Document:

<PAGE>
                                                                    EXHIBIT 10.2

                                 PROMISSORY NOTE

Amount:  $75,000,000                            Date:   As of December 14, 2001
                                                        Wilmington, Delaware

SECTION 1. SUBORDINATION.

         The indebtedness evidenced by this instrument is subordinated to other
indebtedness pursuant to, and to the extent provided in, and is otherwise
subject to the terms of each of (a) the Subordination and Support Agreement
dated as of August 31, 2001, as amended or supplemented by and among Crown Media
Holdings, Inc., a Delaware company (the "Company"), various of its subsidiaries,
JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), as Agent for
various Lenders and the Issuing Bank, and Hallmark Cards, Incorporated (the
"Bank Subordination Agreement") and (b) the Subordination and Support Agreement
dated as of December 17, 2001 by and among the Company, various of its
subsidiaries, Crown Media Trust, Hallmark Cards, Incorporated and JPMorgan Chase
Bank, as the trustee under the Indenture (defined below) and other parties
signatory thereto ("Subordination and Support Agreement"). Even though HC Crown
Corp., a Delaware corporation ("HC"), is not a signatory to the Bank
Subordination Agreement, it agrees to be bound by the terms thereof as if it
were a "Subordinated Creditor" as that term is defined in the Bank Subordination
Agreement and as if the obligations of the Company pursuant to this Promissory
Note were explicitly enumerated as being included in the Subordinated
Obligations as defined in the Bank Subordination Agreement.

SECTION 2. PROMISE TO PAY.

          For value received, the Company and those Guarantors signatory hereto
("Guarantors"), hereby promise to pay to the order of HC, at such place as HC
may, from time to time specify in writing, the principal amount outstanding
under this Note together with all fees and accrued interest no later than the
Maturity Date and in accordance with Section 6 hereof.

SECTION 3. DEFINITIONS.

         "Affiliate" means, with respect to any party, any entity which directly
or indirectly holds a controlling interest in, is controlled by or under common
control with such party.

         "Applicable Interest Rate" means for any day with respect to any LIBOR
loan, the amount set forth in Section 5 hereof.

         "Bank Facility" means that certain Credit, Security, Guaranty and
Pledge Agreement of the Company with JPMorgan Chase Bank (formerly known as The
Chase Manhattan Bank) as Agent, and certain Lenders identified therein dated as
of August 31, 2001 as amended or supplemented.

         "Company" has the meaning specified in Section 1 hereof.

         "Debentures" means the debentures authenticated and delivered pursuant
to the Indenture.

         "Equity Proceeds" has the meaning specified in the Subordination and
Support Agreement.

         "Free Cash Flow" has the meaning specified in the Subordination and
Support Agreement.

                                       1
<PAGE>

         "HC" has the meaning specified in Section 1 hereof.

         "Indebtedness" means all obligations of borrowed money (including
capital leases, notes payable and letters of credit) of the Company, its
subsidiaries, or of any acquired business (without duplication) including
contingent liabilities.

         "Indenture" means that certain Indenture dated as of December 17, 2001
between the Company and JPMorgan Chase Bank as Trustee, whereby the Company has
issued its 6.75% Subordinated Debentures due 2007.

         "LIBOR" means the three month rate published the first day of each
quarter in the Wall Street Journal.

         "Limited Guarantee" has the meaning specified in the Bank Facility.

         "Maturity Date" means the earlier of (x) December 21, 2007, (y) such
time as the Maximum Amount has been reduced to zero and (z) six months
subsequent to the later of the date of the redemption of the Debentures and the
Contingent Appreciation Certificates and the termination of the commitments and
all obligations under the Bank Facility.

         "Maximum Amount" means as of the time of any computation, $75,000,000
less the sum of (i) any loan amounts previously advanced to the Company and
still outstanding under this Note, (ii) any amounts the Company receives under
the Replacement Hallmark Cards Letter of Credit and any amounts advanced under
the Limited Guarantee, (iii) Free Cash Flow applied in the manner permitted by
Section 6(c) of the Subordination and Support Agreement to reduce the commitment
hereunder, (iv) Equity Proceeds applied in the manner permitted by Section 6(c)
of the Subordination and Support Agreement to reduce the commitment hereunder
and (v) any portion of the Note refinanced with any indebtedness which is
subordinate or junior in right of payment to all obligations under the Bank
Facility and the Debentures and the Contingent Appreciation Certificates
(pursuant to a written agreement to that effect executed by the Person to whom
such indebtedness is owed). HC shall have no obligation to make loans under this
Note in an amount in excess of the Maximum Amount. To the extent that the
Maximum Amount decreases subsequent to the making of any loans hereunder, the
amount by which the outstanding principal amount of the loans exceeds the
Maximum Amount shall be subject to repayment to the extent allowed by the terms
of the Bank Subordination Agreement and the Subordination and Support Agreement.

         "Replacement Hallmark Cards Letter of Credit" has the meaning specified
in the Bank Facility.

SECTION 4. USE OF PROCEEDS.

         The proceeds of this Note shall be used: (i) to acquire, distribute and
market film and television related properties, and (ii) for general corporate
purposes.

SECTION 5. AVAILABILITY.

         HC agrees to make the Maximum Amount available to the Company in
accordance with the terms hereof only at such time as the Company shall have
borrowed all amounts then available to it under the Bank Facility (giving effect
to all of the conditions precedent, restrictions and other terms of the Bank
Facility).

                                       2
<PAGE>

SECTION 6. INTEREST.

         SECTION 6.1 Loans provided hereunder shall bear interest at a rate
         equal to LIBOR plus three percent (3%). Interest shall be payable
         quarterly as defined in Section 7.1. Upon the occurrence of an Event of
         Default, the Applicable Interest Rate plus 2% per annum shall apply on
         all outstanding loans.

         SECTION 6.2 All calculations of interest and fees shall be made on the
         basis of actual number of days elapsed in a 360-day year.

         SECTION 6.3 In the event the interest provisions of this Note shall
         result, because of (a) the reduction of principal, or (b) any other
         reason related or unrelated to such interest provisions at any time
         during the life of the loan or any combination of (a) and (b), in an
         effective rate of interest which, for any period of time, exceeds the
         limits of the usury laws or any other law applicable to the loan
         evidenced hereby, all sums in excess of those lawfully collectible as
         interest for the period in question shall, without further agreement or
         notice between or by any party hereto, be applied to principal
         immediately upon receipt of such monies by HC with the same force and
         effect as though the Company had specifically designated such extra
         sums to be so applied to principal and HC had agreed to accept such
         extra payment(s) as a premium-free prepayment.

SECTION 7. REPAYMENT AND MANDATORY PREPAYMENT.

         SECTION 7.1 The obligation evidenced by this Note shall be repaid on
         the basis of interest only installments. Such payments shall accrue as
         of the end of each calendar quarter occurring during the term hereof
         and shall be paid on or before forty-five (45) days after the end of
         each such calendar quarter. The Company shall pay to HC a single
         principal payment (together with all accrued and unpaid interest) on
         the Maturity Date, if not previously paid.

         SECTION 7.2 To the extent permitted by the Bank Facility and the
         Subordination and Support Agreement, the Company shall have the
         obligation within five (5) days of receipt thereof to apply any Free
         Cash Flow and Equity Proceeds realized since the date hereof to (i)
         prepay any outstanding balance of this Note or (ii) reduce the Maximum
         Amount hereunder by such amount by delivery of a written notice to that
         effect. Such mandatory prepayment shall be without premium or penalty
         and the Company shall not be entitled to reborrow such amounts.

         SECTION 7.3 The Company shall have the privilege at any time and from
         time to time, to prepay this Note in whole or in part without premium
         or penalty to the extent permitted by the Bank Subordination Agreement,
         the Bank Facility and the Subordination and Support Agreement.

SECTION 8. FEES.

         In consideration of the loans provided hereunder, the Company agrees to
pay to HC a commitment fee of one and one-half percent (1.5%) of the initial
Maximum Amount, which at the Company's option may be paid in common stock of the
Company which shall be valued at the average closing price of the common stock
for the fifteen trading days prior to the date the fee is due. The fee shall be
payable in arrears in four equal installments on the last business day of each
of March, June, September and December 2002.

                                       3
<PAGE>

SECTION 9. COVENANTS.

         The Company shall deliver to HC not later than 45 days after the end of
         each fiscal quarter and not later than 90 days in the event of the
         fiscal year end:

         (i)      A consolidated balance sheet of the Company and its
                  subsidiaries as of the end of the most recently ended fiscal
                  year together with the consolidated statements of income,
                  shareholder's equity, and cashflows corresponding to the same;
                  and

         (ii)     A balance sheet of the Company as of the end of the most
                  recently ended fiscal quarter (together with the consolidated
                  statements of income, shareholder's equity, and cashflows
                  corresponding to such period), and, if HC so requests, each
                  such statement shall be certified by the chief financial
                  officer or the chief accounting officer of the Company as to
                  fairness of presentation, generally accepted accounting
                  principles and consistency (subject only to normal year-end
                  adjustments).

SECTION 10. EVENTS OF DEFAULT.

         Subject to the terms of the Subordination and Support Agreement
referred to in Section 1 above, each of the following shall constitute an event
of default hereunder (an "Event of Default"):

         (i)      The failure of the Company to make any payment of interest
                  hereunder when the same is due and payable or to pay the
                  principal balance in the lump sum or balloon payment when the
                  same is due and payable (except when such payment is
                  prohibited by the Bank Subordination Agreement, the Bank
                  Facility or the Subordination and Support Agreement), and such
                  failure to pay continues for a period of five (5) days or more
                  after written notice thereof from HC;

         (ii)     The Company shall be in default with respect to the Bank
                  Facility or the Indenture and such default could accelerate
                  the maturity of the indebtedness thereunder and such default
                  is not cured or waived within the grace period provided
                  therein.

SECTION 11. REMEDIES.

         Subject to the terms of the Subordination and Support Agreement, upon
the occurrence of an Event of Default and at any time thereafter during the
continuance of such Event of Default hereunder, HC shall have the right to
declare the entire unpaid amount of principal and interest hereunder immediately
due and payable in full without presentation, demand or protest, each of which
is hereby waived by the Company and Guarantors.

SECTION 12. WAIVERS.

         SECTION 12.1 The failure by HC to exercise any right or remedy
         available hereunder in the Event of Default shall in no event be
         construed as a waiver or release of the same. Likewise, HC shall not,
         by any act or omission or commission, be deemed to waive any right
         hereunder unless such waiver is evidenced in writing and signed by HC,
         and then only to the extent specifically set forth in such writing.
         Moreover, a waiver with respect to any one event shall not be construed
         as continuing or as a bar to or waiver of HC's rights or remedies with
         respect to any subsequent event.

                                       4
<PAGE>

         SECTION 12.2 The Company and Guarantors expressly waive presentment for
         payment, notice of dishonor, protest, notice of protest, diligence of
         collection, and each other notice of any kind, and hereby consent to
         any number of renewals or extensions of time for payment hereof, which
         renewals and extensions shall not affect the liability of the Company.

         SECTION 12.3 The Company and Guarantors hereby waive and release all
         errors, defects and imperfections in any proceeding instituted by HC
         under the terms hereof as well as all benefits that might accrue to the
         Company or Guarantors by virtue of any present or future laws exempting
         any property, real, personal or mixed, or any part of the proceeds
         arising from any sale of such property, from attachment, levy or sale
         under execution, or providing for any stay of execution, exemption from
         civil process, or extension of time for payment; and the Company and
         Guarantors agree that any real estate that may be levied upon pursuant
         to a judgment obtained by virtue hereof, or any writ of execution
         issued thereon, may be sold upon any such writ in whole or in part or
         in any other manner desired by HC.

SECTION 13. NOTICES.

         Each notice required to be given to any party hereunder shall be in
writing and shall be deemed to have been sufficiently given for all purposes
when sent by certified or registered mail, return receipt requested, to the
party at its respective address as follows:

               COMPANY:      Crown Media Holdings, Inc.
                             6430 S. Fiddlers Green Circle
                             Greenwood Village, CO 80111
                             Attn: Mark Thompson

               HC:           HC Crown Corporation
                             103 Foulk Road, Suite 214
                             Wilmington, DE 19803
                             Attn: David C. Eppes, Vice President and Controller

SECTION 14. ASSIGNABILITY.

