyssey as a party to
any suit against third party infringers if Hallmark, in its sole opinion,
determines that it is desirable to any infringement suit.

         12. Nonassignability. Odyssey agrees that without the prior written
consent of Hallmark it may not Transfer the rights granted hereunder or permit
any third party to utilize the Licensed Marks and any such Transfer shall be
null and void ab initio upon such proposed Transfer.

         13. Applicable Law. The validity, construction and performance of this
Agreement shall be governed by, and interpreted in accordance with, the laws of
the State of Missouri. In any dispute relating to this Agreement, the parties
hereto submit themselves to the exclusive jurisdiction of the tribunals of the
State of Missouri and the United States Courts within the State of Missouri,
expressly waiving any venue to which they may be entitled by their present or
future domiciles and any objection based on forum non conveniens.

         14. No Agency. Nothing in this Agreement shall be construed to make
either party hereto the agent or representative of the other party and neither
party shall so hold itself out nor shall either party be liable or be bound by
any act or omission of the other party.

         15. Waiver. Failure of either party at any time to require the
performance of any provision under this Agreement shall not affect the right of
such party to require full performance thereafter and a waiver by either party
of a breach of any provision of this Agreement shall not be taken or held to be
a waiver of any further or similar breach or as nullifying the effectiveness of
such provision.

         16. Amendments. This Agreement expresses the entire understanding of
the parties hereto and replaces any prior oral or written agreements concerning
the subject matter hereof and Licensee acknowledges that it has not executed
this Agreement in reliance upon any promise, agreement, representation or
warranty not expressly set forth in this Agreement. No amendment modification,
or supplementation hereof shall be effective or binding on either party hereto
unless reduced to writing and executed by the duly authorized representatives of
both parties hereto.

         IN WITNESS WHEREOF, this Agreement is executed as of the date first
written above.

                                               HALLMARK LICENSING, INC.

                                               By /s/ JUDITH WHITTAKER
                                                  ---------------------------

                                               Title Vice President
                                                     ------------------------

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                                      ODYSSEY HOLDINGS, L.L.C.

                                      By  /s/ MARGARET A. LOESCH
                                          --------------------------------------

                                      Title  President & Chief Executive Officer
                                             -----------------------------------

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                       GUIDELINES FOR ODYSSEY PROGRAMMING

This section sets forth a summary of Broadcast Standards and Practices policies
with which all entertainment programming produced for telecast on the Odyssey
must conform. Programs must meet appropriate standards of taste and comply with
all applicable governmental regulations.

                        A. PURPOSE OF ODYSSEY PROGRAMMING

The purpose of Odyssey's programming is to provide families with positive
meaningful experiences through high quality entertainment that celebrates the
human spirit and caring relationships. The programming should strive to
reinforce positive social values, educate and inspire.

                               B. SPECIFIC ISSUES

1. DRUGS AND ALCOHOL

Drug and alcohol abuse are among society's most serious social problems. Odyssey
has a duty to ensure that any depiction of drug or alcohol consumption is
presented in an appropriate and responsible manner.

All portrayals of alcohol consumption and/or use of legal or illegal drugs
should be restricted to situations necessary to plot and/or character
delineation. The use of illegal drugs and/or the abuse of legal drugs or alcohol
is destructive behavior and shall not be shown as desirable, beneficial or as an
effective problem-solver.

Drug and alcohol use should not be glamorized and, when substance abuse is
noted, attention should be directed to the adverse consequences of such abuse
(e.g. the dangers of driving while intoxicated).

2. LANGUAGE

Language and dialogue must be judged generally acceptable to a mass audience and
appropriate to a public medium. Coarse or vulgar language should be avoided.
Blasphemy and obscenity are unacceptable.

3. SEXUAL MATERIAL

Sexual scenes must be sensitively handled and contribute to plot or
characterization. Gratuitous or overly explicate sexual action is unacceptable
and the depiction of physical coercion intended to satisfy prurient interests is
to be avoided. The depiction of the act of sexual intercourse is prohibited.

Particular care must be taken in scenes where sex is coupled with violence. Rape
must be portrayed as an act of violence, not a sexual act. In general, nudity is
unacceptable. Partial nudity and degrees of undress shall not be used for
prurient or exploitative purposes.

4. STEREOTYPES

Characters in Odyssey programs should reflect the wide diversity of our
audience, keeping in mind the importance of dignity to every human being.
Sensitivity is necessary in the presentation of material relating to age, sex,
race, religion, sexual orientation, ethnicity or national derivation to avoid
demeaning stereotypes.

Special precautions must be taken to avoid portrayals and terminology which
ridicule or patronize those who are physically or mentally disabled.

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5. VIOLENCE

Explicit, excessive gratuitous violence is to be avoided. Programs are not to
glamorize violence and/or promote violence as the solution to problems.
Depictions of violence in any form must be essential to the development of
theme, plot or characterization. The intensity and frequency of violent acts
must be limited.

Exceptional care must be taken where children are victims of, or are threatened
by acts of violence.

                               C. GENERAL ISSUES

ADVISORIES

There should be no programming for which circumstances (subject matter,
treatment, and time period) require the use of special audience advisories in
programs or program promotions.

ANIMALS

The use and handling of animals must conform to accepted standards of humane
treatment.

CHARITIES

Solicitations within the body of an entertainment program for charities or other
non-profit organizations are generally not permitted.

COMMERCIAL MENTIONS/SPONSOR REFERENCES

Extraneous commercial mentions or exposure of commercial names, products or
trademarks included in program content are to be minimized and are subject to
prior approval by identification of, or references to, a program's sponsor other
than previously accepted commercial announcements, billboards, and program
titles must be specifically approved in advance by the Hallmark Branding
Committee.

CONTROVERSIAL TOPICS

Issues of social importance or controversy must be handled with care. A decision
to present such subject matter in an entertainment program should include a
determination that the particular program involved is appropriate for the
presentation contemplated.

HYPNOSIS

Actual hypnosis techniques may not be demonstrated in detail.

INSTRUCTIONAL CRIMINAL BEHAVIOR

Scenes containing complete and accurate instructions in the use of illegal
drugs, harmful devices or weapons, or describing imitable techniques for other
illegal activities or evasion of apprehension are not permitted.

MISLEADING DRAMATIZATIONS, SIMULATIONS AND RECREATIONS

Odyssey programs may not be deceptive to the viewing public in any material
respect. In cases where the audience might be misled, appropriate disclaimers
are to be used. Programming purporting to present non-fictional material in a
non-fictional manner must be accurate with respect to material facts or
statements.

The use of techniques or language such as "we interrupt this program" which may
cause viewers to believe an actual news report is being presented is not
permitted.

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PROFESSIONAL PROCEDURES

Dramatization or actual presentation of professional advice and procedures must
be accurate and comply with recognized professional practices.

PROMOTIONAL ELEMENTS

Promotional elements such as "teasers" and "trailers," including "promos," must
properly reflect the actual nature and content of the program. Certain material
acceptable in the context of the program may not be appropriate for inclusion in
promotional elements.

PSEUDO-SCIENCES

Program material should not promote belief in the efficacy of occultism,
astrology, mind-reading or other pseudo-sciences.

SUBLIMINAL MESSAGES

Audio and video content which is inserted within the body of a program which
attempts to convey information below the level of normal viewer awareness is
prohibited.

                          D. SPECIALIZED PROGRAM TYPES

1. PROGRAMS INTENDED TO BE VIEWED PRIMARILY BY CHILDREN

Odyssey must be sensitive to the special needs of young people. Odyssey should
present educational and pro-social materials and require that producers avoid
program content that would have an adverse effect on a child's behavior or
development. Acknowledging the audiences' expectation that children's programs
will provide young viewers with a positive entertainment experience, producers
of children's programs should not only observe the general standards guidelines
contained herein, but should be particularly careful with respect to the
following:

         a. Characters should not be placed in situations that would provoke
         excessive or prolonged anxiety in children. Catastrophe and jeopardy
         should not be extreme as to frighten younger viewers. References to
         death and/or suicide should be handled with extreme caution.

         b. Characters should reflect the ethnic and racial diversity of
         Odyssey's audience. It is encouraged that women, minorities, disabled
         persons and distinctive characters with whom viewers would personally
         identify (e.g. kids who wear glasses) should be included, but,
         derogatory stereotypes should be avoided.

         c. Violence should not be depicted as glamorous or shown as an
         acceptable solution to problems. The negative consequences of violence
         should be stressed. To mitigate violence, action sequences should
         emphasize unrealistic settings, fantasy weapons, and superhuman feats.

         d. Dangerous behavior which could prompt a child to place himself or
         others in jeopardy should not be shown. Special care should be taken
         with respect to depicting fire-making techniques or use of electrical
         devices, especially when such materials are readily available in the
         viewer's home. Depicting household items as weapons must also be
         avoided.

         e. Characters should not engage in unlawful, anti-social or
         self-destructive behavior without suffering negative consequences for
         their actions. Whenever possible, protagonists should be shown
         following generally accepted rules of safety (e.g. wearing seatbelts).

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         f. Romantic storylines which include acts of affection are generally
         considered appropriate but should be handled with discretion. Language
         and storylines that are sexual in nature should be avoided.

         g. Commercial products and references may only be included in programs
         with Odyssey's approval and must serve a valid entertainment purpose.

         h. Children's programs are generally required to have Separator Devices
         before and after commercial messages.

2. FACT-BASED PROGRAMS

There shall be no broadcast of any deceptive or misleading programs or program
material. Fact-based dramas and presentation must be reviewed for accuracy and
producers must provide substantiation when deemed necessary.

3. THEATRICAL FILMS

Theatrical or other programs originally produced for another medium must be
reviewed before broadcast and shall comply with all Odyssey Broadcast Standards
and Practices.

                                       11<PAGE>   1
                                                                   EXHIBIT 10.13

                              AMENDED AND RESTATED
                           CROWN MEDIA HOLDINGS, INC.
                          2000 LONG TERM INCENTIVE PLAN

SECTION 1. PURPOSE; DEFINITIONS

         The purpose of the Plan is to give the Company a competitive advantage
in attracting and retaining officers, employees, consultants and/or directors
and to provide the Company and its Subsidiaries and Affiliates with a stock plan
providing incentives directly linked to the profitability of the Company's
businesses and increases in the Company's shareholder value.

         For purposes of the Plan, the following terms are defined as set forth
below:

         (a) "Affiliate" means a corporation or other entity controlled by,
controlling or under common control with the Company.

         (b) "Award" means a Stock Appreciation Right, Stock Option, Restricted
Stock, Performance Unit, Deferred Stock Unit or other stock-based award.

         (c) "Award Agreement" means a written agreement setting forth the
terms and conditions of an Award.

         (d) "Award Cycle" shall mean a period of consecutive fiscal years or
portions thereof designated by the Committee over which Performance Units are to
be earned.

         (e) "Board" means the Board of Directors of the Company.

         (f) "Cause" with respect to an employee means, unless otherwise
provided by the Committee, (1) "Cause" as defined in any Individual Agreement to
which the participant is a party, or (2) if there is no such Individual
Agreement or, if it does not define Cause, any of the following on the part of
the participant: an intentional failure to perform assigned duties; willful
misconduct in the course of the participant's employment; breach of a fiduciary
duty involving personal profit; or acts or omissions of personal dishonesty, any
of which results in material loss to the Company or any of its Subsidiaries or
Affiliates. The Committee shall, unless otherwise provided in an Individual
Agreement with the participant, have the sole discretion to determine whether
"Cause" exists, and its determination shall be final.

         (g) "Cause" with respect to a Nonemployee Director means, unless
otherwise determined by the Board, (a) the conviction of the Nonemployee
Director of a commission of a felony under Federal law or the law in the state
in which such action occurred, or (b) dishonesty in the course of fulfilling
the Nonemployee Director's duties as a director.

         (h) "CEA" means Chase Equity Associates, L.P., a California limited
partnership.

         (i) "Change in Control" has the meaning set forth in Section 10(b).

         (j) "Change in Control Price" has the meaning set forth in Section
10(c).

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         (k) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.

         (1) "Commission" means the Securities and Exchange Commission or any
successor agency.

         (m) "Committee" means the Committee referred to in Section 2.

         (n) "Common Stock" means Class A common stock, par value $.01 per
share, of the Company.

         (o) "Company" means Crown Media Holdings, Inc., a Delaware corporation.

         (p) "Corporate Transaction" has the meaning set forth in Section
10(b)(iii).

         (q) "Covered Employee" means a participant designated prior to or at
the time of the grant of Restricted Stock or Performance Units by the Committee
as an individual who is or may be a "covered employee" within the meaning of
Section 162(m)(3) of the Code in the year in which Restricted Stock or
Performance Units are expected to be taxable to such participant.

         (r) "Deferral Election" shall have the meaning set forth in Section
17(a).

         (s) "Deferred Stock Unit" means an Award granted under Section 17.

         (t) "Disability" means, unless otherwise provided by the Committee, (1)
"Disability" as defined in an Individual Agreement to which the participant is
a party, or (2) if there is no such Individual Agreement or it does not define
"Disability," a total disability as determined under the group insurance policy
between Hallmark Entertainment, Inc. and Phoenix Home Life Mutual Insurance
Company.

         (u) "Eligible Employee" means an Eligible Individual who is not a
Nonemployee Director.

         (v) "Eligible Individuals" means officers, employees, consultants and
directors of the Company or any of its Subsidiaries or Affiliates, and
prospective employees who have accepted offers of employment from the Company or
its Subsidiaries or Affiliates, and who are or will be responsible for or
contribute to the management, growth or profitability of the business of the
Company, or its Subsidiaries or Affiliates.

         (w) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.

         (x) "Exchanged SARs" has the meaning set forth in Section 5(a).

         (y) "Fair Market Value" of the Common Stock means, as of any given
date, the closing price of the Common Stock on The Nasdaq Stock Market as of the
close of the regular business hours of The Nasdaq Stock Market, without regard
to any after-hours trading that may hereinafter be commenced on the Nasdaq Stock
Market, on the immediately preceding date or, if

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there are no reported sales on such immediately preceding date, on the last day
prior to such date on which there were sales of the Common Stock on The Nasdaq
Stock Market or, if the Common Stock is not listed on The Nasdaq Stock Market,
on any national securities exchange on which the Common Stock is listed. If
there is no regular public trading market for such Common Stock, the Fair Market
Value of the Common Stock shall be determined by the Committee in good faith.

         (z) "Fees" shall mean the annual retainer fee for a Nonemployee
Director in connection with his or her service on the Board for any calendar
year of the Company and any additional fees scheduled to be paid for attendance
at Board or committee meetings during the calendar year.

         (aa) "Freestanding Stock Appreciation Right" has the meaning set forth
in Section 6(a).

         (bb) "HEI" means Hallmark Entertainment, Inc., a Delaware corporation.

         (cc) "Incumbent Board" has the meaning set forth in Section 10(b)(ii).

         (dd) "Incentive Stock Option" means any Stock Option designated as, and
qualified as, an "incentive stock option" within the meaning of Section 422 of
the Code.

         (ee) "Individual Agreement" means an employment or similar agreement
between a participant and the Company or one of its Subsidiaries or Affiliates.

         (ff) "Initial Director Options" has the meaning set forth in Section
16(a).

         (gg) "Initial Public Offering Price" means the offering price per share
of the Common Stock in the Company's initial public offering of the Common
Stock.

         (hh) "Liberty" means Liberty Media Corporation, a Delaware corporation.

         (ii) "NICC" means the National Interfaith Cable Coalition, Inc., a
Maryland not-for-profit corporation.

         (jj) "Nonemployee Director" shall mean each individual who is a member
of the Board and who is not an employee of the Company or any of its
Subsidiaries or Affiliates.

         (kk) "Nonqualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.

         (ll) "Outstanding Company Common Stock" has the meaning set forth in
Section 10(b)(i).

         (mm) "Outstanding Company Voting Power" has the meaning set forth in
Section 10(b)(i).

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         (nn) "Performance Goals" means the performance goals established by the
Committee in connection with the grant of Restricted Stock or Performance Units.
In the case of Qualified Performance-Based Awards, (i) such goals shall be based
on the attainment of specified levels of one or more of the following measures:
return on equity, return on assets, operating income, earnings per share, net
income, total shareholder return, share price, shareholder value added, cash
value added and/or achievement of pre-determined, objectively defined strategic
performance goals and (ii) such Performance Goals shall be set by the Committee
within the time period prescribed by Section 162(m) of the Code and related
regulations. Performance Goals may be stated in the alternative or in
combination.

         (oo) "Performance Units" means an Award granted under Section 8.

         (pp) "Performance Units Agreement" means a written agreement setting
forth the terms and conditions of an award of Performance Units.

         (qq) "Person" has the meaning set forth in Section 10(b)(i).

         (rr) "Phantom Share Appreciation Rights" means a phantom share
appreciation right granted to a participant under the Hallmark Entertainment
Networks, Inc. Share Appreciation Rights Plan.

         (ss) "Plan" means the Crown Media Holdings, Inc. 2000 Long Term
Incentive Plan, as set forth herein and as hereinafter amended from time to
time.

         (tt) "Qualified Performance-Based Award" means an Award of Restricted
Stock or Performance Units designated as such by the Committee at the time of
grant, based upon a determination that (i) the recipient is a Covered Employee
and (ii) the Committee wishes such Award to qualify for the Section 162(m)
Exemption.

         (uu) "Restricted Stock" means an Award granted under Section 7.

         (vv) "Restricted Stock Agreement" means a written agreement setting
forth the terms and conditions of an award of Restricted Stock.

         (ww) "Restriction Period" has the meaning set forth in Section
7(c)(ii).