         This Agreement shall be binding upon and inure to the benefit of the
Company and HC and their respective successors and assigns; provided, however,
that this Agreement, or any portion thereof, may not be assigned by the Company
without the written consent of HC.

SECTION 15. MODIFICATIONS.

         This Note may be modified only in a writing signed by the Company and
HC. Any amendment, extension of time or any other modification shall not affect
Guarantors' obligations hereunder.

SECTION 16. GOVERNING LAW.

         This Note shall be governed by and construed according to the laws of
the State of Delaware without regard to the conflict of laws provisions thereof.

                                       5
<PAGE>

SECTION 17. HEADINGS.

         The heading preceding the text of each Section hereof is inserted
solely for convenience of reference and shall not constitute a part of this
Note, nor shall the same affect the meaning, construction of effect hereof.

SECTION 18. SEVERABILITY.

         If any provision of this Note or the application thereof is declared by
a court of competent jurisdiction to be invalid or unenforceable, the remaining
provisions hereof shall be unaffected and remain valid and enforceable to the
fullest extent permitted by law.

         IN WITNESS WHEREOF, the undersigned officers have executed this Note as
of the day and year first above written thereby legally binding such party to
the terms hereof.

HC CROWN CORP.                          CROWN MEDIA HOLDINGS, INC.

By     /s/ Judith Whittaker             By     /s/ C. Stanford
      ----------------------------            --------------------------------

Name:  Judith Whittaker                 Name:  Charles Stanford
      ----------------------------            --------------------------------

Title: Vice President                   Title: Exec. V.P.
      ----------------------------            --------------------------------

CROWN MEDIA INTERNATIONAL, INC.         CROWN MEDIA UNITED STATES, LLC

By       /s/ C. Stanford                By     /s/ C. Stanford
      ----------------------------            --------------------------------

Name:    Charles Stanford               Name:  Charles Stanford
      ----------------------------            --------------------------------

Title:   Exec. V.P.                     Title: V.P.
      ----------------------------            --------------------------------

                                       6<PAGE>
                                                                    EXHIBIT 10.3

                          SECURITIES PURCHASE AGREEMENT

                          dated as of December 17, 2001

                                  by and among

                           CROWN MEDIA HOLDINGS, INC.,

                                CROWN MEDIA TRUST

                                       and

                           the INVESTORS NAMED HEREIN

<PAGE>
<Table>
<S>      <C>                                                                                           <C>
1.       DEFINITIONS....................................................................................1

2.       PURCHASE OF SECURITIES.........................................................................7

         2.1      Purchase of Securities................................................................7

         2.2      Certificates..........................................................................7

         2.3      Use of Proceeds.......................................................................8

3.       THE INVESTORS' REPRESENTATIONS AND WARRANTIES..................................................8

         3.1      Existence; Authorization; Legal Proceedings...........................................8

         3.2      Investment Intention..................................................................9

         3.3      Accredited Investor...................................................................9

         3.4      Restricted Securities.................................................................9

         3.5      Tax Residency.........................................................................9

         3.6      Treatment of Units....................................................................9

         3.7      No Disposition of Shares by Investor.................................................10

         3.8      ERISA................................................................................10

4.       THE ISSUERS' REPRESENTATIONS AND WARRANTIES...................................................10

         4.1      Authorized and Outstanding Shares of Capital Stock...................................10

         4.2      Securities Laws......................................................................11

         4.3      Corporate Existence; Compliance with Law.............................................11

         4.4      No Violations........................................................................12

         4.5      Preferred Securities.................................................................12

         4.6      Common Securities....................................................................13

         4.7      Contingent Appreciation Certificate Agreement........................................13

         4.8      Contingent Appreciation Certificates.................................................13

         4.9      Exercise of Contingent Appreciation Certificates.....................................13

         4.10     Purchase Agreement...................................................................13

         4.11     Indenture............................................................................13

         4.12     Debentures...........................................................................14

         4.13     Guarantee............................................................................14

         4.14     Subordination and Support Agreement..................................................14

         4.15     No Conflicts.........................................................................14

         4.16     Subsidiaries.........................................................................15
</Table>

                                       i
<PAGE>

                                TABLE OF CONTENTS
                                   (CONTINUED)

<Table>
<Caption>
                                                                                                       PAGE
<S>               <C>                                                                                  <C>
         4.17     SEC Documents; Financial Statements..................................................15

         4.18     No Violations........................................................................16

         4.19     Authorizations.......................................................................16

         4.20     Benefit Plans........................................................................16

         4.21     Taxes................................................................................17

         4.22     No Litigation........................................................................17

         4.23     Brokers..............................................................................17

         4.24     Patents, Trademarks, Copyrights and Licenses.........................................17

         4.25     Ownership of Property................................................................18

         4.26     Investment Company...................................................................18

         4.27     Registration Rights..................................................................18

         4.28     No Material Adverse Change...........................................................18

         4.29     Assumed Hallmark Obligations and Existing Indebtedness...............................18

         4.30     No Material Untrue Statement or Omission.............................................19

         4.31     Certificates.........................................................................19

         4.32     Treatment of Units...................................................................19

5.       CLOSING DELIVERIES............................................................................20

         5.1      Indenture............................................................................20

         5.2      Declaration..........................................................................20

         5.3      Contingent Appreciation Certificate Agreement........................................20

         5.4      Contingent Appreciation Certificates.................................................20

         5.5      Debentures...........................................................................20

         5.6      Preferred Securities Guarantee.......................................................20

         5.7      Subordination and Support Agreement..................................................20

         5.8      Trust Securities and Debenture Purchase Agreement....................................20

         5.9      Credit, Security, Guaranty and Pledge Agreement and Consent..........................20

         5.10     Stock Certificates...................................................................21

         5.11     Opinion of Wachtell, Lipton, Rosen & Katz............................................21

         5.12     Opinion of Judith C. Whittaker.......................................................23

         5.13     Opinion of Charles Stanford..........................................................24
</Table>

                                       ii
<PAGE>

                                TABLE OF CONTENTS
                                   (CONTINUED)

<Table>
<Caption>
                                                                                                       PAGE
<S>               <C>                                                                                  <C>
         5.14     Opinion of Richards, Layton & Finger, P.A. ..........................................26

         5.15     Opinion to Company...................................................................28

         5.16     Use of Proceeds......................................................................28

         5.17     Fees.................................................................................28

         5.18     Good Standing Certificates...........................................................28

6.       INDEMNIFICATION...............................................................................28

         6.1      Indemnification......................................................................28

         6.2      General Indemnification Procedures...................................................29

         6.3      Tax Treatment of Indemnity Payments..................................................30

7.       MISCELLANEOUS.................................................................................30

         7.1      Successors and Assigns...............................................................30

         7.2      Amendments; Etc. ....................................................................30

         7.3      Entire Agreement.....................................................................31

         7.4      Severability.........................................................................31

         7.5      Governing Law........................................................................31

         7.6      Waiver of Jury Trial.................................................................31

         7.7      Notices..............................................................................31

         7.8      Survival.............................................................................32

         7.9      Section and Other Headings...........................................................33

         7.10     Counterparts.........................................................................33

         7.11     Publicity............................................................................33

         7.12     Remedies.............................................................................33

ANNEX A...............................................................................................A-1

Schedule 2.3 Use of Proceeds..........................................................................S-1

Schedule 3.5 Non-U.S. Person..........................................................................S-2

Schedule 3.8 ERISA....................................................................................S-3

Schedule 4.1(c) Preemptive Rights.....................................................................S-4

Schedule 4.16 Subsidiaries............................................................................S-5

Schedule 4.20 Benefit Plans...........................................................................S-6

Schedule 4.22 Litigation..............................................................................S-8
</Table>

                                      iii
<PAGE>

                                TABLE OF CONTENTS
                                   (CONTINUED)

<Table>
<Caption>
                                                                                                       PAGE
<S>                                                                                                    <C>
Schedule 4.29(a) Assumed Obligations.................................................................S-10

Schedule 4.29(b) Outstanding Indebtedness............................................................S-11
</Table>

                                       iv
<PAGE>

                          SECURITIES PURCHASE AGREEMENT

         SECURITIES PURCHASE AGREEMENT, dated as of December 17, 2001, by and
among Crown Media Trust, a Delaware statutory business trust (the "Trust"),
Crown Media Holdings, Inc., a Delaware corporation (the "Company," and together
with the Trust, the "Issuers") and the Investors named on the signature pages
hereto (the "Investors").

                                   WITNESSETH:

         WHEREAS, the Issuers have agreed to issue and sell to the Investors,
and the Investors have agreed to purchase from the Issuers, upon the terms and
conditions hereinafter provided, Units (as defined herein), consisting of: (i)
one preferred security, representing undivided beneficial interests in the
assets of Trust and having such terms as are set forth in the Declaration (each
a "Preferred Security") and (ii) one contingent appreciation certificate (each a
"Contingent Appreciation Certificate") to receive cash or to purchase 38.261
(the "Index Amount") shares (the "Certificate Shares") of Class A Common Stock,
par value $0.01 per share (the "Class A Common Stock") of the Company at a price
per share of $13.07 (the "Index Price"). The Units, Preferred Securities and
Contingent Appreciation Certificates shall be referred to herein as the
"Securities."

         WHEREAS, pursuant to the terms of a Preferred Securities Guarantee
Agreement, dated as of December 17, 2001 (the "Guarantee"), the Company has
agreed to guarantee, on a subordinated basis, the obligations of the Trust with
respect to the Preferred Securities, including with respect to distributions and
amounts payable on the Preferred Securities upon liquidation or redemption or
otherwise, to the extent of the Trust's assets.

         WHEREAS, the Trust is subject to the provisions of the Amended and
Restated Declaration of Trust (the "Declaration") among the Company, as Sponsor,
JP Morgan Chase Bank, as property trustee (the "Property Trustee"), Chase
Manhattan Bank USA, National Association, as Delaware trustee (the "Delaware
Trustee"), three individual trustees who are officers of the Company (the
"Regular Trustees," and together with the Property Trustee and Delaware Trustee,
the "Trustees"), for the benefit of the holders of the Securities, from time to
time.

         NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, it is agreed as follows:

1. DEFINITIONS

         "Affiliate" has the meaning given to that term in Rule 405 under the
Securities Act or any successor rule thereunder.

         "Agreement" means this Securities Purchase Agreement, including all
amendments, modifications and supplements hereto and any appendices, exhibits
and

                                       1
<PAGE>

schedules hereto or thereto, and shall refer to such agreement as the same may
be in effect at the time such reference becomes operative.

         "Assumed Obligations" means the obligations set forth in Schedule
4.29(a) hereof.

         "Authorization" has the meaning set forth in Section 4.19 hereof.

         "Beneficial Ownership" (including correlative meanings) means the
ownership of a security (as defined in the Securities Act) as defined under Rule
13d-3 under the Exchange Act.

         "Business Day" means any day other than a day on which Federal and
State banking institutions in The Borough of Manhattan, the City of New York are
authorized or obligated by law, executive order or regulation to close.

         "Certificate Shares" has the meaning set forth in the recitals to this
Agreement.

         "Class A Common Stock" has the meaning set forth in the recitals to
this Agreement.

         "Class B Common Stock" means the Company's Class B Common Stock, par
value $0.01 per share.

         "Code" means the Internal Revenue Code of 1986, as amended.

         "Commission" means the U.S. Securities and Exchange Commission.

         "Common Securities" means the common securities of the Trust
representing undivided beneficial interests in the assets of the Trust having
such terms as are set forth in the Declaration.

         "Common Stock" means collectively the Class A Common Stock and the
Class B Common Stock and any recapitalization or reclassification of either such
class of Common Stock.

         "Company" has the meaning set forth in the first paragraph of this
Agreement.

         "Company SEC Documents" has the meaning set forth in Section 4.17(a)
hereof.

         "Contingent Appreciation Certificate" has the meaning set forth in the
recitals to this Agreement.

         "Contingent Appreciation Certificate Agreement" means the Contingent
Appreciation Certificate Agreement dated as of the Issue Date, between the
Company and the Investors.

                                       2
<PAGE>

         "Control Group" has the meaning set forth in Section 4.20 hereof.

         "Crown Media" means Crown Media International, Inc., a Delaware
corporation and a subsidiary of the Company.

         "Debentures" means $273,196,000 in aggregate principal amount of the
Company's 6.75% Subordinated Debentures due 2007.

         "Declaration" has the meaning set forth in the recitals to this
Agreement.