         (xx) "Retirement" means retirement from the employ of the Company or
its Subsidiaries or Affiliates at the normal or early retirement date as set
forth in any tax-qualified retirement/pension plan of the Company.

         (yy) "Rule 16b-3" means Rule 16b-3, as promulgated by the Commission
under Section 16(b) of the Exchange Act, as amended from time to time.

         (zz) "Section 162(m) Exemption" means the exemption from the
limitation on deductibility imposed by Section 162(m) of the Code that is set
forth in Section 162(m)(4)(C) of the Code.

         (aaa) "Share Amount" has the meaning set forth in Section 17(a).

                                      -4-
<PAGE>   5

         (bbb) "Stock Appreciation Right" means an Award granted under Section
6.

         (ccc) "Stock Option" means an Award granted under Section 5.

         (ddd) "Subsidiary" means any corporation, partnership, joint venture
or other entity during any period in which at least a 50% voting or profits
interest is owned, directly or indirectly, by the Company or any successor to
the Company.

         (eee) "Tandem Stock Appreciation Right" has the meaning set forth in
Section 6(a).

         (fff) "Target Award Amounts" has the meaning set forth in Section
10(a)(iii).

         (ggg) "Termination of Employment" means the termination of the Eligible
Employee's employment with the Company and any of its Subsidiaries or
Affiliates. A participant employed by, or performing services for, a Subsidiary
or an Affiliate shall also be deemed to incur a Termination of Employment if the
Subsidiary or Affiliate ceases to be such a Subsidiary or an Affiliate, as the
case may be, and the participant does not immediately thereafter become an
employee of, or service-provider for, the Company or another Subsidiary or
Affiliate. Temporary absences from employment because of illness, vacation or
leave of absence and transfers among the Company and its Subsidiaries and
Affiliates shall not be considered Terminations of Employment. For purposes of
the Plan, a participant's employment shall be deemed to have terminated at the
close of business on the day preceding the first date on which he or she is no
longer for any reason whatsoever employed by the Company or any of its
Subsidiaries or Affiliates.

SECTION 2. ADMINISTRATION

         (a) Except as otherwise provided in subsection (e) of this Section 2
the Plan shall be administered by the Compensation Committee of the Board or
such other committee of the Board as the Board may from time to time designate
(the "Committee"), which shall be composed of not less than two directors, and
shall be appointed by and serve at the pleasure of the Board.

         (b) The Committee shall have plenary authority to grant Awards pursuant
to the terms of the Plan to Eligible Employees. The Board shall have plenary
authority to grant Nonqualified Stock Options and/or Deferred Stock Units to
Nonemployee Directors.

         (c) Among other things, with respect to Eligible Employees, the
Committee shall have the authority, subject to the terms of the Plan:

             (i) to select the Eligible Employees to whom Awards may from time
         to time be granted;

             (ii) to determine whether and to what extent Incentive Stock
         Options, Nonqualified Stock Options, Stock Appreciation Rights,
         Restricted Stock, Performance Units and other stock-based awards or any
         combination thereof are to be granted hereunder;

                                      -5-
<PAGE>   6

             (iii) to determine the number of shares of Common Stock to be
         covered by each Award granted to an Eligible Employee;

             (iv) to determine the terms and conditions of any Award granted to
         an Eligible Employee, including, but not limited to, the option price
         (subject to Section 5(a)), any vesting condition, restriction or
         limitation (which may be related to the performance of the participant,
         the Company or any Subsidiary or Affiliate) and any vesting
         acceleration or forfeiture waiver regarding any Award and the shares of
         Common Stock relating thereto, based on such factors as the Committee
         shall determine;

             (v) to modify, amend or adjust the terms and conditions of any
         Award granted to an Eligible Employee, at any time or from time to
         time, including but not limited to, to Performance Goals; provided,
         however, that the Committee may not (i) subject to the last paragraph
         of Section 3, reduce the option price or cancel and regrant a Stock
         Option theretofore granted or (ii) adjust upwards the amount payable
         with respect to a Qualified Performance-Based Award or waive or alter
         the Performance Goals associated therewith;

             (vi) to determine to what extent and under what circumstances
         Common Stock and other amounts payable with respect to an Award granted
         to an Eligible Employee shall be deferred; and

             (vii) to determine under what circumstances an Award granted to an
         Eligible Employee may be settled in cash or Common Stock under Sections
         5(j), 6(b) and 8(b)(iv).

         (d) The Committee shall have the authority to adopt, alter and repeal
such administrative rules, guidelines and practices governing the Plan as it
shall from time to time deem advisable, to interpret the terms and provisions of
the Plan and any Award issued under the Plan (and any agreement relating
thereto) and to otherwise supervise the administration of the Plan.

             (i) The Committee may act only by a majority of its members then in
         office, except that the Committee may, except to the extent prohibited
         by applicable law or the applicable rules of a stock exchange, allocate
         all or any portion of its responsibilities and powers to any one or
         more of its members and may delegate all or any part of its
         responsibilities and powers to any person or persons selected by it;
         provided, that no such delegation may be made that would cause Awards
         or other transactions under the Plan to cease to be exempt from Section
         16(b) of the Exchange Act or cause an Award designated as a Qualified
         Performance-Based Award not to qualify for, or to cease to qualify for,
         the Section 162(m) Exemption. Any such allocation or delegation may be
         revoked by the Committee at any time.

             (ii) Any determination made by the Committee or pursuant to
         delegated authority pursuant to the provisions of the Plan with respect
         to any Award shall be made in the sole discretion of the Committee or
         such delegate at the time of the grant of the Award or, unless in
         contravention of any express term of the Plan, at any time thereafter.
         All decisions made by the Committee or any appropriately delegated
         officer pursuant to

                                      -6-
<PAGE>   7

         the provisions of the Plan shall be final and binding on all persons,
         including the Company and Plan participants.

             (iii) Any authority granted to the Committee may also be exercised
         by the full Board, except to the extent that the grant or exercise of
         such authority would cause any Award or transaction to become subject
         to (or lose an exemption under) Section 16(b) of the Exchange Act or
         cause an Award designated as a Qualified Performance-Based Award not to
         qualify for, or to cease to qualify for, the Section 162(m) Exemption.
         To the extent that any permitted action taken by the Board conflicts
         with action taken by the Committee, the Board action shall control.

         (e) Among other things, with respect to Nonemployee Directors, the
Board shall have the authority, subject to the terms of the Plan:

             (i) to determine whether, and to what extent, Nonqualified Stock
         Options and/or Deferred Stock Units are to be granted to Nonemployee
         Directors;

             (ii) to determine the number of shares of Common Stock to be
         covered by each Award granted to a Nonemployee Director;

             (iii) to determine the terms and conditions of any Award granted to
         a Nonemployee Director, including, but not limited to, the option price
         (subject to Section 5(a)), any vesting condition, restriction or
         limitation and any vesting acceleration or forfeiture waiver regarding
         any Award and the shares of Common Stock relating thereto, based on
         such factors as the Board shall determine;

             (iv) to modify, amend or adjust the terms and conditions of any
         Award granted to a Nonemployee Director, at any time or from time to
         time; provided, however, that the Board may not, subject to the last
         paragraph of Section 3, reduce the option price of a Nonqualified Stock
         Option or cancel and regrant a Nonqualified Stock Option theretofore
         granted;

             (v) to determine to what extent and under what circumstances Common
         Stock and other amounts payable with respect to an Award granted to a
         Nonemployee Director shall be deferred; and

             (vi) to determine under what circumstances an Award granted to a
         Nonemployee Director may be settled in cash or Common Stock under
         Section 5(j).

SECTION 3. Common Stock Subject to Plan

         The maximum number of shares of Common Stock that may be delivered to
participants and their beneficiaries under the Plan shall be 10,000,000. No
participant may be granted more than 1,000,000 shares of Restricted Stock.
Shares subject to an Award under the Plan may be authorized and unissued shares
or may be treasury shares.

                                      -7-
<PAGE>   8

         If any Award is forfeited or if any Stock Option (and related Stock
Appreciation Right, if any) terminates, expires or lapses without being
exercised, or if any Stock Appreciation Right is exercised for cash, shares of
Common Stock subject to such Awards shall again be available for distribution
in connection with Awards under the Plan. If the option price of any Stock
Option granted under the Plan is satisfied by delivering shares of Common Stock
to the Company (by either actual delivery or by attestation), only the number of
shares of Common Stock issued net of the shares of Common Stock delivered or
attested to shall be deemed delivered for purposes of determining the maximum
numbers of shares of Common Stock available for delivery under the Plan. To the
extent any shares of Common Stock subject to an Award are not delivered to a
participant because such shares are used to satisfy an applicable tax
withholding obligation, such shares shall not be deemed to have been delivered
for purposes of determining the maximum number of shares of Common Stock
available for delivery under the Plan. The maximum number of shares of Common
Stock that may be issued pursuant to Stock Options intended to be Incentive
Stock Options shall be 5,000,000 shares.

         In the event of any change in corporate capitalization, such as a stock
split or an extraordinary corporate transaction, such as any merger,
consolidation, separation, including a spin-off, or other distribution of stock
or property of the Company, any reorganization (whether or not such
reorganization comes within the definition of such term in Section 368 of the
Code) or any partial or complete liquidation of the Company, the Committee or
Board may make such substitution or adjustments to reflect such change or
transaction in (i) the aggregate number and kind of shares reserved for issuance
under the Plan, including the number of shares that may be issued pursuant to
Incentive Stock Options or Restricted Stock; (ii) the limitation upon Restricted
Stock to be granted to any participant, to the extent such adjustment does not
cause any Qualified Performance-Based Award to fail to qualify for the Section
162(m) Exemption; (iii) the number, kind and option price of shares subject to
outstanding Stock Options, Stock Appreciation Rights and other Awards; (iv) the
number and kind of shares subject to other outstanding Awards granted under the
Plan; and/or (v) such other equitable manner, in each case, as it may determine
to be appropriate in its sole discretion; provided, however, that the number of
shares subject to any Award shall always be a whole number. Such adjusted
option price shall also be used to determine the amount payable by the Company
upon the exercise of any Tandem Stock Appreciation Right.

SECTION 4. ELIGIBILITY

         Awards may be granted under the Plan to Eligible Individuals; provided,
however, that Nonemployee Directors shall not be eligible to receive Awards
other than Nonqualified Stock Options and/or Deferred Stock Units.

SECTION 5. STOCK OPTIONS

         Stock Options may be granted to an Eligible Employee alone or in
addition to other Awards granted under the Plan and may be of two types:
Incentive Stock Options and Nonqualified Stock Options. Any Stock Option granted
to an Eligible Employee under the Plan shall be in such form as the Committee
may from time to time approve. Nonqualified Stock Options may be granted to
Nonemployee Directors pursuant to Section 16.

                                      -8-
<PAGE>   9

         The Committee shall have the authority to grant any Eligible Employee
Incentive Stock Options, Nonqualified Stock Options or both types of Stock
Options (in each case with or without Stock Appreciation Rights). Incentive
Stock Options may be granted only to employees of the Company and its
subsidiaries or parent corporation (within the meaning of Sections 424(e)and (f)
of the Code). To the extent that any Stock Option is not designated as an
Incentive Stock Option or even if so designated does not qualify as an Incentive
Stock Option on or subsequent to its grant date, it shall constitute a
Nonqualified Stock Option.

         Stock Options shall be evidenced by option agreements, the terms and
provisions of which may differ. An option agreement shall indicate on its face
whether it is intended to be an agreement for an Incentive Stock Option or a
Nonqualified Stock Option. The grant of a Stock Option shall occur on the date
the Committee or Board, as applicable, by resolution selects an Eligible
Individual to receive a grant of a Stock Option, determines the number of shares
of Common Stock to be subject to such Stock Option to be granted to such
Eligible Individual and specifies the terms and provisions of the Stock Option.
The Company shall notify an Eligible Individual of any grant of a Stock Option,
and a written option agreement or agreements shall be duly executed and
delivered by the Company to the participant. Such agreement or agreements shall
become effective upon execution by the Company and the participant.

         Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions as
the Committee shall deem desirable:

         (a) Option Price. The option price per share of Common Stock
purchasable under a Stock Option shall be determined by the Committee or, with
respect to Nonemployee Directors, the Board and set forth in the option
agreement, and shall not be less than the Fair Market Value of the Common Stock
subject to the Stock Option on the date of grant; provided, however, that the
option price per share of Common Stock subject to any Stock Option granted at
the time of the Company's initial public offering to a participant in exchange
for such participant's phantom share appreciation rights under the Crown Media,
Inc. (formerly Hallmark Entertainment Networks, Inc.) Share Appreciation Rights
Plan shall be determined by the Committee; provided, further, that the option
price per share of Common Stock subject to any Stock Option granted in
connection with the initial public offering of the Common Stock (including the
Initial Director Options) may be the Initial Public Offering Price.

         (b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Stock Option shall be exercisable more than 10 years after the
date the Stock Option is granted.

         (c) Exercisability. Except as otherwise provided herein or as
determined at the time of grant by the Committee or, with respect to Nonemployee
Directors, the Board, each Stock Option shall be exercisable in five equal
annual installments, beginning on the first anniversary of the date of grant.
The Committee or, with respect to Nonemployee Directors, the Board may at any
time waive such installment exercise provisions, in whole or in part, based on
such factors as the Committee or the Board, as applicable, may determine. In
addition, the Committee or the Board, as applicable, may at any time accelerate
the exercisability of any Stock Option.

                                      -9-
<PAGE>   10

         (d) Method of Exercise. Subject to the provisions of this Section 5,
Stock Options may be exercised, in whole or in part, at any time during the
option term by giving written notice of exercise to the Company specifying the
number of shares of Common Stock subject to the Stock Option to be purchased.

         Such notice shall be accompanied by payment in full of the purchase
price by certified or bank check or such other instrument as the Company may
accept. If approved by the Committee, payment, in full or in part, may also be
made in the form of unrestricted Common Stock (by delivery of such shares or by
attestation) already owned by the optionee of the same class as the Common Stock
subject to the Stock Option (based on the Fair Market Value of the Common Stock
on the date the Stock Option is exercised); provided, however, that such already
owned shares have been held by the optionee for at least six months at the time
of exercise or had been purchased on the open market; and provided, further,
that, in the case of an Incentive Stock Option, the right to make a payment in
the form of already owned shares of Common Stock of the same class as the Common
Stock subject to the Stock Option may be authorized only at the time the Stock
Option is granted.

         If approved by the Committee, payment in full or in part may also be
made by delivering a properly executed exercise notice to the Company, together
with a copy of irrevocable instructions to a broker to deliver promptly to the
Company the amount of sale or loan proceeds necessary to pay the purchase price,
and, if requested, reduced by the amount of any federal, state, local or foreign
withholding taxes. To facilitate the foregoing, the Company may enter into
agreements for coordinated procedures with one or more brokerage firms.

         No shares of Common Stock shall be issued until full payment therefor
has been made. Except as otherwise provided in Section 5(j), an optionee shall
have all of the rights of a shareholder of the Company holding the Common Stock
that is subject to such Stock Option (including, if applicable, the right to
vote the shares and the right to receive dividends), when the optionee has given
written notice of exercise, has paid in full for such shares and, if requested,
has given the representation described in Section 14(a).

         (e) Nontransferability of Stock Options. No Stock Option shall be
transferable by the optionee other than (i) by will or by the laws of descent
and distribution or (ii) in the case of a Nonqualified Stock Option, as
otherwise expressly permitted by the Committee including, if so permitted,
pursuant to a transfer to such optionee's immediate family, whether directly or
indirectly or by means of a trust or partnership or otherwise. For purposes of
the Plan, unless otherwise determined by the Committee, "immediate family" shall
mean any child, sibling, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, sister-in-law or brother-in-law, including adoptive
relationships, of the optionee. All Stock Options shall be exercisable, subject
to the terms of the Plan, only by the optionee, the guardian or legal
representative of the optionee, or any person to whom such option is transferred
pursuant to this paragraph, it being understood that the terms "holder" and
"optionee" include such guardian, legal representative and other transferee.

         (f) Termination by Death. Unless otherwise determined by the Committee
or as set forth in an Award Agreement, if an optionee incurs a Termination of
Employment by reason of

                                      -10-
<PAGE>   11

death, any Stock Option held by such optionee may thereafter be exercised, to
the extent then exercisable, or on such accelerated basis as the Committee may
determine, for the shorter of (1) a period of 12 months (or such other period as
the Committee may specify in the option agreement) from the date of such death
or (2) until the expiration of the stated term of such Stock Option.

         (g) Termination by Reason of Disability or Retirement. Unless otherwise
determined by the Committee or as set forth in an Award Agreement, if an
optionee incurs a Termination of Employment by reason of Disability or
Retirement, any Stock Option held by such optionee may thereafter be exercised
by the optionee, to the extent it was exercisable at the time of termination, or
on such accelerated basis as the Committee may determine, for a period of 12
months (or such other period as the Committee may specify in the option
agreement) from the date of such Termination of Employment or until the
expiration of the stated term of such Stock Option, whichever period is shorter;
provided, however, that if the optionee dies within such period, any unexercised
Stock Option held by such optionee shall, notwithstanding the expiration of such
period, continue to be exercisable to the extent to which it was exercisable at
the time of death for a period of 12 months from the date of such death or until
the expiration of the stated term of such Stock Option, whichever period is
shorter. If an Incentive Stock Option is exercised after the expiration of the
exercise periods that apply for purposes of Section 422 of the Code, such Stock
Option will thereafter be treated as a Nonqualified Stock Option.