         "Delaware Trustee" has the meaning set forth in the recitals to this
Agreement.

         "DGCL" means the General Corporation Law of the State of Delaware.

         "Environmental Laws" means all foreign, federal, state and local laws,
statutes, ordinances and regulations, now or hereafter in effect, and in each
case as amended or supplemented from time to time, and any judicial or
administrative interpretation thereof, including any applicable judicial or
administrative order, consent decree or judgment, relative to the applicable
real estate, relating to the regulation and protection of human health and
safety, the environment and natural resources (including ambient air, surface
water, groundwater, wetlands, land surface or subsurface strata, wildlife,
aquatic species and vegetation) or hazardous or toxic substances or wastes,
pollutants or contaminants. Environmental Laws include but are not limited to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended (42 U.S.C. Section 9601 et seq.) ("CERCLA"); the Hazardous
Material Transportation Act, as amended (49 U.S.C. Section 1801 et seq.); the
Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C.
Section 136 et seq.); the Resource Conservation and Recovery Act, as amended (42
U.S.C. Section 6901 et seq.) ("RCRA"); the Toxic Substance Control Act, as
amended (15 U.S.C. Section 2601 et seq.); the Clean Air Act, as amended (42
U.S.C. Section 740 et seq.); the Federal Water Pollution Control Act, as amended
(33 U.S.C. Section 1251 et seq.); the Occupational Safety and Health Act, as
amended (29 U.S.C. Section 651 et seq.) ("OSHA"); and the Safe Drinking Water
Act, as amended (42 U.S.C. Section 300f et seq.), and any and all regulations
promulgated thereunder, and all analogous state and local counterparts or
equivalents and any transfer of ownership notification or approval statutes that
relate to worker health and safety or the environment.

         "ERISA" means the Employee Retirement Income Security Act of 1974 (or
any successor legislation thereto), as amended from time to time and any
regulations promulgated thereunder.

         "Exchange Act" means the Securities Exchange Act of 1934, as amended,
from time to time, or any successor statute, and all rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.

         "GAAP" means generally accepted accounting principles in the United
States, as in effect on the Issue Date.

                                       3
<PAGE>

         "Governmental Authority" means any nation or government, any state,
local or other political subdivision thereof, any court, arbitrator, official,
agency, department or other Person exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government, or any
foreign, federal, state or local governmental or regulatory agency, authority,
commission or instrumentality.

         "Group" has the meaning given such term in Section 13(d)(3) of the
Exchange Act.

         "Guarantee" has the meaning set forth in the recitals to this
Agreement.

         "Hallmark Cards" means Hallmark Cards, Incorporated, a Missouri
corporation, and its successors and assigns.

         "herein", "hereof" and "hereunder", and other words of similar import,
refer to this Agreement as a whole and not to any particular Article, Section or
other subdivision.

         "Indemnified Party" has the meaning set forth in Section 6.2(a) hereof.

         "Indemnifying Party" has the meaning set forth in Section 6.2(a)
hereof.

         "Indemnity Payment" has the meaning set forth in Section 6.3 hereof.

         "Indenture" means the Indenture, dated as of December 17, 2001, by and
among the Company and the Indenture Trustee, as such indenture may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof.

         "Indenture Trustee" means the Indenture Trustee named in the Indenture.

         "Index Amount" has the meaning set forth in the recitals to this
agreement.

         "Index Price" has the meaning set forth in the recitals to this
Agreement.

         "Initial Declaration of Trust" means the Declaration of Trust of the
Trust, dated December 7, 2001, among the Company, as Sponsor, and the Trustees.

         "Intellectual Property Rights" has the meaning set forth in Section
4.24 hereof.

         "Investment Company Act" has the meaning set forth in Section 4.26
hereof.

         "Investors" has the meaning set forth in the first paragraph of this
Agreement.

         "Issue Date" means December 17, 2001.

         "Issuers" has the meaning set forth in the first paragraph of this
Agreement.

         "Losses" has the meaning set forth in Section 6.1 hereof.

                                       4
<PAGE>

         "Material Adverse Effect" means any change, occurrence or effect that
is materially adverse to the business, prospects, financial condition or results
of operations of the Company and its Subsidiaries (including the Trust) taken as
a whole, or materially adversely affects the ability of any such party to
perform its obligations under any Transaction Documents.

         "Minimum Return Amount" has the meaning set forth in the Contingent
Appreciation Certificate Agreement.

         "PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.

         "Permit" means any license, franchise, permit, consent, approval,
waiver or certificate.

         "Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, entity or
government (whether federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, body or
department thereof).

         "PPM" means the private placement memorandum relating to the Securities
delivered by the Company to the Investors in connection herewith.

         "Preferred Securities" has the meaning set forth in the recitals to
this Agreement.

         "Property Trustee" has the meaning set forth in the recitals to this
Agreement.

         "Purchase Price" has the meaning set forth in Section 2.1 hereof.

         "Regular Trustees" has the meaning set forth in the recitals to this
Agreement.

         "SEC" means the U.S. Securities and Exchange Commission, or any
successor thereto.

         "Securities" has the meaning set forth in the recitals to this
Agreement.

         "Securities Act" means the Securities Act of 1933, as amended, from
time to time, or any successor statute, and all rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.

         "Significant Subsidiary" has the meaning assigned to such term in
Regulation S-X promulgated by the SEC.

         "Stock" means all shares, options, warrants, general or limited
partnership interests, limited liability company membership interests,
participations or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited

                                       5
<PAGE>

liability company or equivalent entity whether voting or nonvoting, including,
without limitation, common stock, preferred stock, or any other "equity
security" (as such term is defined in Rule 3a11-1 under the Exchange Act).

         "Subordination and Support Agreement" means the Subordination and
Support Agreement, dated as of December 17, 2001, among the Trust, the Company,
Hallmark Cards, the Indenture Trustee, the Property Trustee and the holders of
Contingent Appreciation Certificates identified therein.

         "Subsidiary" means, with respect to any Person, (i) any corporation at
least a majority of whose voting power of outstanding Stock shall at the time be
owned, directly or indirectly, by such Person or by one or more Subsidiaries of
such Person, (ii) any general partnership, joint venture or similar entity, at
least a majority of whose outstanding voting partnership or similar voting
interests shall at the time be owned by such Person, or by one or more
Subsidiaries of such Person and (iii) any limited partnership of which such
Person or any of its Subsidiaries is a general partner.

         "Third-Party Claim" has the meaning set forth in Section 6.2(a) hereof.

         "Trading with the Enemy Act" means the Trading with the Enemy Act of
1917, as amended.

         "Transaction Documents" means this Agreement, the Indenture, the
Contingent Appreciation Certificate Agreement, the Debentures, the Contingent
Appreciation Certificates, the Guarantee, the Declaration, certificates
representing the Trust Securities and the Subordination and Support Agreement.

         "Trust" has the meaning set forth in the first paragraph of this
Agreement.

         "Trust Securities" means the Common Securities and the Preferred
Securities, collectively.

         "Trust Securities and Debenture Purchase Agreement" means the Trust
Securities and Debenture Purchase Agreement, dated as of the date hereof,
between the Company and Trust, relating to the exchange by the Company and the
Trust of the Trust Securities and Debentures.

         "Trustees" has the meaning set forth in the recitals to this Agreement.

         "Units" means the units, each comprised of one Trust Security and one
Contingent Appreciation Certificate.

         Any accounting term used in this Agreement shall have, unless otherwise
specifically provided herein, the meaning customarily given such term in
accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
consistently applied. That certain

                                       6
<PAGE>

terms or computations are explicitly modified by the phrase "in accordance with
GAAP" shall in no way be construed to limit the foregoing.

         The words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole, including any exhibits and schedules
hereto, as the same may from time to time be amended, modified or supplemented,
and not to any particular section, subsection or clause contained in this
Agreement. The words "includes" or "including" and other words of similar import
means "including, without limitation," unless the context expressly otherwise
requires.

         Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, the feminine and the neuter. Any reference to a party hereto shall
include the successors and assigns of such party.

2. PURCHASE OF SECURITIES

                  2.1 Purchase of Securities. On the terms, provisions and
conditions set forth herein and in reliance upon the representations and
warranties contained herein, each Investor hereby purchases, and the Issuers
hereby issue and sell to each Investor, that number of Units set forth below
each such Investor's name on the signature pages hereto at the price per Unit
equal to $1,000, or $265,000,000 in the aggregate (such price, in the aggregate,
the "Purchase Price").

                  2.2 Certificates. The certificate or certificates representing
the Units, the Preferred Securities and the Contingent Appreciation Certificates
shall be subject to a legend restricting transfer under the Securities Act, such
legend to be substantially as follows:

EACH HOLDER OF THE SECURITIES REPRESENTED HEREBY, BY ITS ACCEPTANCE THEREOF,
WILL BE DEEMED TO HAVE ACKNOWLEDGED, REPRESENTED TO AND AGREED WITH THE COMPANY
AND THE TRUST THAT SUCH HOLDER UNDERSTANDS AND ACKNOWLEDGES THAT (1) THE
SECURITIES AND ANY UNDERLYING SECURITIES OR SECURITIES ISSUABLE PURSUANT THERETO
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY OTHER APPLICABLE
SECURITIES LAWS AND ARE NOT FREELY TRANSFERABLE WITHOUT REGISTRATION UNDER OR AN
EXEMPTION FROM THE SECURITIES ACT, (2) THE SECURITIES ARE BEING PURCHASED FOR
THE ACCOUNT OF THE HOLDER WITHOUT A VIEW TO DISTRIBUTE, OR FOR OFFER OR SALE IN
CONNECTION WITH ANY DISTRIBUTION OF, THE SECURITIES IN VIOLATION OF THE
SECURITIES ACT OR ANY OTHER APPLICABLE SECURITIES LAWS AND (3) IN THE ABSENCE OF
REGISTRATION, THE SECURITIES CAN ONLY BE TRANSFERRED PURSUANT TO AN EXEMPTION
UNDER THE SECURITIES ACT AND UPON DELIVERY OF SUCH CERTIFICATIONS AND AN OPINION
OF COUNSEL

                                       7
<PAGE>

REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH EFFECT AND IN ACCORDANCE WITH ANY
OTHER APPLICABLE SECURITIES LAWS AND THAT SUCH HOLDER WILL NOTIFY THE TRANSFEREE
OF SUCH RESALE RESTRICTIONS.

                  2.3 Use of Proceeds. (a) The Trust shall issue the Trust
Securities to the Company in exchange for the Debentures pursuant to an
agreement between the Trust and the Company and the Company shall simultaneously
sell the Units, each of which is comprised of one Preferred Security and one
Contingent Appreciation Certificate, to the Investors.

                        (b) The Company shall use the proceeds of the sale of
the Units to the Investors as set forth in Schedule 2.3. The Company covenants
that no part of the proceeds from the sale of the Debentures hereunder will be
used, directly or indirectly, for the purpose of buying or carrying any margin
stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System (12 CFR 207), or for the purpose of buying or carrying or
trading in any securities under such circumstances as to involve the Company in
a violation of Regulation X of said Board (12 CFR 224) or to involve any broker
or dealer in a violation of Regulation T of said Board (12 CFR 220). The Company
warrants that it has no margin stock and the Company does not have any present
intention to have any margin stock. As used in this Section, the terms "margin
stock" and "purpose of buying or carrying" shall have the meanings assigned to
them in said Regulation U.

3. THE INVESTORS' REPRESENTATIONS AND WARRANTIES

         Each Investor (as to itself only and not as to any other Investor)
makes the following representations and warranties to the Company and the Trust:

                  3.1 Existence; Authorization; Legal Proceedings. The Investor
is a corporation, limited liability company or limited partnership duly
organized, validly existing and in good standing under the laws of the state of
its organization. The execution, delivery and performance by the Investor of
this Agreement and the other Transaction Documents to be executed by the
Investor, and the consummation of the transactions contemplated hereby and
thereby: (i) are within such Investor's corporate, limited liability company or
partnership power; (ii) have been duly authorized by all necessary corporate,
limited liability company or partnership action; and (iii) are not in
contravention of any provision of such Investor's certificate of incorporation,
by-laws, certificate of formation, limited liability company agreement,
certificate of limited partnership or limited partnership agreement, as
applicable. The Investor is not required to obtain any Authorization from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Transaction Documents to which it is a
party. There are no legal or governmental proceedings pending, or to the best
knowledge of the Investor, threatened against such Investor that would have the
effect of preventing or delaying the Investor from entering into any of the
transactions contemplated by the Transaction Documents.