         (h) Other Termination. Unless otherwise determined by the Committee or
as set forth in an Award Agreement: (A) if an optionee incurs a Termination of
Employment for Cause, all Stock Options held by such optionee shall thereupon
terminate; and (B) if an optionee incurs a Termination of Employment for any
reason other than death, Disability, Retirement or for Cause, any Stock Option
held by such optionee, to the extent it was then exercisable at the time of
termination, or on such accelerated basis as the Committee may determine, may be
exercised for a period of three months from the date of such Termination of
Employment or until the expiration of the stated term of such Stock Option,
whichever period is shorter; provided, however, that if the optionee dies within
such three-month period, any unexercised Stock Option held by such optionee
shall, notwithstanding the expiration of such three-month period, continue to be
exercisable to the extent to which it was exercisable at the time of death for a
period of 12 months from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is shorter. Notwithstanding
any other provision of this Plan to the contrary, in the event an optionee
incurs a Termination of Employment other than for Cause during the 24-month
period following a Change in Control, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it was exercisable at the
time of termination, including on such accelerated basis as provided in Section
10(a), for (x) the longer of (i) 12 months from the date of such Termination of
Employment and (ii) such other period as may be provided in the Plan for such
Termination of Employment or as the Committee may provide in the option
agreement, or (y) until expiration of the stated term of such Stock Option,
whichever period is shorter. If an Incentive Stock Option is exercised after the
expiration of the post-termination exercise periods that apply for purposes of
Section 422 of the Code, such Stock Option will thereafter be treated as a
Nonqualified Stock Option.

         (i) Cashing Out of Stock Option. On receipt of written notice of
exercise, the Committee may elect to cash out all or part of the portion of the
shares of Common Stock for

                                      -11-
<PAGE>   12

which a Stock Option is being exercised by paying the optionee an amount, in
cash or Common Stock, equal to the excess of the Fair Market Value of the Common
Stock over the option price times the number of shares of Common Stock for which
the Option is being exercised on the effective date of such cash-out.

         (j) Change in Control Cash-Out. Notwithstanding any other provision of
the Plan, if the Committee shall so determine at the time of grant or
thereafter, then during the 60-day period from and after a Change in Control
(the "Exercise Period"), an optionee shall have the right, whether or not the
Stock Option is fully exercisable and in lieu of the payment of the option price
for the shares of Common Stock being purchased under the Stock Option and by
giving notice to the Company, to elect (within the Exercise Period) to surrender
all or part of the Stock Option to the Company and to receive cash, within 10
days of such election, in an amount equal to the amount by which the Change in
Control Price per share of Common Stock on the date of such election shall
exceed the option price per share of Common Stock under the Stock Option (the
"Spread") multiplied by the number of shares of Common Stock (subject to any
substitution or adjustment made under Section 3) granted under the Stock Option
as to which the right granted under this Section 5(j) shall have been exercised.
Notwithstanding the foregoing, if any right granted pursuant to this Section
5(j) would make a Change in Control transaction ineligible for
pooling-of-interests accounting under APB No. 16 that but for the nature of such
grant would otherwise be eligible for such accounting treatment, the Committee
shall have the ability to substitute for the cash payable pursuant to such right
Common Stock (subject to any substitution or adjustment made under Section 3)
with a Fair Market Value (as of the date immediately prior to the date of
delivery of such stock) equal to the cash that would otherwise be payable
hereunder or, if necessary to preserve such accounting treatment, otherwise
modify or eliminate such right.

         (k) Deferral of Option Shares. The Committee may from time to time
establish procedures pursuant to which an optionee may elect to defer, until a
time or times later than the exercise of an Option, receipt of all or a portion
of the shares of Common Stock subject to such Option on such terms and
conditions as the Committee shall determine. If any such deferrals are
permitted, then notwithstanding Section 5(d) above, an optionee who elects such
deferral shall not have any rights as a stockholder with respect to such
deferred shares unless and until shares are actually delivered to the optionee
with respect thereto, except to the extent otherwise determined by the
Committee.

SECTION 6. STOCK APPRECIATION RIGHTS

         (a) Grant and Exercise. Stock Appreciation Rights may be granted to
Eligible Employees without relationship to a Stock Option (each, a "Freestanding
Stock Appreciation Right") or in conjunction with all or part of any Stock
Option granted under the Plan (each, a "Tandem Stock Appreciation Right"). In
the case of a Nonqualified Stock Option, Tandem Stock Appreciation Rights may be
granted either at or after the time of grant of such Stock Option. In the case
of an Incentive Stock Option, Tandem Stock Appreciation Rights may be granted
only at the time of grant of such Stock Option. A Tandem Stock Appreciation
Right shall terminate and no longer be exercisable upon the termination or
exercise of the related Stock Option.

                                      -12-
<PAGE>   13

         (b) Terms of Freestanding Stock Appreciation Rights. Freestanding Stock
Appreciation Rights shall be subject to such terms and conditions as shall be
determined by the Committee, including the following:

                  (i) a Freestanding Stock Appreciation Right shall be
         exercisable as determined by the Committee, but in no event after ten
         years from the date of grant;

                  (ii) the base price of a Freestanding Stock Appreciation Right
         shall be the Fair Market Value of a share of Common Stock on the date
         of grant. A Freestanding Stock Appreciation Right shall entitle the
         holder, upon exercise of such right, to an amount in cash, shares of
         Common Stock or both (as determined by the Committee), with a value
         equal to the product of (A) the excess of the Fair Market Value of a
         share of Common Stock on the date of exercise of the Stock Appreciation
         Right over the base price of the Stock Appreciation Right and (B) the
         number of shares of Common Stock as to which such Stock Appreciation
         Right shall have been exercised, with the Committee having the right to
         determine the form of payment;

                  (iii) a Freestanding Stock Appreciation Right shall be
         exercised by giving written notice of exercise to the Company or its
         designated agent specifying the number of shares of Common Stock as to
         which such Stock Appreciation Right is being exercised; and

                  (iv) a Freestanding Stock Option shall not be transferable
         other than by will or laws of descent and distribution.

         (c) Terms of Tandem Stock Appreciation Rights. Tandem Stock
Appreciation Rights shall be subject to such terms and conditions as shall be
determined by the Committee, including the following:

                  (i) Tandem Stock Appreciation Rights shall be exercisable only
         at such time or times and to the extent that the Stock Options to which
         they relate are exercisable in accordance with the provisions of
         Section 5 and this Section 6;

                  (ii) upon the exercise of a Tandem Stock Appreciation Right,
         an optionee shall be entitled to receive an amount in cash, shares of
         Common Stock or both, in value equal to the excess of the Fair Market
         Value of one share of Common Stock over the option price per share
         specified in the related Stock Option multiplied by the number of
         shares in respect of which the Stock Appreciation Right shall have been
         exercised, with the Committee having the right to determine the form of
         payment;

                  (iii) a Tandem Stock Appreciation Right may be exercised by an
         optionee in accordance with this Section 6(c) by surrendering the
         applicable portion of the related Stock Option in accordance with
         procedures established by the Committee and upon such exercise and
         surrender, the optionee shall be entitled to receive an amount
         determined in the manner prescribed in this Section 6(c), and Stock
         Options which have been so surrendered shall no longer be exercisable
         to the extent the related Tandem Stock Appreciation Rights have been
         exercised;

                                      -13-
<PAGE>   14

                  (iv) upon the exercise of a Tandem Stock Appreciation Right,
         the Stock Option or part thereof to which such Tandem Stock
         Appreciation Right is related shall be deemed to have been exercised
         for the purpose of the limitation set forth in Section 3 on the number
         of shares of Common Stock to be issued under the Plan, but only to the
         extent that the number of shares covered by the Tandem Stock
         Appreciation Right at the time of exercise is based on the value of the
         Tandem Stock Appreciation Right at such time; and

                  (v) Tandem Stock Appreciation Rights shall be transferable
         only to permitted transferees of the underlying Stock Option in
         accordance with Section 5(e).

SECTION 7. RESTRICTED STOCK

         (a) Administration. Shares of Restricted Stock may be awarded to
Eligible Employees either alone or in addition to other Awards granted under the
Plan. The Committee shall determine the Eligible Employees to whom and the time
or times at which grants of Restricted Stock will be awarded, the number of
shares to be awarded to any Eligible Employee, the conditions for vesting, the
time or times within which such Awards may be subject to forfeiture and any
other terms and conditions of the Awards, in addition to those contained in
Section 7(c).

         (b) Awards and Certificates. Shares of Restricted Stock shall be
evidenced in such manner as the Committee may deem appropriate, including
book-entry registration or issuance of one or more stock certificates. Any
certificate issued in respect of shares of Restricted Stock shall be registered
in the name of such participant and shall bear an appropriate legend referring
to the terms, conditions and restrictions applicable to such Award,
substantially in the following form:

                  The transferability of this certificate and the shares of
                  stock represented hereby are subject to the terms and
                  conditions (including forfeiture) of the Crown Media Holdings,
                  Inc. 2000 Long Term Incentive Plan and a Restricted Stock
                  Agreement. Copies of such Plan and Agreement are on file at
                  the offices of Crown Media Holdings, Inc., Suite 500, 6430 S.
                  Fiddlers Green Circle, Englewood, Colorado 80111.