                                       8
<PAGE>

                  3.2 Investment Intention. The Investor is purchasing the Units
pursuant to this Agreement for its own account, for investment purposes and not
with a present view to the distribution thereof in violation of the Securities
Act. The Investor confirms that the Issuers have made available to such Investor
and its representatives and agents the opportunity to ask questions of the
officers and management employees of the Issuers and to acquire such additional
information about the business and financial condition of the Issuers as the
Investor has requested.

                  3.3 Accredited Investor. Each Investor is an "accredited
investor" (as that term is defined in Rule 501 of Regulation D under the
Securities Act) and by reason of its business and financial experience, it has
such knowledge, sophistication and experience in business and financial matters
as to be capable of evaluating the merits and risks of the prospective
investment, is able to bear the economic risk of such investment and is able to
afford a complete loss of such investment for the foreseeable future.

                  3.4 Restricted Securities. The Investor understands that the
Securities to be purchased by it pursuant to this Agreement are characterized as
"restricted securities" under the Securities Act inasmuch as they are being
acquired from the Company in a transaction not involving a public offering, and
that under the Securities Act such securities may be resold without registration
under the Securities Act only in certain limited circumstances. The Investor is
familiar with Rule 144 of the Securities Act, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.

                  3.5 Tax Residency. Except as disclosed on Schedule 3.5, the
Investor is a "United States person" under the Code.

                  3.6 Treatment of Units. The Investor hereby agrees to treat,
for United States federal income tax purposes, the Preferred Securities and the
related Contingent Appreciation Certificates that comprise the Units, as unitary
debt instruments that are subject to the United States Treasury regulations
governing contingent payment debt instruments. Notwithstanding any other
provision in this Agreement and the other applicable Transaction Documents to
the contrary, in the event that on or after the Issue Date, (a) an Investor
determines (and the Company agrees in writing, which agreement shall not be
unreasonably withheld) that there is a change in the laws of the United States
which change occurs on or after the Issue Date and would require an Investor to
characterize, for United States federal income tax purposes, the Preferred
Securities and the related Contingent Appreciation Certificates that comprise
the Units as other than unitary debt instruments that are subject to the United
States Treasury regulations governing contingent payment debt instruments, or
(b) there is a "determination" within the meaning of Section 1313(a)(1) of the
Code with respect to an Investor that requires an Investor to characterize, for
United States federal income tax purposes, the Preferred Securities and the
related Contingent Appreciation Certificates that comprise the Units as other
than unitary debt instruments that are subject to the United States Treasury
regulations governing contingent payment debt instruments, then that Holder
shall not be bound pursuant to the preceding sentence or the documents referred
to in this sentence to

                                       9
<PAGE>

treat, for United States federal income tax purposes, the Preferred Securities
and the related Contingent Appreciation Certificates that comprise the Units as
unitary debt instruments that are subject to the United States Treasury
regulations governing contingent payment debt instruments. In the event that the
Debentures are distributed by the Trust to holders of Securities, the above
provisions of this Section 3.6 shall apply with respect to the Debentures so
distributed in lieu of the Preferred Securities.

                  3.7 No Disposition of Shares by Investor. Except as set forth
on Schedule 3.7, during the 30 days immediately preceding the date hereof,
neither the Investor nor any of its Affiliates (other than either (a) for the
account of others or (b) for the account of the Investor or its Affiliates in
trading conducted pursuant to internal procedures and policies to maintain
confidentiality as between the functions of the Investor assessing the
investment in the Units and such trading functions) has purchased, acquired,
sold, transferred, conveyed, mortgaged or otherwise disposed of, or undertaken,
agreed or promised (whether orally or in writing) to acquire, purchase, sell,
transfer, convey, mortgage or otherwise dispose of (i) any shares of Class A
Common Stock, (ii) any option, warrant, convertible or derivative security or
instrument, exercisable to, convertible into, or exchangeable for, Class A
Common Stock or (iii) any other right in respect of any Class A Common Stock.

                  3.8 ERISA. Except as disclosed in Schedule 3.8 hereto, no
portion of the assets used by the Investor to acquire the Units constitutes
"plan assets" as defined under Title I of ERISA. Each Investor hereby agrees,
and any purchaser or other transferee of any Unit shall agree, that it will not
sell or otherwise transfer any Unit or any interest therein to any "benefit plan
investor" (as such term is defined in Department of Labor regulation Section
2510.3-101) or Excluded Person (as defined below) unless (i) each purchaser or
other transferee of any Unit represents and warrants as to the percentage of the
assets used by such purchaser or transferee to acquire or hold the Units
constituting assets of any benefit plan investor and agrees that it shall not
sell or otherwise transfer any Unit without complying with this sentence, (ii)
the Units held in the aggregate by benefit plan investors immediately after such
transfer are less than 25% of the total number of Units (excluding any Units
held by the Trustees and their affiliates (collectively, "Excluded Persons"))
and (iii) the Company and the Trust agree in writing with respect to clause (ii)
above. Any purported sale or other transfer that violates the preceding sentence
shall be null and void. The Company, the Trust and each Investor shall be
entitled to conclusively rely upon the representations under or pursuant to this
Section 3.8 by each Investor or any purchaser or other transferee of any Unit
without further inquiry or investigation.

4. THE ISSUERS' REPRESENTATIONS AND WARRANTIES

         The Issuers, jointly and severally, make the following representations
and warranties to the Investors:

                  4.1 Authorized and Outstanding Shares of Capital Stock. (a) As
of December 6, 2001, the authorized capital stock of the Company consisted of
(i)

                                       10
<PAGE>

200,000,000 shares of Class A Common Stock, $0.01 par value per share, of which
73,907,788 shares were issued and outstanding; (ii) 120,000,000 shares of Class
B Common Stock, $0.01 par value per share, of which 30,670,422 shares were
issued and outstanding; and (iii) 10,000,000 shares of Preferred Stock, $0.01
par value per share, none of which were issued and outstanding. All of such
issued and outstanding shares are validly issued, fully paid and non-assessable.
No shares of capital stock are held by the Company as treasury stock as of the
date of this Agreement. True, correct and complete copies of the certificate of
incorporation and by-laws of the Company have been made available to each
Investor.

                        (b) As of the Issue Date, the authorized capital stock
of the Trust consisted of (i) 8,196 Common Securities, stated liquidation amount
of $1,000 per security, and (ii) 265,000 Preferred Securities, stated
liquidation amount of $1,000 per security, none of either of which were issued
and outstanding.

                        (c) There are no outstanding subscriptions, rights,
warrants, options, calls, convertible securities, commitments of sale or liens
granted or issued by the Company or any of its Subsidiaries relating to or
entitling any Person to purchase or otherwise to acquire any Stock of the
Company or any of its Subsidiaries, except as disclosed in the Company SEC
Documents and except as further reflected on Schedule 4.1(c) hereto.

                  4.2 Securities Laws. The offer, issuance, sale and delivery of
the Securities contemplated by this Agreement and the Contingent Appreciation
Certificate Agreement, as provided in this Agreement and the Contingent
Appreciation Certificate Agreement, and the Debentures pursuant to the
Indenture, as provided in the Indenture, are exempt from the registration
requirements of the Securities Act and all applicable state securities laws, and
are otherwise in compliance with such laws. Neither the Trust nor the Company
nor any Person acting on their behalf has taken or will take any action
(including any offering of any securities of the Trust or the Company under
circumstances which would require the integration of such offering with the
offering of the Securities contemplated by this Agreement and the Contingent
Appreciation Certificate Agreement under the Securities Act and the rules and
regulations of the SEC thereunder) which would subject the offering, issuance or
sale of the Securities contemplated by this Agreement and the Contingent
Appreciation Certificate Agreement, to the registration requirements of Section
5 of the Securities Act.

                  4.3 Corporate Existence; Compliance with Law. (a) Each of the
Company and its Significant Subsidiaries has been duly organized, is validly
existing as a corporation or limited liability company, as applicable, in good
standing under the laws of its respective jurisdiction of organization and has
the requisite corporate or other similar power and authority to carry on its
business as it is currently being conducted and to own, lease and operate its
properties except where the failure to have such power and authority,
individually or in the aggregate, would not have a Material Adverse Effect; and
the Company has the requisite corporate power and authority to authorize the
offering of the Contingent Appreciation Certificates, the Guarantee and the
Debentures, to execute,

                                       11
<PAGE>

deliver and perform this Agreement and the other Transaction Documents, and to
issue, sell and deliver the Debentures, the Guarantee and the Certificate Shares
and to pay the Minimum Return Amount; and each of the Company and the
Significant Subsidiaries is duly qualified and is in good standing as a foreign
corporation or limited liability company, as the case may be, authorized to do
business in each jurisdiction where the operation, ownership or leasing of
property or the conduct of its business requires such qualification, except
where the failure to be so qualified, individually or in the aggregate, would
not have a Material Adverse Effect.

                        (b) The Trust is a statutory business trust duly created
and validly existing as a statutory business trust and in good standing under
the Delaware Business Trust Act; with the trust power and authority to own
property and conduct its business as it is currently being conducted, and has
conducted and will conduct no business other than the transactions contemplated
by this Agreement; and the Trust has the requisite trust power and authority to
authorize the offering of the Trust Securities, to execute, deliver and perform
this Agreement and the other Transaction Documents to which it is a party, and
to issue, sell and deliver the Trust Securities as contemplated by this
Agreement; the Trust is not a party to or bound by any agreement or instrument
other than this Agreement, the Declaration, the Subordination and Support
Agreement and the agreements and instruments contemplated by the Transaction
Documents; assuming (i) all factual statements concerning the issuance of the
Securities and Debentures contained in, and all factual representations made in,
the Transaction Documents by parties other than the Company, are true, correct
and complete and (ii) all terms of the Transaction Documents are complied with,
the Trust is not under current law, classified as an association taxable as a
corporation for United States federal income tax purposes; and the Trust is not
a party to or subject to any action, suit or proceeding of any nature.

                  4.4 No Violations. Neither the Company nor any of its
Subsidiaries, including the Trust, is now, or after giving effect to the
transactions contemplated hereby, will be (a) in violation of its respective
charter or bylaws (or other organizational documents), or (b) in violation of
applicable law, judgment or decree or in default in the performance of any
obligation, agreement, covenant or condition contained in any bond, debenture,
note or any other evidence of indebtedness or any indenture, mortgage, deed of
trust or other contract, lease or other instrument (i) to which the Company or
any Subsidiary is a party or by which any of them is bound or (ii) to which any
of the property or assets of the Company or any Subsidiary is subject, except,
with respect to clause (b) in the case of the Company and the Trust, and either
clause (a) or (b) in the case of any Subsidiary, such violation or default by a
Subsidiary, as would not have a Material Adverse Effect.

                  4.5 Preferred Securities. The Preferred Securities have been
duly authorized by the Trust, and, when issued and delivered to the Investors
against payment therefor as provided herein, will be duly and validly issued and
fully paid and non-assessable undivided beneficial interests in the assets of
the Trust; the issuance of the Preferred Securities is not subject to preemptive
or other similar rights; the Preferred Securities will have the rights set forth
in the Declaration, and certificates representing

                                       12
<PAGE>

the Preferred Securities, when duly executed and delivered by the Trust, will be
the valid and binding obligations of the Trust as set forth in the Declaration.

                  4.6 Common Securities. The Common Securities have been duly
and validly authorized by the Trust and when issued and delivered by the Trust
to the Company against payment therefor, will be duly and validly issued and
fully paid and non-assessable undivided beneficial interests in the assets of
the Trust; the issuance of the Common Securities is not subject to preemptive or
other similar rights; all of the issued and outstanding Common Securities of the
Trust are directly owned by the Company free and clear of any lien; and the
Trust Securities are the only interests authorized to be issued by the Trust.

                  4.7 Contingent Appreciation Certificate Agreement. The
Contingent Appreciation Certificate Agreement has been duly and validly
authorized by the Company and, when duly executed and delivered by the Company,
will be the valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except (i) as may be limited by
bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer,
reorganization, moratorium or similar laws affecting creditors' rights and
remedies generally, (ii) as to general principles of equity, regardless of
whether the same is sought in a proceeding at law or in equity, and (iii) to the
extent that a waiver of rights under any usury laws may be unenforceable.