The Committee may require that the certificates evidencing such shares be held
in custody by the Company until the restrictions thereon shall have lapsed and
that, as a condition of any Award of Restricted Stock, the participant shall
have delivered a stock power, endorsed in blank, relating to the Common Stock
covered by such Award.

         (c) Terms and Conditions. Shares of Restricted Stock shall be subject
to the following terms and conditions:

                  (i) the Committee may, prior to or at the time of grant,
         designate an Award of Restricted Stock as a Qualified Performance-Based
         Award, in which event it shall condition the grant or vesting, as
         applicable, of such Restricted Stock upon the attainment of Performance
         Goals. If the Committee does not designate an Award of Restricted
         Stock as a Qualified Performance-Based Award, it may also condition the
         grant or

                                      -14-
<PAGE>   15

vesting thereof upon the attainment of Performance Goals. Regardless of whether
an Award of Restricted Stock is a Qualified Performance-Based Award, the
Committee may also condition the grant or vesting thereof upon the continued
service of the participant. The conditions for grant or vesting and the other
provisions of Restricted Stock Awards (including without limitation any
applicable Performance Goals) need not be the same with respect to each
recipient. The Committee may at any time, in its sole discretion, accelerate or
waive, in whole or in part, any of the foregoing restrictions; provided,
however, that (except as otherwise provided in Section 7(c)(iv) or 10(a)(ii))
in the case of Restricted Stock that is a Qualified Performance-Based Award, the
applicable Performance Goals have been satisfied;

         (ii) subject to the provisions of the Plan and the Restricted Stock
Agreement referred to in Section 7(c)(vi), during the period, if any, set by the
Committee, commencing with the date of such Award for which such participant's
continued service is required (the "Restriction Period"), and until either, as
determined by the Committee, the earlier or the later of (i) the expiration of
the Restriction Period and (ii) the date the applicable Performance Goals (if
any) are satisfied, the participant shall not be permitted to sell, assign,
transfer, pledge or otherwise encumber shares of Restricted Stock;

         (iii) except as provided in this paragraph (iii) and Sections 7(c)(i)
and 7(c)(ii) and in the Restricted Stock Agreement and except as otherwise
determined by the Committee, the participant shall have, with respect to the
shares of Restricted Stock, all of the rights of a stockholder of the Company
holding the class or series of Common Stock that is the subject of the
Restricted Stock, including, if applicable, the right to vote the shares and the
right to receive any cash dividends. If so determined by the Committee in the
applicable Restricted Stock Agreement and subject to Section 14(e), (A) cash
dividends or distributions of property other than Common Stock with respect to
the class or series of Common Stock that is the subject of the Restricted Stock
Award shall be automatically deferred and reinvested in additional Restricted
Stock, held subject to the vesting of the underlying Restricted Stock, or held
subject to meeting Performance Goals applicable only to dividends, and (B)
dividends payable in Common Stock shall be paid in the form of Restricted Stock
of the same class as the Common Stock with which such dividend was paid, held
subject to the vesting of the underlying Restricted Stock, or held subject to
meeting Performance Goals applicable only to dividends;

         (iv) except to the extent otherwise provided in the applicable
Restricted Stock Agreement or Section 7(c)(i), 7(c)(ii). 7(c)(v) or 10(a)(ii),
upon a participant's Termination of Employment for any reason during the
Restriction Period or before the applicable Performance Goals are satisfied, all
shares still subject to restriction shall be forfeited by the participant;
provided, however, that the Committee shall have the discretion to waive, in
whole or in part, any or all remaining restrictions (other than, in the case of
Restricted Stock which is a Qualified Performance-Based Award, satisfaction of
the applicable Performance Goals unless the participant's employment is
terminated by reason of death or Disability) with respect to any or all of such
participant's shares of Restricted Stock;

                                      -15-
<PAGE>   16

                  (v) if and when any applicable Performance Goals are satisfied
         and the Restriction Period expires without a prior forfeiture of the
         Restricted Stock, unlegended certificates for such shares shall be
         delivered to the participant upon surrender of the legended
         certificates; and

                  (vi) each Award shall be confirmed by, and be subject to, the
         terms of a Restricted Stock Agreement.

SECTION 8. PERFORMANCE UNITS

         (a) Administration. Performance Units may be awarded to Eligible
Employees either alone or in addition to other Awards granted under the Plan.
The Committee shall determine the Eligible Employees to whom and the time or
times at which Performance Units shall be awarded, the number of Performance
Units to be awarded to any Eligible Employee, the duration of the Award Cycle
and any other terms and conditions of the Award, in addition to those contained
in Section 8(b).

         (b) Terms and Conditions. Performance Units Awards shall be subject to
the following terms and conditions:

                  (i) the Committee may, prior to or at the time of the grant,
         designate Performance Units as Qualified Performance-Based Awards, in
         which event it shall condition the settlement thereof upon the
         attainment of Performance Goals, except as otherwise provided in
         Section 8(b)(ii) or 10(a)(iii). If the Committee does not designate
         Performance Units as Qualified Performance-Based Awards, it may also
         condition the settlement thereof upon the attainment of Performance
         Goals. Regardless of whether Performance Units are Qualified
         Performance-Based Awards, the Committee may also condition the
         settlement thereof upon the continued service of the participant. The
         provisions of such Awards (including without limitation any applicable
         Performance Goals) need not be the same with respect to each recipient.
         Subject to the provisions of the Plan and the Performance Units
         Agreement referred to in Section 8(b)(v), Performance Units may not be
         sold, assigned, transferred, pledged or otherwise encumbered during the
         Award Cycle;

                  (ii) except to the extent otherwise provided in the applicable
         Performance Units Agreement or Section 8(b)(iii) or 10(a)(iii), upon a
         participant's Termination of Employment for any reason during the Award
         Cycle or before any applicable Performance Goals are satisfied, all
         rights to receive cash or stock in settlement of the Performance Units
         shall be forfeited by the participant; provided, however, that the
         Committee shall have the discretion to waive, in whole or in part, any
         or all remaining payment limitations (other than, in the case of
         Performance Units that are Qualified Performance-Based Awards,
         satisfaction of the applicable Performance Goals unless the
         participant's employment is terminated by reason of death or
         Disability) with respect to any or all of such participant's
         Performance Units:

                  (iii) a participant may elect to further defer receipt of cash
         or shares in settlement of Performance Units for a specified period or
         until a specified event, subject

                                      -16-
<PAGE>   17

         in each case to the Committee's approval and to such terms as are
         determined by the Committee. Subject to any exceptions adopted by the
         Committee, such election must generally be made prior to commencement
         of the Award Cycle for the Performance Units in question;

                  (iv) at the expiration of the Award Cycle, the Committee shall
         evaluate and certify the Company's performance in light of any
         Performance Goals for such Award, and shall determine the number of
         Performance Units granted to the participant which have been earned,
         and the Committee shall then cause to be delivered (A) a number of
         shares of Common Stock equal to the number of Performance Units
         determined by the Committee to have been earned or (B) cash equal to
         the Fair Market Value of such number of shares of Common Stock to the
         participant, as the Committee shall elect (subject to any deferral
         pursuant to Section 8(b)(iii)); and

                  (v) each Award shall be confirmed by, and be subject to, the
         terms of a Performance Units Agreement.

SECTION 9. OTHER STOCK-BASED AWARDS

         Other Awards of Common Stock and other Awards that are valued in whole
or in part by reference to, or are otherwise based upon, Common Stock, including
(without limitation) dividend equivalents, may be granted to Eligible Employees
either alone or in conjunction with other Awards granted under the Plan.

SECTION 10. CHANGE IN CONTROL PROVISIONS

         (a) Impact of Event. Notwithstanding any other provision of the Plan to
the contrary, except as otherwise provided in the applicable Award Agreement,
upon the occurrence of a Change in Control:

                  (i) any Stock Options and Stock Appreciation Rights
         outstanding as of the date of such Change in Control, and which are not
         then exercisable and vested, shall become fully exercisable and vested
         to the full extent of the original grant;

                  (ii) the restrictions and deferral limitations applicable to
         any outstanding Restricted Stock shall lapse, and such Restricted Stock
         shall become free of all restrictions and become fully vested and
         transferable to the full extent of the original grant;

                  (iii) with respect to Performance Units, all Performance Goals
         shall be considered to have been achieved at the target levels (the
         "Target Award Amounts"), any deferral or other restriction shall lapse,
         and the amount payable with respect to each Performance Unit shall be
         equal to the product of (A) the Target Award Amount and (B) a fraction,
         the numerator of which is the number of days from the first day of the
         Award Cycle for such Performance Unit through the date of the Change in
         Control, and the denominator of which is the total number of days in
         the Award Cycle for such Performance Unit, and such Performance Units
         shall be settled in cash as promptly as is

                                      -17-
<PAGE>   18

         practicable; provided, that, if such cash settlement would make a
         Change in Control transaction ineligible for pooling-of-interests
         accounting under APB No. 16 (that but for the nature of such payment
         would otherwise be eligible for such accounting treatment), the
         Committee shall have the ability to substitute Common Stock (subject to
         any substitution or adjustment under Section 3) with a Fair Market
         Value (as of the date immediately prior to the date of delivery of such
         stock) equal to the cash that would otherwise be payable hereunder for
         such cash settlement;

                  (iv) the Committee may also make additional adjustments and/or
         settlements of outstanding Awards granted to Eligible Employees as it
         deems appropriate and consistent with the Plan's purposes and shall,
         with respect to any right granted under this Plan that would make a
         Change in Control transaction ineligible for pooling-of-interests
         accounting under APB No. 16 (that but for the nature of such grant
         would otherwise be eligible for such accounting treatment), equitably
         adjust such Award or, if necessary to preserve such accounting
         treatment, otherwise modify or eliminate such right (as determined by
         the Committee in its sole discretion);

                  (v) all Deferred Stock Units credited to a Share Account shall
         be converted immediately prior to the Change in Control into Common
         Stock on a one-for-one basis, with fractional shares converted to cash
         and each Nonemployee Director's Share Account shall be transferred or
         distributed as soon as practicable following the Change in Control to
         the Nonemployee Director; and

                  (vi) the Board may also make additional adjustments and/or
         settlements of outstanding Nonqualified Stock Options and/or Deferred
         Stock Units granted to Nonemployee Directors as it deems appropriate
         and consistent with the Plan's purposes and shall, with respect to any
         such Nonqualified Stock Option granted under this Plan that would make
         a Change in Control transaction ineligible for pooling-of-interests
         accounting under APB No. 16 (that but for the nature of such grant
         would otherwise be eligible for such accounting treatment), equitably
         adjust such Nonqualified Stock Option or, if necessary to preserve such
         accounting treatment, otherwise modify or eliminate such Nonqualified
         Stock Option (as determined by the Board in its sole discretion).

         (b) Definition of Change in Control. For purposes of the Plan, a
"Change in Control" shall mean the happening of any of the following events:

                  (i) an acquisition by any individual, entity or group (within
         the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
         "Person") of beneficial ownership (within the meaning of Rule 13d-3
         promulgated under the Exchange Act) of 20% or more of either (A) the
         then outstanding shares of common stock of the Company (the
         "Outstanding Company Common Stock") or (B) the combined voting power of
         the then outstanding voting securities of the Company entitled to vote
         generally in the election of directors (the "Outstanding Company Voting
         Securities"); excluding, however, the following: (A) any acquisition
         directly from the Company, other than an acquisition by virtue of the
         exercise of a conversion privilege unless the security being so
         converted was itself acquired directly from the Company, (B) any
         acquisition by the Company or by HEI, NICC, Liberty or CEA or one of
         their subsidiaries, (C) any acquisition by any

                                      -18-
<PAGE>   19

employee benefit plan (or related trust) sponsored or maintained by the Company
or any entity controlled by the Company, (D) any acquisition pursuant to a
transaction which complies with clauses (A), (B) and (C) of subsection (iii) of
this Section 10(b), or (E) any acquisition, immediately following which HEI (or
one of its Affiliates) holds more than 50% of the beneficial ownership of the
voting power of the Outstanding Company Voting Securities; or

         (ii) a change in the composition of the Board such that the individuals
who, as of the effective date of the Plan, constitute the Board (such Board
shall be hereinafter referred to as the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; provided, however, for purposes
of this Section 10(b), that any individual who becomes a member of the Board
subsequent to the effective date of the Plan, whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of those individuals who are members of the Board and who were also
members of the Incumbent Board (or deemed to be such pursuant to this proviso)
shall be considered as though such individual were a member of the Incumbent
Board; but, provided further, that any such individual whose initial assumption
of office occurs as a result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board shall not be so considered as a
member of the Incumbent Board; or

         (iii) consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company
("Corporate Transaction"); excluding, however, a Corporate Transaction pursuant
to which (A) all or substantially all of the individuals and entities who are
the beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Corporate
Transaction will beneficially own, directly or indirectly, more than 50% of,
respectively, the outstanding shares of common stock, and the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation resulting from
such Corporate Transaction (including, without limitation, a corporation which
as a result of such transaction owns the Company or all or substantially all of
the Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such
Corporate Transaction, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (B) no Person (other than the
Company, any employee benefit plan (or related trust) of the Company or such
corporation resulting from such Corporate Transaction or HEI, NICC, Liberty or
CEA (or one of their subsidiaries)) will beneficially own, directly or
indirectly, 20% or more of, respectively, the outstanding shares of common stock
of the corporation resulting from such Corporate Transaction or the combined
voting power of the outstanding voting securities of such corporation entitled
to vote generally in the election of directors except to the extent that such
ownership existed prior to the Corporate Transaction, and (C) individuals who
were members of the Incumbent Board will constitute at least a majority of the
members of the board of directors of the corporation resulting from such
Corporate Transaction; or

                                      -19-
<PAGE>   20

                  (iv) the approval by the stockholders of the Company of a
         complete liquidation or dissolution of the Company.

         (c) Change in Control Price. For purposes of the Plan, "Change in
Control Price" means the higher of (i) the highest reported sales price, regular
way, of a share of Common Stock in any transaction reported on The Nasdaq Stock
Market or national exchange on which such shares are listed during the 60-day
period prior to and including the date of a Change in Control or (ii) if the
Change in Control is the result of a tender or exchange offer or a Corporate
Transaction, the highest price per share of Common Stock paid in such tender or
exchange offer or Corporate Transaction; provided, however, that in the case of
Incentive Stock Options and Stock Appreciation Rights relating to Incentive
Stock Options, the Change in Control Price shall be in all cases the Fair
Market Value of the Common Stock on the date such Incentive Stock Option or
Stock Appreciation Right is exercised. To the extent that the consideration paid
in any such transaction described above consists all or in part of securities or
other noncash consideration, the value of such securities or other noncash
consideration shall be determined in the sole discretion of the Board.

SECTION 11. FORFEITURE OF AWARDS

         Notwithstanding anything in the Plan to the contrary, the Committee
may, in its sole discretion, in the event of serious misconduct by a participant
other than a Nonemployee Director (including, without limitation, any misconduct
prejudicial to or in conflict with the Company or its Subsidiaries or
Affiliates, or any Termination of Employment for Cause), or any activity of a
participant in competition with the business of the Company or any Subsidiary or
Affiliate, (a) cancel any outstanding Award granted to such participant, in
whole or in part, whether or not vested or deferred, and/or (b) if such conduct
or activity occurs within one year following the exercise or payment of an
Award, require such participant to repay to the Company any gain realized or
payment received upon the exercise of payment of such Award (with such gain or
payment valued as of the date of exercise or payment). Such cancellation or
repayment obligation shall be effective as of the date specified by the
Committee. Any repayment obligation may be satisfied in Common Stock or cash or
a combination thereof (based upon the Fair Market Value of Common Stock on the
day of payment), and the Committee may provide for an offset to any future
payments owed by the Company or any Subsidiary or Affiliate to the participant
if necessary to satisfy the repayment obligation. The determination of whether a
participant has engaged in a serious breach of conduct or any activity in
competition with the business of the Company or any Subsidiary or Affiliate
shall be determined by the Committee in good faith and in its sole discretion.
This Section 11 shall have no application following a Change in Control.

SECTION 12. TERM, AMENDMENT AND TERMINATION

         The Plan will terminate on the tenth anniversary of the effective date
of the Plan. Awards outstanding under the Plan as of such date shall not be
affected or impaired by the termination of the Plan.

                                      -20-
<PAGE>   21

         The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would impair the rights of an
optionee under a Stock Option or a recipient of a Stock Appreciation Right,
Restricted Stock Award, Performance Unit Award or other stock-based Award
theretofore granted without the optionee's or recipient's consent, except such
an amendment made to comply with applicable law, stock exchange rules or
accounting rules. In addition, no such amendment shall be made without the
approval of the Company's stockholders to the extent such approval is required
by applicable law or stock exchange rules.

         Subject to the repricing and option term restrictions in Section
2(c)(v), the Committee may amend the terms of any Stock Option or other Award
theretofore granted, prospectively or retroactively, but no such amendment shall
be permitted that would cause an Award that is, or is intended to be, a
Qualified Performance-Based Award to fail or cease to qualify for the Section
162(m) Exemption, nor shall any such amendment impair the rights of any holder
without the holder's consent except such an amendment made to cause the Plan or
Award to comply with applicable law, NASDAQ rules, stock exchange rules or
accounting rules.