                  4.8 Contingent Appreciation Certificates. The Contingent
Appreciation Certificates have been duly and validly authorized by the Company
and, when duly executed and delivered by the Company, will be the valid and
binding obligation of the Company, enforceable against the Company in accordance
with their terms, except (i) as may be limited by bankruptcy, insolvency,
fraudulent conveyance, fraudulent transfer, reorganization, moratorium or
similar laws affecting creditors' rights and remedies generally, and (ii) as to
general principles of equity, regardless of whether the same is sought in a
proceeding at law or in equity.

                  4.9 Exercise of Contingent Appreciation Certificates. When the
Contingent Appreciation Certificates are delivered in accordance with this
Agreement, such Contingent Appreciation Certificates will be exercisable for the
Certificate Shares in accordance with the terms of the Contingent Appreciation
Certificates; the Certificate Shares have been duly authorized and reserved for
issuance upon such exercise and, when issued upon such exercise, will be validly
issued, fully paid and nonassessable.

                  4.10 Purchase Agreement. This Agreement has been duly and
validly authorized, executed and delivered by each of the Company and the Trust
and is a valid and binding obligation of the Company and the Trust.

                  4.11 Indenture. The Indenture has been duly and validly
authorized by the Company and, when duly executed and delivered by the Company
and the Indenture Trustee, will be the valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except
(i) as may be limited by bankruptcy,

                                       13
<PAGE>

insolvency, fraudulent conveyance, fraudulent transfer, reorganization,
moratorium or similar laws affecting creditors' rights and remedies generally,
(ii) as to general principles of equity, regardless of whether the same is
sought in a proceeding at law or in equity, and (iii) to the extent that a
waiver of rights under any usury laws may be unenforceable.

                  4.12 Debentures. The Debentures have been duly and validly
authorized for issuance and sale by the Company to the Trust and, when issued
and authenticated in accordance with the terms of the Indenture and delivered
against payment therefor in accordance with the terms thereof, will be the valid
and binding obligations of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits of the Indenture,
except (i) as may be limited by bankruptcy, insolvency, fraudulent conveyance,
fraudulent transfer, reorganization, moratorium or similar laws affecting
creditors' rights and remedies generally, (ii) as to general principles of
equity, regardless of whether the same is sought in a proceeding at law or in
equity, and (iii) to the extent that a waiver of rights under any usury laws may
be unenforceable.

                  4.13 Guarantee. The Guarantee has been duly and validly
authorized by the Company and, when duly executed and delivered by the Company,
will be the valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except (i) as may be limited by
bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer,
reorganization, moratorium or similar laws affecting creditors' rights and
remedies generally and (ii) as to general principles of equity, regardless of
whether the same is sought in a proceeding at law or in equity.

                  4.14 Subordination and Support Agreement. The Subordination
and Support Agreement has been duly and validly authorized by the Company and,
when duly executed and delivered by the Company, will be the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except (i) as may be limited by bankruptcy, insolvency, fraudulent
conveyance, fraudulent transfer, reorganization, moratorium or similar laws
affecting creditors' rights and remedies generally and (ii) as to general
principles of equity, regardless of whether the same is sought in a proceeding
at law or in equity.

                  4.15 No Conflicts. (a) The execution, delivery and performance
by the Company of this Agreement and the other Transaction Documents, the
compliance by the Company with all the provisions hereof and thereof and the
consummation of the transactions contemplated hereby and thereby will not (i)
require any consent, approval, authorization or other order of, or qualification
with, any court or governmental body or agency (except such as have been
obtained or made by the Company), (ii) conflict with or constitute a breach of
any of the terms or provisions of, or a default under, the charter or by-laws of
the Company or any of its Significant Subsidiaries or any indenture, loan
agreement, mortgage, lease or other agreement or instrument to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or its property is bound, (iii) violate or conflict with Section 7
of the Exchange Act or any

                                       14
<PAGE>

regulation promulgated thereunder, including, without limitation, Regulations T,
U and X of the Board of Governors of the Federal Reserve System or with any
other material law (including the Trading with the Enemy Act, or any of the
foreign assets control regulations of the United States Treasury Department (31
CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive
order relating thereto) or any rule, regulation, judgment, order or decree of
any court or any governmental body or agency having jurisdiction over the
Company, any of its Subsidiaries or their respective property, or (iv) result in
the suspension, termination or revocation of any Authorization of the Company or
any of its Subsidiaries or any other impairment of the rights of the holder of
any such Authorization, except in the case of clause (iii) above, as would not,
individually or in the aggregate, have a Material Adverse Effect.

                        (b) The execution, delivery and performance by the Trust
of this Agreement and the other Transaction Documents to which it is a party,
the compliance by the Trust with all the provisions hereof and the consummation
of the transactions contemplated hereby will not (i) require any consent,
approval, authorization or other order of, or qualification with, any court or
governmental body or agency, (ii) conflict with or constitute a breach of any of
the terms or provisions of, or a default under, the Declaration or any
indenture, loan agreement, mortgage, lease or other agreement or instrument to
which the Trust is a party or by which the Trust or its property is bound, (iii)
violate or conflict with any material law or any rule, regulation, judgment,
order or decree of any court or any governmental body or agency having
jurisdiction over the Trust or its property, or (iv) result in the suspension,
termination or revocation of any Authorization of the Trust or any other
impairment of the rights of the holder of any such Authorization.

                  4.16 Subsidiaries. All of the outstanding Stock, including
member interests, of each of the Company's Significant Subsidiaries have been
duly authorized and validly issued and are fully paid and non-assessable, and
are owned by the Company, directly or indirectly through one or more
Subsidiaries, free and clear of any security interest, claim, lien, encumbrance
or adverse interest of any nature, except as set forth in Schedule 4.16.

                  4.17 SEC Documents; Financial Statements. (a) Each form,
report, schedule, registration statement and definitive proxy statement filed by
the Company with the SEC since January 1, 2001 and prior to the date hereof (as
such documents have been amended or supplemented prior to the date hereof, the
"Company SEC Documents"), as of their respective dates, complied in all material
respects with the applicable requirements of the Securities Act and the Exchange
Act. None of the Company SEC Documents, as of their respective dates, contains
any untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The
Company has made available to the Investors true, accurate and complete copies
of all of the Company SEC Documents. The audited consolidated financial
statements and unaudited consolidated interim financial statements of the
Company and its Subsidiaries included in such reports comply as to form in all
material

                                       15
<PAGE>

respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of the
unaudited interim financial statements, as permitted by Form 10-Q of the SEC)
and fairly present in all material respects (subject, in the case of the
unaudited interim financial statements, to normal, year-end audit adjustments)
the consolidated financial position of the Company and its Subsidiaries as at
the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended.

                        (b) No dividends or other distributions have been
declared, paid or made upon any shares of capital stock of the Company, nor have
any shares of capital stock of the Company been redeemed, retired, purchased or
otherwise acquired for value by the Company since December 31, 2000.

                  4.18 No Violations. Neither the Company nor any of its
Subsidiaries has violated any Environmental Laws, any provisions of ERISA, any
provisions of the Trading with the Enemy Act, or any provisions of the Foreign
Corrupt Practices Act or the rules and regulations promulgated thereunder,
except for such violations which, individually or in the aggregate, would not
have a Material Adverse Effect.

                  4.19 Authorizations. Each of the Company and its Subsidiaries
has such permits, licenses, consents, exemptions, franchises, authorizations and
other approvals (each, an "Authorization") of, and has made all filings with and
notices to, all governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including, without limitation,
under any applicable Environmental Laws, as are necessary to own, lease, license
and operate its respective properties and to conduct its business, except where
the failure to have any such Authorization or to make any such filing or notice
would not, individually or in the aggregate, have a Material Adverse Effect.
Each such Authorization is valid and in full force and effect and each of the
Company and its Subsidiaries is in compliance with all the terms and conditions
thereof and with the rules and regulations of the authorities and governing
bodies having jurisdiction with respect thereto; and the Company is not aware
that any event has occurred (including, without limitation, the receipt of any
notice from any authority or governing body) which allows or, after notice or
lapse of time or both, would allow, revocation, suspension or termination of any
such Authorization or results or, after notice or lapse of time or both, would
result in any other impairment of the rights of the holder of any such
Authorization; except where such failure to be valid and in full force and
effect or to be in compliance, the occurrence of any such event or the presence
of any such restriction would not, individually or in the aggregate, have a
Material Adverse Effect.

                  4.20 Benefit Plans. Schedule 4.20 hereto sets forth a list of
each material pension, retirement, savings, disability, dental, health, life,
death benefit, group insurance, profit-sharing, deferred compensation, stock
option, bonus, incentive, severance pay or other employee benefit plan, trust,
arrangement, contract, commitment,

                                       16
<PAGE>

agreement or policy sponsored or maintained by Company or its Subsidiaries, in
which present or former employees of Company or any Subsidiary participate
(collectively, the "Company Plans"). Correct and complete copies of the
following documents, which are correct and complete in all material respects,
with respect to each of the Company Plans (other than a Multiemployer Plan),
have been made available to each Investor, to the extent applicable: (i) any
plans, all material amendments thereto and related trust documents, and
amendments thereto; (ii) the most recent Forms 5500 and all schedules thereto
and the most recent actuarial report, if any; (iii) the most recent IRS
determination letter; (iv) summary plan descriptions; (v) material written
communications to employees relating to the Company Plans; and (vi) written
descriptions of all material non-written agreements relating to the Company
Plans.

                  4.21 Taxes. Except as set forth on Schedule 4.21, all federal,
state, local and foreign tax returns, reports and statements required to be
filed by the Company and its Significant Subsidiaries have been timely filed
with the appropriate Governmental Authority and all such returns, reports and
statements are true, correct and complete, except, in either case, as would not,
individually or in the aggregate, have a Material Adverse Effect. All taxes and
other impositions due and payable on such returns, reports and statements have
been paid (other than those taxes being contested in good faith or those taxes
currently payable without penalty or interest) prior to the date on which any
fine, penalty, interest or late charge may be added thereto for nonpayment
thereof, or any such fine, penalty, interest, late charge or loss has been paid,
except as would not have a Material Adverse Effect.

                  4.22 No Litigation. Except as disclosed in the Company SEC
Documents and except as disclosed on Schedule 4.22 hereto, no action, claim or
proceeding is now pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries, at law, in equity or otherwise,
before any court, board, commission, agency or instrumentality of any foreign,
federal, state, or local government or of any agency or subdivision thereof, or
before any arbitrator or panel of arbitrators which would reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect.

                  4.23 Brokers. Except for those brokers or finders to whom the
Company is solely responsible for the payment of any brokerage or finder's fees,
no broker or finder acting on behalf of the Company or any of its Subsidiaries
brought about the consummation of the transactions contemplated pursuant to this
Agreement or any of the other Transaction Documents and neither the Company nor
any of its Subsidiaries has any obligation to any Person in respect of any
brokerage or finder's fees (or any similar obligation) in connection with the
transactions contemplated by this Agreement or any of the other Transaction
Documents.

                  4.24 Patents, Trademarks, Copyrights and Licenses. The Company
and its Subsidiaries own, possess, license or can acquire on reasonable terms,
adequate trademarks, trade names and other rights to inventions, know-how,
patents, copyrights, confidential information and other intellectual property
(collectively, "Intellectual

                                       17
<PAGE>

Property Rights") necessary to conduct the business now operated by them, or
presently employed by them, and have no knowledge of, and have not received, any
notice of infringement of or conflict with asserted rights of others with
respect to any intellectual property rights that, if determined adversely to the
Company or any of its Subsidiaries, would individually or in the aggregate have
a Material Adverse Effect.

                  4.25 Ownership of Property. Except as disclosed on Schedule
4.25 hereto, the Company and its Subsidiaries have good and marketable title to
all real properties owned by them that are material to the Company and its
Subsidiaries taken as a whole and all personal properties reflected as owned in
the financial statements described in Section 4.17 and not disposed of in the
ordinary course of business since December 31, 2000, in each case that are
material to the business of the Company and its Subsidiaries taken as a whole,
in each case free from liens, encumbrances and defects that would materially
affect the value thereof or materially interfere with the use made or to be made
thereof by them; and except as disclosed on Schedule 4.25 hereto, the Company
and its Subsidiaries hold any leased real or personal property that are material
to the Company and its Subsidiaries taken as a whole under valid and enforceable
leases with no exceptions that would materially interfere with the use made or
to be made thereof by them.

                  4.26 Investment Company. Neither the Company nor the Trust is
and, after giving effect to the offering and sale of the Units and the
application of the proceeds thereof as described in Section 2.3 hereof, will be,
an "investment company" as such term is defined in the Investment Company Act of
1940, as amended (the "Investment Company Act").

                  4.27 Registration Rights. Except as disclosed in the Company
SEC Documents, there are no contracts, agreements or understandings between the
Company and any Person granting such Person the right to require the Company to
file a registration statement under the Securities Act with respect to any
securities of the Company or to require the Company, except as set forth on
Schedule 4.27. None of the rights disclosed in the Company SEC Documents or
described in Schedule 4.27 conflicts with the registration rights granted to the
Investors under the Contingent Appreciation Certificate Agreement.

                  4.28 No Material Adverse Change. Since the date as of the
Company's most recent report on Form 10-Q under the Securities Act, (i) there
has not occurred any Material Adverse Effect or any development involving a
prospective Material Adverse Effect, and (ii) neither the Company nor any of its
Significant Subsidiaries has incurred any material liability or obligation,
direct or contingent.

                  4.29 Assumed Hallmark Obligations and Existing Indebtedness.
Schedule 4.29(a) sets forth a complete and correct list of all of the "Assumed
Liabilities" identified in, and assumed by, the Company pursuant to that certain
Assignment and Assumption Agreement, dated as of September 28, 2001, between the
Company and Hallmark Entertainment Distribution LLC. Schedule 4.29(b) sets forth
a complete and

                                       18
<PAGE>

correct list of all outstanding indebtedness of the Company and its consolidated
Subsidiaries, as of the Issue Date, since which date there has been no material
change in the amounts, interest rates sinking funds, installment payments or
maturities of the indebtedness of the Company or its consolidated Subsidiaries.
Except for waivers of payment defaults with respect to amounts owed to Hallmark
Cards or its subsidiaries, neither the Company nor any consolidated Subsidiary
is in default and no waiver of any default is currently in effect, in the
payment of any principal, premium, if any, or interest on, any indebtedness of
the Company or such consolidated Subsidiary and no event or condition exists
with respect to any indebtedness of the Company or any consolidated Subsidiary
that with notice or the lapse of time, or both, would permit one or more Persons
to cause such indebtedness to become due and payable before its stated maturity
or before its regularly scheduled dates of payment.

                  4.30 No Material Untrue Statement or Omission. As of the date
hereof, neither the PPM nor any of the other materials or documents provided to
the Investors directly or indirectly by the Company in connection herewith,
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.

                  4.31 Certificates. Each certificate signed by any officer of
either the Company or the Trust and delivered to the Investors or counsel for
the Investors shall be deemed to be a representation and warranty by the Company
or the Trust, as the case may be, to the Investors as to the matters covered
thereby.

                  4.32 Treatment of Units. The Company hereby agrees to treat,
for United States Federal income tax purposes, the Preferred Securities and the
related Contingent Appreciation Certificates that comprise the Units, as unitary
debt instruments that are subject to the United States Treasury regulations
governing contingent payment debt instruments. Notwithstanding any other
provision in this Agreement and the other applicable Transaction Documents to
the contrary, in the event that on or after the Issue Date, (a) the Company
determines that there is a change in the laws of the United States which change
occurs on or after the Issue Date and would require the Company to characterize,
for United States federal income tax purposes, the Preferred Securities and the
related Contingent Appreciation Certificates that comprise the Units as other
than unitary debt instruments that are subject to the United States Treasury
regulations governing contingent payment debt instruments, or (b) there is a
"determination" within the meaning of Section 1313(a) of the Code requiring
that, for United States federal income tax purposes, the Preferred Securities
and the related Contingent Appreciation Certificates that comprise the Units be
treated as other than unitary debt instruments that are subject to the United
States Treasury regulations governing contingent payment debt instruments, then
the Company shall not be bound pursuant to the preceding sentence or the
documents referred to in this sentence to treat, for United States federal
income tax purposes, the Preferred Securities and the related Contingent
Appreciation Certificates that comprise the Units as unitary debt instruments
that are subject to the United States Treasury regulations governing contingent
payment debt instruments. If the Company

                                       19
<PAGE>

determines that there is a change in law or there is a "determination" as
described above requiring the Company to characterize the Preferred Securities
and the related Contingent Appreciation Certificates that comprise the Units as
other than unitary debt instruments that are subject to the United States
Treasury regulations governing contingent payment debt instruments pursuant to
clause (a) or (b) of the preceding sentence, the Company shall promptly notify,
in writing, the Holders. In the event that the Debentures are distributed by the
Trust to holders of Securities, the above provisions of this Section 4.32 shall
apply with respect to the Debentures so distributed in lieu of the Preferred
Securities.

5. CLOSING DELIVERIES

         The following documents shall be delivered concurrently with the
execution and delivery of this Agreement:

                  5.1 Indenture. The Indenture, executed by the Company and the
Indenture Trustee, shall be delivered to each Investor and the Trust.

                  5.2 Declaration. Each of the Initial Declaration of Trust and
the Declaration, executed by the Company, the Delaware Trustee, the Property
Trustee, and the Regular Trustees, and filed with the Secretary of State of the
State of Delaware, shall be delivered to each Investor.

                  5.3 CONTINGENT APPRECIATION CERTIFICATE AGREEMENT. The
Contingent Appreciation Certificate Agreement, executed by the parties thereto
shall be delivered to each Investor.

                  5.4 Contingent Appreciation Certificates. The Contingent
Appreciation Certificates, executed by the Company, shall be delivered to each
Investor.

                  5.5 Debentures. The Debentures, executed by the Company and
the Indenture Trustee, shall be delivered to the Trust.

                  5.6 Preferred Securities Guarantee. The Guarantee, executed by
the Company and the Preferred Guarantee Trustee named therein, shall be
delivered to the Trust and the Investors.

                  5.7 Subordination and Support Agreement. The Subordination and
Support Agreement, executed by each of the Company, Hallmark Cards, the
Investors, and the Indenture Trustee, shall be delivered to each Investor.

                  5.8 Trust Securities and Debenture Purchase Agreement. The
Trust Securities and Debenture Purchase Agreement, executed by each of the
Company and the Trust, shall be delivered to each Investor.

                  5.9 Credit, Security, Guaranty and Pledge Agreement and
Consent. The amendment and consent referenced in Section 4.15(a) hereof to the
Credit, Security,

                                       20
<PAGE>

Guaranty and Pledge Agreement, dated as of December 17, 2001, executed by each
of the Company, the Guarantors named therein, the requisite Lenders named
therein and The Chase Manhattan Bank, as Administrative Agent, shall be
delivered to each Investor.

                  5.10 Stock Certificates. (a) The Trust shall issue and deliver
to each Investor certificates representing the Preferred Securities set forth
below such Investor's name on the signature pages hereto.

                        (b) The Trust shall issue and deliver to the Company
certificates representing the Common Securities.

                  5.11 OPINION OF WACHTELL, LIPTON, ROSEN & KATZ. The Investors
shall have received an opinion, in form and substance satisfactory to the
Investors, dated as of the date hereof, of Wachtell, Lipton, Rosen & Katz,
counsel for the Company and the Trust, to the effect that:

                        (a) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of its jurisdiction of
incorporation and has the corporate power and authority to carry on its business
as it is currently being conducted and to own, lease and operate its properties;

                        (b) the Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement,
the Contingent Appreciation Certificates, the Guarantee, the Indenture and the
other Transaction Documents to which it is a party and to consummate the
transactions contemplated hereby or thereby, including without limitation, with
respect to the Company, all requisite corporate power and authority to issue,
sell and deliver the Debentures, the Contingent Appreciation Certificates, the
Guarantee and the Certificate Shares as contemplated by this Agreement;

                        (c) each of this Agreement, the Indenture, the
Contingent Appreciation Certificate Agreement, the Guarantee and the
Subordinated Support Agreement has been duly authorized, executed and delivered
by the Company; and this Agreement is the valid and binding obligation of the
Company;

                        (d) the Contingent Appreciation Certificate Agreement is
the valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms, except (i) as may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance, fraudulent transfer,
moratorium or similar laws affecting creditors' rights and remedies generally,
(ii) as to general principles of equity, regardless of whether the same is
sought in a proceeding at law or in equity, and (iii) rights to indemnification
and contribution thereunder may be limited by federal or state securities laws
or public policy relating thereto;

                        (e) the Contingent Appreciation Certificates have been
duly authorized for issuance and sale in accordance with the transactions
contemplated by this

                                       21
<PAGE>

Agreement and the Contingent Appreciation Certificate Agreement and, when issued
in accordance with the terms of such agreements and delivered against payment
therefor in accordance with the terms hereof, will be the valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except (i) as may be limited by bankruptcy, insolvency, fraudulent
conveyance, fraudulent transfer, reorganization, moratorium or similar laws
affecting creditors' rights and remedies generally, and (ii) as to general
principles of equity, regardless of whether the same is sought in a proceeding
at law or in equity;

                        (f) assuming the due authorization, execution and
delivery thereof by the Indenture Trustee, the Indenture is the valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except (i) as may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, fraudulent transfer, moratorium or
similar laws affecting creditors' rights and remedies generally, (ii) as to
general principles of equity, regardless of whether the same is sought in a
proceeding at law or in equity, and (iii) to the extent that a waiver of rights
under any usury laws may be unenforceable;

                        (g) the Debentures have been duly authorized for
issuance and sale in accordance with the transactions contemplated by this
Agreement and, when issued and authenticated in accordance with the terms of the
Indenture and delivered against payment therefor in accordance with the terms
thereof, will be the valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms and entitled to the benefits
of the Indenture, except (i) as may be limited by bankruptcy, insolvency,
fraudulent conveyance, fraudulent transfer, reorganization, moratorium or
similar laws affecting creditors' rights and remedies generally, (ii) as to
general principles of equity, regardless of whether the same is sought in a
proceeding at law or in equity, and (iii) to the extent that a waiver of rights
under any usury laws may be unenforceable;

                        (h) the Guarantee is the valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
except (i) as may be limited by bankruptcy, insolvency, fraudulent conveyance,
fraudulent transfer, reorganization, moratorium or similar laws affecting
creditors' rights and remedies generally and (ii) as to general principles of
equity, regardless of whether the same is sought in a proceeding at law or in
equity;

                        (i) when the Units are issued and delivered pursuant to
this Agreement and the Contingent Appreciation Certificate Agreement, none of
the Preferred Securities, the Contingent Appreciation Certificates, the
Debentures or the Guarantee will be of the same class (within the meaning of
Rule 144A under the Securities Act) as securities of the Company, the Trust or
any similar trust affiliated with the Company that are listed on a national
securities exchange registered under Section 6 of the Exchange Act or that are
quoted in a United States automated inter-dealer quotation system;

                                       22
<PAGE>

                        (j) the Subordination and Support Agreement is the valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except (i) as may be limited by bankruptcy,
insolvency, fraudulent conveyance, fraudulent transfer, reorganization,
moratorium or similar laws affecting creditors' rights and remedies generally
and (ii) as to general principles of equity, regardless of whether the same is
sought in a proceeding at law or in equity;

                        (k) no registration under the Securities Act or Trust
Indenture Act of 1939, as amended, of any of the Preferred Securities, the
Debentures, the Guarantee, the Contingent Appreciation Certificates or the
Certificate Shares is required for the sale of the Preferred Securities to the
Investors as contemplated hereby;

                        (l) the execution, delivery and performance of this
Agreement by the Company, the compliance by the Company with all the provisions
hereof and the consummation of the transactions contemplated hereby will not,
(A) require any consent, approval, authorization or other order of, or
qualification with, any U.S. federal, New York or Delaware (with respect to
matters relating to the Company's incorporation under the DGCL) court or
governmental body or agency (except such as have been obtained or made by the
Company or such as may be required under the securities or Blue Sky laws of the
various states), (B) conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the charter or by-laws of the Company or (C)
violate or conflict with any provision of the laws of the State of New York
(other than its securities or Blue Sky laws) or the federal laws of the United
States;

                        (m) neither the Company nor the Trust is, after giving
effect to the offering and sale of the Units and the application of the proceeds
thereof as described herein, will be, an "investment company" as such term is
defined in the Investment Company Act;

                        (n) none of the transactions contemplated by this
Agreement or the other Transaction Documents (including, without limitation, the
use of the proceeds set forth in Section 2.3) will violate or result in a
violation of Section 7 of the Exchange Act or any regulation promulgated
thereunder, including, without limitation, Regulations T, U and X of the Board
of Governors of the Federal Reserve System; and

         In rendering this opinion, such counsel may state that such opinion is
limited to matters arising under the laws of the State of New York, the DGCL and
the federal laws of the United States.