         Subject to the above provisions, the Board shall have the authority to
amend the Plan to take into account changes in law and in tax and accounting
rules as well as other developments, and to grant Awards which qualify for
beneficial treatment under such rules without stockholder approval.

SECTION 13. UNFUNDED STATUS OF PLAN

         It is presently intended that the Plan constitute an "unfunded" plan
for incentive and deferred compensation. The Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Common Stock or make payments; provided, however, that
unless the Committee otherwise determines, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.

SECTION 14. GENERAL PROVISIONS

         (a) The Committee may require each person purchasing or receiving
shares pursuant to an Award to represent to and agree with the Company in
writing that such person is acquiring the shares without a view to the
distribution thereof. The certificates for such shares may include any legend
which the Committee deems appropriate to reflect any restrictions on transfer.

         Notwithstanding any other provision of the Plan or agreements made
pursuant thereto, the Company shall not be required to issue or deliver any
certificate or certificates for shares of Common Stock under the Plan prior to
fulfillment of all of the following conditions:

                  (1) listing or approval for listing upon notice of issuance of
         such shares on The Nasdaq Stock Market or securities exchange as may at
         the time be the principal market for the Common Stock;

                  (2) any registration or other qualification of such shares of
         the Company under any state or federal law or regulation, or the
         maintaining in effect of any such

                                      -21-
<PAGE>   22

         registration or other qualification which the Committee shall, in its
         absolute discretion upon the advice of counsel, deem necessary or
         advisable; and

                  (3) obtaining any other consent, approval, or permit from any
         state or federal governmental agency which the Committee shall, in its
         absolute discretion after receiving the advice of counsel, determine to
         be necessary or advisable.

         (b) Nothing contained in the Plan shall prevent the Company or any
Subsidiary or Affiliate from adopting other or additional compensation
arrangements for its employees.

         (c) The Plan shall not constitute a contract of employment, and
adoption of the Plan shall not confer upon any employee any right to continued
employment, nor shall it interfere in any way with the right of the Company or
any Subsidiary or Affiliate to terminate the employment of any employee at any
time.

         (d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for federal income tax
purposes with respect to any Award under the Plan, the participant shall pay to
the Company, or make arrangements satisfactory to the Company regarding the
payment of, any federal, state, local or foreign taxes of any kind required by
law to be withheld with respect to such amount. Unless otherwise determined by
the Company, statutorily required withholding obligations may be settled with
Common Stock, including Common Stock that is part of the Award that gives rise
to the withholding requirement. The obligations of the Company under the Plan
shall be conditional on such payment or arrangements, and the Company and its
Affiliates shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment otherwise due to the participant. The Committee may
establish such procedures as it deems appropriate, including making irrevocable
elections, for the settlement of withholding obligations with Common Stock.

         (e) Reinvestment of dividends in additional Restricted Stock or
Deferred Stock Units at the time of any dividend payment shall only be
permissible if sufficient shares of Common Stock are available under Section 3
for such reinvestment (taking into account then outstanding Stock Options and
other Awards).

         (f) The Committee shall establish such procedures as it deems
appropriate for a participant to designate a beneficiary to whom any amounts
payable in the event of the participant's death are to be paid or by whom any
rights of the participant, after the participant's death, may be exercised.

         (g) In the case of a grant of an Award to any employee of a Subsidiary
of the Company, the Company may, if the Committee so directs, issue or transfer
the shares of Common Stock, if any, covered by the Award to the Subsidiary, for
such lawful consideration as the Committee may specify, upon the condition or
understanding that the Subsidiary will transfer the shares of Common Stock to
the employee in accordance with the terms of the Award specified by the
Committee pursuant to the provisions of the Plan. All shares of Common Stock
underlying Awards that are forfeited or canceled shall revert to the Company.

                                      -22-
<PAGE>   23

         (h) The Plan and all Awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Delaware,
without reference to principles of conflict of laws.

         (i) Except as otherwise provided in Section 5(e) or 6(c)(v) or by the
Committee, Awards under the Plan are not transferable except by will or by the
laws of descent and distribution.

         (j) In the event an Award is granted to an Eligible Employee who is
employed or providing services outside the United States and who is not
compensated from a payroll maintained in the United States, the Committee may,
in its sole discretion, modify the provisions of the Plan as they pertain to
such individual to comply with applicable foreign law.

SECTION 15. EFFECTIVE DATE OF PLAN

         The Plan shall be effective as of the date it is adopted by the Board,
subject to the approval by at least a majority of the outstanding shares of
Common Stock of the Company.

SECTION 16. DIRECTOR STOCK OPTIONS

         (a) Each Nonemployee Director shall be eligible to receive a grant or
grants of Nonqualified Stock Options as determined by the Board. The Board may,
by resolution, determine that Nonqualified Stock Options shall be automatically
granted to (i) a Nonemployee Director on the first day after such Nonemployee
Director's first election or appointment as a director of the Company and (ii)
to each Nonemployee Director (who is not elected or appointed as a director at
such annual meeting of the stockholders of the Company) upon, or a certain
number of days following, each annual meeting of the stockholders of the
Company. Each Nonemployee Director as of the initial public offering of the
Common Stock shall be granted automatically on the date of such initial public
offering a Nonqualified Stock Option to purchase 7,800 shares of Common Stock
(the "Initial Director Options").

         (b) An automatic stock option grant shall be made hereunder only if as
of the date of grant the Nonemployee Director has not been an employee of the
Company or any of its Subsidiaries or Affiliates for any part of the preceding
fiscal year.

         (c) In the event that the number of shares of Common Stock available
for future grant under the Plan is insufficient to make all automatic grants to
be made on a given date, then all Nonemployee Directors entitled to a grant on
such date shall share ratably in the number of options on shares available for
grant under the Plan.

         (d) Each vested stock option shall remain outstanding until the tenth
anniversary of the date of grant; provided, that in the event a Nonemployee
Director's membership on the Board terminates (other than for Cause), any vested
stock option held by the Nonemployee Director shall be canceled three years
after such termination of Board membership to the extent not sooner exercised;
provided, however, that any vested stock option held by a Nonemployee Director
who has served as a Nonemployee Director for fewer than three consecutive years
shall be canceled one year after such termination of Board membership to the
extent not sooner

                                      -23-
<PAGE>   24

exercised. If a Nonemployee Director incurs a termination of membership on the
Board for Cause, such Nonemployee Director's stock options shall be
automatically canceled immediately.

         (e) Except as expressly provided in this Section 16, any stock option
granted hereunder shall be subject to the terms and conditions of the Plan as if
the grant were made pursuant to Section 5 hereof.

SECTION 17. DIRECTOR DEFERRED STOCK UNITS

         (a) At the discretion of the Board, each Nonemployee Director may
irrevocably elect annually (a "Deferral Election") to defer receiving all or a
portion of the Fees that would otherwise be transferred to such Nonemployee
Director. A Nonemployee Director who makes a Deferral Election shall have a
number of stock units representing the amount of deferred shares of Common Stock
credited to a "Share Account" maintained by the Company in the form of "Deferred
Stock Units."

         (b) Amount and Timing of Deferral Election. The Deferral Election shall
be in writing and delivered to the Secretary of the Company on or prior to
December 31 of the calendar year immediately preceding the calendar year in
which the applicable Fees are to be earned; provided, however, that a
Nonemployee Director may make a Deferral Election with respect to Fees earned
subsequent to such election during (i) the 30-day period immediately following
the commencement of his or her directorship or (2) the 30-day period immediately
following the effective date of the Plan. A Deferral Election, once made, shall
be irrevocable for the calendar year with respect to which it is made and shall
remain in effect for future calendar years unless modified or revoked by a
subsequent Deferral Election in accordance with the provisions hereof.

         (c) Cash Dividends and Share Accounts. Whenever cash dividends are paid
by the Company on outstanding Common Stock, there shall be credited to a
Nonemployee Director's Share Account additional Deferred Stock Units equal to
(i) the aggregate dividend that would be payable on outstanding shares of Common
Stock equal to the number of Deferred Stock Units in such Share Account on the
record date for the dividend, divided by (ii) the Fair Market Value of the
Common Stock on the last trading business day immediately preceding the date of
payment of the dividend.

         (d) Commencement of Distributions. A Nonemployee Director's Share
Account shall become distributable as soon as practicable following the date the
Nonemployee Director terminates service as a director. Distributions from a
Share Account shall be made by converting Deferred Stock Units into Common Stock
on a one-for-one basis, with payment of fractional shares to be made in cash.

         (e) Manner of Distributions. In his or her Deferral Election, each
Nonemployee Director shall elect to receive distribution of his or her Share
Account either in a single distribution or in two to 15 substantially equal
annual distributions. In the event of a Nonemployee Director's death,
distribution of the remaining portion of the Nonemployee Director's Share
Account will be made to the Nonemployee Director's estate or beneficiary, as

                                      -24-
<PAGE>   25

applicable, in a single distribution as soon as practicable following the
Nonemployee Director's death.

                                      -25-

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