         The opinion of Wachtell, Lipton, Rosen & Katz described in this Section
5.11 shall be rendered to the Investors at the request of the Company and shall
so state therein.

                  5.12 Opinion of Judith C. Whittaker. The Investors shall have
received an opinion, dated as of the date hereof, of Judith C. Whittaker, Vice
President and General Counsel of Hallmark Cards, to the effect that:

                                       23
<PAGE>

                        (a) the Subordination and Support Agreement has been
duly authorized, executed and delivered by Hallmark Cards and the other
subordinated creditors named therein and is the valid and binding obligation of
Hallmark Cards and the other subordinated creditors named therein, enforceable
against Hallmark Cards in accordance with its terms, except (i) as may be
limited by bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer,
reorganization, moratorium or similar laws affecting creditors' rights and
remedies generally and (ii) as to general principles of equity, regardless of
whether the same is sought in a proceeding at law or in equity;

                        (b) the execution, delivery and performance of the
Subordination and Support Agreement by Hallmark Cards and the other subordinated
creditors named therein, the compliance by Hallmark Cards and the other
subordinated creditors named therein with all the provisions thereof and the
consummation of the transactions contemplated thereby will not (i) require any
consent, approval, authorization or other order of, or qualification with, any
court or governmental body or agency (except such as have been obtained or made
by Hallmark Cards), (ii) conflict with or constitute a breach of any of the
terms or provisions of, or a default under, the charter or by-laws of Hallmark
Cards or any of its Significant Subsidiaries or (iii) any indenture, loan
agreement, mortgage, lease or other agreement or instrument to which Hallmark
Cards or any of its Subsidiaries is a party or by which Hallmark Cards or any of
its Subsidiaries or their respective property is bound; except in the case of
clauses (i) through (iii), as would not have a material adverse effect on the
business, prospects, financial condition or results of operations of Hallmark
Cards and its Subsidiaries taken as a whole or on the ability of Hallmark Cards
to perform its obligations under the Subordination and Support Agreement.

         In rendering this opinion, except as noted above, such counsel may
state that such opinion is limited to matters arising under the laws of the
State of Missouri and that such counsel does not opine as to matters arising
under the laws of any other state or foreign jurisdiction.

         The opinion of Judith C. Whittaker described in this Section 5.12 shall
be rendered to the Investors at the request of the Company and shall so state
therein.

                  5.13 Opinion of Charles Stanford. The Investors shall have
received an opinion, dated as of the date hereof, of Charles Stanford, General
Counsel and Executive Vice President - Legal and Business Affairs of the
Company, to the effect that:

                        (a) Each of the Company and its Significant Subsidiaries
has been duly organized, is validly existing as a corporation or limited
liability company, as applicable, in good standing under the laws of its
respective jurisdiction of organization and has the requisite corporate or other
similar power and authority to carry on its business as it is currently being
conducted and to own, lease and operate its properties except where the failure
to have such power and authority, individually or in the aggregate, would not
have a Material Adverse Effect.

                                       24
<PAGE>

                        (b) Each of the Company and its Significant Subsidiaries
is duly qualified and is in good standing as a foreign corporation or limited
liability company, as the case may be, authorized to do business in each
jurisdiction where the operation, ownership or leasing of property or the
conduct of its business requires such qualification, except where the failure to
be so qualified, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect.

                        (c) all the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid,
non-assessable and, except as set forth in Schedule 4.1(c) to this Agreement,
not subject to any preemptive or similar rights;

                        (d) neither the Company nor any of its Significant
Subsidiaries is (A) in violation of its charter or by-laws and (B) in default in
the performance of any obligation, agreement, covenant or condition contained in
any indenture, loan agreement, mortgage, lease or other agreement or instrument
to which the Company or any Significant Subsidiary thereof is bound, except,
with respect to clause (B) only, such defaults as would not have a Material
Adverse Effect;

                        (e) to the best of such counsel's knowledge after due
inquiry, the Trust is not a party to, or bound by, any agreement or instrument
other than this Agreement, the Declaration and the agreements and instruments
contemplated by this Agreement or the Declaration;

                        (f) the execution, delivery and performance by any
Significant Subsidiary of the Company of the Transaction Documents to which such
Significant Subsidiary is a party, the compliance by such Significant Subsidiary
with all the provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby will not (A) conflict with or
constitute a breach of any of the terms or provisions of, or a default under,
(i) the charter or by-laws of such Significant Subsidiary or (ii) any indenture,
loan agreement, mortgage, lease or other agreement or instrument listed as an
exhibit to the Company SEC Documents, to which any such Significant Subsidiary
is a party or by which any such Significant Subsidiary or its property is bound,
or (B) violate or conflict with any applicable law or any rule, regulation,
judgment, order or decree of any court or any governmental body or agency having
jurisdiction over such Significant Subsidiary or its property except, with
respect to clause (A)(ii) and clause (B), such violation, conflict, breach of
default as would not have a Material Adverse Effect.

                        (g) except as disclosed in the Company SEC Documents and
except as otherwise disclosed in Schedule 4.27, there are no contracts,
agreements or understandings between the Company and any Person granting such
Person the right to require the Company to file a registration statement under
the Securities Act with respect to any securities of the Company; and

                        (h) there are no material legal or governmental
proceedings pending or after due inquiry, to such counsel's knowledge,
threatened to which the

                                       25
<PAGE>

Company or Crown Media is a party or to which any of their respective properties
is subject, except as are described in the Company SEC Documents or disclosed on
Schedule 4.22.

         In rendering this opinion, such counsel may state that such opinion is
limited to matters arising under the laws of the State of New York, the DGCL and
the federal laws of the United States and that such counsel does not opine as to
matters arising under the laws of any other state or foreign jurisdiction.

         The opinion of Charles Stanford described in this Section 5.13 shall be
rendered to you at the request of the Company and shall so state therein.

                  5.14 Opinion of Richards, Layton & Finger, P.A. The Investors
shall have received, an opinion dated as of the date hereof, of Richards, Layton
& Finger, P.A., special Delaware counsel to the Trust and the Company, to the
effect that:

                        (a) the Trust has been duly created and is validly
existing in good standing as a business trust under the Delaware Business Trust
Act;

                        (b) under the Delaware Business Trust Act and the
Declaration, the Trust has the trust power and authority (i) to own its
properties and conduct its business, all as described in the PPM, (ii) to
execute and deliver the Agreements (as defined in such opinion), and (iii) to
issue and perform its obligations under the Trust Securities, all as described
in the Declaration;

                        (c) the Declaration constitutes a valid and binding
obligation of the Company and the Trustees, enforceable against the Company and
the Trustees in accordance with its terms, except to the extent that the same
may be limited by (i) bankruptcy, insolvency, receivership, liquidation,
fraudulent transfer or conveyance, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors' rights and
remedies, (ii) general principles of equity including applicable law relating to
fiduciary duties, (regardless of whether considered and applied in a proceeding
in equity or at law), and (iii) the effect of applicable public policy on the
enforceability of provisions relating to indemnification or contribution;

                        (d) under the Delaware Business Trust Act and the
Declaration, the execution and delivery by the Trust of the Agreements, and the
performance by the Trust of its obligations thereunder, have been duly
authorized by all necessary action on the part of the Trust;

                        (e) the Common Securities are duly authorized by the
Declaration and, when issued and delivered by the Trust to the Company against
exchange therefor in accordance with the Declaration and the agreement in
respect of such exchange, will be validly issued and represent undivided
beneficial interests in the assets of the Trust;

                                       26
<PAGE>

                        (f) the Preferred Securities are duly authorized by the
Declaration and, when issued and delivered by the Trust to the Company against
exchange therefor in accordance with the Declaration and the agreement in
respect of such exchange, will be validly issued and, subject to the
qualifications set forth in paragraph (g) below, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust;

                        (g) the holders of the Preferred Securities, as
beneficial owners of the Trust, will be entitled to the same limitation of
personal liability extended to stockholders of private corporations for profit
organized under the General Corporation Law of the State of Delaware; provided
that such counsel need express no opinion as to any holder of a Preferred
Security that is, was or becomes a named Trustee of the Trust and may note that
the holders of the Preferred Securities may be obligated to make payments or
provide indemnity or security as set forth in the Declaration;

                        (h) under the Delaware Business Trust Act and the
Declaration, the issuance by the Trust of the Trust Securities is not subject to
preemptive rights;

                        (i) assuming that the Trust derives no income from or
connected with sources within the State of Delaware and has no assets,
activities (other than having a Delaware Trustee as required by the Delaware
Business Trust Act and the filing of documents with the Secretary of State of
the State of Delaware) or employees in the State of Delaware, no filing,
registration or qualification with, or authorization, approval, consent,
license, order or decree of, any Delaware court or Delaware governmental
authority or agency (other than as may be required under the securities or blue
sky laws of the State of Delaware as to which such counsel need express no
opinion) is necessary or required to be obtained by the Trust solely in
connection with issuance and sale of the Preferred Securities by the Trust in
accordance with the Declaration or the consummation of the transactions
contemplated by the Agreement;

                        (j) assuming that the Trust derives no income from or
connected with sources within the State of Delaware and has no assets,
activities (other than having a Delaware Trustee as required by the Delaware
Business Trust Act and the filing of documents with the Secretary of State of
the State of Delaware) or employees in the State of Delaware and that the Trust
is treated as a grantor trust for federal income tax purposes, the holders of
the Preferred Securities (other than those holders of Preferred Securities who
reside or are domiciled in the State of Delaware) will have no liability for
income taxes imposed by the State of Delaware solely as a result of their
participation in the Trust, and the Trust will not be liable for any income tax
imposed by the State of Delaware;

                        (k) the purchase by the Trust of the Debentures and the
distribution by the Trust of the Debentures in the circumstances contemplated by
the Declaration do not violate (i) any terms or provisions of the Certificate of
Trust or the Declaration or (ii) any applicable Delaware law or administrative
regulation; and

                                       27
<PAGE>

                        (l) based solely on an inquiry on December 13, 2001,
limited to, and solely to the extent disclosed thereupon, court dockets for
active cases of the Court of Chancery of the State of Delaware in and for New
Castle County, Delaware, of the Superior Court of the State of Delaware in and
for New Castle County, Delaware, of the United States District Court sitting in
the State of Delaware and of the United States Bankruptcy Court sitting in the
State of Delaware, we are not aware of any legal or governmental proceedings
pending to which the Trust is a party or of which any property of the Trust is
subject.

         In rendering this opinion, such counsel may state that such opinion is
limited to matters arising under the laws of the State of Delaware and that such
counsel does not opine as to matters arising under the laws of any other
jurisdiction.

         The opinion of Richards, Layton & Finger, P.A. described in this
Section 5.14 shall be rendered to the Investors at the request of the Company
and shall so state therein.

                  5.15 OPINION TO COMPANY. The Company shall have delivered to
the Investors a copy of the opinion of Wachtell, Lipton, Rosen & Katz to the
Company to the effect that the Trust will be classified as a grantor trust for
United States federal income tax purposes and not as an association subject to
tax as a corporation.

                  5.16 Use of Proceeds. Each Issuer agrees and covenants that it
will use the proceeds of the offering only for lawful purposes in accordance
with Section 2.3 hereof, as applicable and such uses shall not contravene any
applicable law or any provisions hereof.

                  5.17 Fees. The Company shall have paid the fees payable to
Credit Suisse First Boston and the reasonable legal fees and disbursements of
Weil, Gotshal & Manges LLP incurred with respect to the preparation and
negotiation of this Agreement and the other documents ancillary hereto and
reasonable legal expenses of Weil, Gotshal & Manges LLP incurred in connection
with the due diligence performed in connection with entering into this
Agreement.

                  5.18 Good Standing Certificates. The Investors shall have
received from the Company long-form good standing certificates, dated within
five (5) Business Days preceding the date hereof, and related bring-down
memoranda, dated as of the date hereof, for the Company, the Trust and each
Significant Subsidiary issued by the Secretary of State in the jurisdiction of
organization of each such entity.

6. INDEMNIFICATION

                  6.1 Indemnification. Subject to the terms and conditions of
this Section 6 and Section 7.9 hereof, the Company agrees to indemnify and hold
each Investor and each of its officers, directors and Affiliates harmless from
and against any and all liabilities, obligations, damages, losses, deficiencies,
costs, penalties and expenses (including, without limitation, reasonable
attorneys' fees) (collectively, "Losses"),

                                       28
<PAGE>

including those arising from third-party claims, arising out of, based upon,
attributable to or resulting from: (i) the failure of any of the representations
or warranties of the Company set forth in Sections 4.1 through 4.32 hereof, to
be true and correct as of the date hereof; and (ii) the breach of any covenant
or other agreement on the part of the Company under the terms of this Agreement,
in each case, to the extent not waived by such Investor.

                  6.2 General Indemnification Procedures. (a) A Person entitled
to make a claim for indemnification under Section 6.1 (an "Indemnified Party")
against a party (the "Indemnifying Party") required thereunder to indemnify such
Indemnified Party not involving a claim or action by a third party shall give
written notice of the assertion of such claim covered by such indemnity to the
Indemnifying Party, which notice shall set forth in reasonable detail, the
amount of such claim and a description of the basis for such claim with
reference to the provision of this Agreement under which liability is asserted.
In the event that any suit, action or proceedings shall be instituted by any
third party or that any claim or demand shall be asserted by any third party in
respect of which indemnification may be sought under Section 6.1 (a "Third-Party
Claim"), the Indemnified Party shall reasonably promptly cause written notice of
the assertion of such Third Party Claim of which it has knowledge to be
forwarded to the Indemnifying Party. The Indemnifying Party shall have the
right, at its sole option and expense, to be represented by counsel of its
choice and to defend against, negotiate, settle or otherwise take over control
and deal with any Third-Party Claim, and if the Indemnifying Party elects to
defend against, negotiate, settle or otherwise take over control and deal with
any Third-Party Claim, the Indemnifying Party's choice of counsel must be
reasonably satisfactory to the Indemnified Party, and the Indemnifying Party
shall within twenty (20) days of such notice (or sooner, if the nature of the
Third-Party Claim so requires) notify the Indemnified Party of its intent to do
so. If the Indemnifying Party elects not to defend against, negotiate, settle or
otherwise take over control and deal with any Third-Party Claim, fails to notify
the Indemnified Party of its election as herein provided or contests its
obligation to indemnify the Indemnified Party for such Losses under this
Agreement, the Indemnified Party may defend against, negotiate, settle or
otherwise deal with such Third-Party Claim; provided, that if the Indemnifying
Party contests its obligations to indemnify the Indemnified Party, and if it is
finally determined that any such Third-Party Claim was not a claim for which
indemnification was available under this Section 6, the Indemnified Party shall
reimburse the Indemnifying Party for any expenses advanced on its behalf;
provided, further, that the Indemnified Party shall keep the Indemnifying Party
fully informed of the facts of the Third-Party Claim and the progress of the
defense thereof. If the Indemnified Party defends any Third-Party Claim, then
the Indemnifying Party shall reimburse the Indemnified Party for the reasonable
and documented expenses of defending such Third-Party Claim with respect to
which it is entitled to be indemnified hereunder upon submission of periodic
bills. If the Indemnifying Party shall assume the defense of any Third-Party
Claim, the Indemnified Party may participate, at his, her or its own expense, in
the defense of such Third-Party Claim; provided, however, that such Indemnified
Party shall be entitled to participate in any such defense with separate counsel
at the expense of the Indemnifying Party (as provided above) if (i) so requested

                                       29
<PAGE>

by the Indemnifying Party to participate or (ii) in the reasonable opinion of
counsel to the Indemnified Party, a conflict or potential conflict exists
between the Indemnified Party and the Indemnifying Party that would make such
separate representation advisable; and provided, further, that the Indemnifying
Party shall not be required to pay for more than one such counsel for all
Indemnified Parties in connection with any Third-Party Claim. The parties hereto
agree to cooperate fully with each other in connection with the defense,
negotiation or settlement of any such Third-Party Claim.

                        (b) After any final judgment or award shall have been
rendered by a court, arbitration board or administrative agency of competent
jurisdiction and the expiration of the time in which to appeal therefrom, or a
settlement (which is reasonably acceptable to the Indemnifying Party) shall have
been consummated, or the Indemnified Party and the Indemnifying Party shall have
arrived at a mutually binding agreement with respect to a claim for
indemnification under Section 6.1, including any Third-Party Claim, the
Indemnified Party shall forward to the Indemnifying Party notice of any sums due
and owing by the Indemnifying Party pursuant to this Agreement, with respect to
such matter and the Indemnifying Party shall be required to make payment of all
sums so due and owing to such Indemnified Party by wire transfer of immediately
available funds within ten (10) Business Days after the date of such notice.

                        (c) The failure of the Indemnified Party to give
reasonably prompt notice of any Third-Party Claim shall not release, waive or
otherwise affect the Indemnifying Party's obligations with respect thereto
except to the extent that the Indemnifying Party can demonstrate actual loss and
prejudice as a result of such failure.

                  6.3 Tax Treatment of Indemnity Payments. The parties agree
that any indemnity payment made pursuant to this Section 6 (an "Indemnity
Payment") shall be treated by the parties for all tax purposes as an adjustment
to the Purchase Price.

7. MISCELLANEOUS

                  7.1 Successors and Assigns. Any Investor may assign its rights
and obligations under this Agreement to any Person; provided, however, that any
such assignee shall agree in writing to be bound hereby. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Except as provided in Section 6,
nothing in this Agreement shall create or be deemed to create any third party
beneficiary rights in any Person not a party to this Agreement.

                  7.2 AMENDMENTS; ETC. No amendment, modification, termination,
or waiver of any provision of this Agreement, and no consent to any departure by
a party to this Agreement from any provision of this Agreement, shall be
effective unless it shall be in writing making specific reference hereto and
signed and delivered by each other party to this Agreement, and then it shall be
effective only in the specific instance and for the specific purpose for which
it is given.

                                       30
<PAGE>

                  7.3 Entire Agreement. This Agreement and the other Transaction
Documents embody the entire agreement and understanding of the parties and
supersede all prior agreements or understandings with respect to the subject
matter thereof.

                  7.4 Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.

                  7.5 Governing Law. This Agreement and the obligations arising
hereunder shall be governed by, and construed and enforced in accordance with,
the laws of the State of New York applicable to contracts made and performed in
such State, without regard to the principles thereof regarding conflict of laws,
and any applicable laws of the United States of America. The Investors and the
Company agree to submit to personal jurisdiction and to waive any objection as
to venue in the federal or New York State courts located in the County of New
York, State of New York. Service of process on the Investors or the Company in
any action arising out of or relating to any of the Transaction Documents shall
be effective if mailed to such party at the address listed in Section 7.8
hereof.

                  7.6 Waiver of Jury Trial. The parties hereto waive all right
to trial by jury in any action or proceeding to enforce or defend any rights
under the Transaction Documents.

                  7.7 Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made and shall be effective (i) upon receipt if delivered personally,
(ii) upon receipt of a transmission confirmation if sent by facsimile (with a
confirming copy sent by overnight courier), and (iii) on the next Business Day
if sent by Federal Express, United Parcel Service, Express Mail or other
reputable overnight courier to the parties at the following addresses (or at
such other address for a party as shall be specified by notice):

                  If to the Company:

                  Crown Media Holdings, Inc.
                  6430 S. Fiddlers Green Circle
                  Greenwood Village, Colorado 80111
                  Attn:    Charles Stanford, Esq.
                  Fax:     (303) 221-3779

                                       31
<PAGE>

                  with copies to:

                  Hallmark Cards, Incorporated
                  2501 McGee, P.O. Box 419126
                  Mail Drop #339
                  Kansas City, MO  64108
                  Attn:    General Counsel
                  Fax:     (816) 274-7171

                  and:

                  Wachtell, Lipton, Rosen & Katz
                  51 West 52nd Street
                  New York, New York 10019
                  Attn:    Eric S. Robinson, Esq.
                  Fax:     (212) 403-2000

                  If to the Investors, at the addresses and telecopy numbers set
                  forth in Annex A hereto with copies to:

                  Weil, Gotshal & Manges LLP
                  767 Fifth Avenue
                  New York, New York  10153
                  Attn:    Rod Miller, Esq.
                  Fax:     (212) 310-8007

For purposes of the Transaction Documents, all notices, payments and other
deliveries to the Investors shall be made in accordance with Annex A hereto.

The giving of any notice required hereunder may be waived in writing by the
party entitled to receive such notice. Failure or delay in delivering copies of
any notice, demand, request, consent, approval, declaration or other
communication to the Persons designated above to receive copies shall in no way
adversely affect the effectiveness of such notice, demand, request, consent,
approval, declaration or other communication.

                  7.8 Survival. The representations and warranties contained in
Sections 4.1 through 4.32 hereof (except insofar as such representations are
expressly limited to a certain date), and the applicable obligations of the
Company to indemnify the Investors pursuant to Section 6 hereof, shall survive
the execution, delivery and acceptance hereof by the parties hereto, and any
examination or due diligence inquiry by a party hereto, until the date that is
one year after the date hereof. Except as set forth in the preceding sentence,
no other representation or warranty in this Agreement shall survive the
execution, delivery and acceptance hereof by the parties hereto. All covenants
and agreements contained in this Agreement (which terms do not include
representations and warranties) shall, except as provided in such covenant or
agreement, survive the execution, delivery and acceptance hereof by the parties
hereto and shall remain operative and in full force and effect. The obligations
to indemnify and hold harmless a Person pursuant to Section 6 hereof shall
survive only until the expiration of the applicable survival period referred to
above for the representation and warranty under which the claim for
indemnification is being made; provided, however, that such

                                       32
<PAGE>

obligations to indemnify and hold harmless shall not terminate with respect to
any such item as to which an Indemnified Party shall have, before the expiration
of the applicable period, previously made a bona fide good faith claim by
delivering a notice (stating in reasonable detail the basis of such claim) to
the Indemnifying Party.

                  7.9 Section and Other Headings. The article, section and other
headings contained in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.

                  7.10 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument.

                  7.11 Publicity. Neither the Investors nor the Company shall
issue any press release or make any public disclosure regarding the transactions
contemplated hereby unless such press release or public disclosure is approved
by the other party in advance. Notwithstanding the foregoing, each of the
parties hereto may, in documents required to be filed by it with the SEC or
other regulatory bodies, make such statements with respect to the transactions
contemplated hereby as each may be advised by counsel is legally necessary or
advisable, and may make such disclosure as it is advised by its counsel is
required by law, subject, in any such case, to advance consultation with The
Investors.

                  7.12 Remedies. Subject to Section 6, the Investor's rights and
remedies under this Agreement shall be cumulative and nonexclusive of any other
rights and remedies which the Investors may have under any other agreement,
including the other Transaction Documents, by operation of law or otherwise.

                  [Signatures Appear On Following Page.]

                                       33
<PAGE>

         IN WITNESS WHEREOF, the Company, the Trust and each Investor have
executed this Purchase Agreement as of the day and year first above written.

                                    CROWN MEDIA HOLDINGS, INC.

                                    By:  /s/  William J. Aliber
                                         ---------------------------------------
                                         Name:  William J. Aliber
                                         Title: Chief Financial Officer

                                    CROWN MEDIA TRUST

                                    By:  /s/  William J. Aliber
                                         ---------------------------------------
                                         Name:  William J. Aliber
                                         Title: Regular Trustee

                                       34
<PAGE>

                                   INVESTORS

                                   FARALLON CAPITAL PARTNERS, L.P.
                                   By:  FARALLON PARTNERS, L.L.C., its General
                                   Partner

                                   Number of Units: 22,500

                                   By:  /s/  William F. Duhamel
                                        ----------------------------------------
                                        Name:  William F. Duhamel
                                        Title: Managing Member

                                   FARALLON CAPITAL INSTITUTIONAL PARTNERS, L.P.
                                   By:  FARALLON PARTNERS, L.L.C., its General
                                   Partner

                                   Number of Units: 17,500

                                   By:  /s/  William F. Duhamel
                                        ----------------------------------------
                                        Name:  William F. Duhamel
                                        Title: Managing Member

                                   FARALLON CAPITAL INSTITUTIONAL PARTNERS II,
                                   L.P.
                                   By:  FARALLON PARTNERS, L.L.C., its General
                                   Partner

                                   Number of Units: 4,000

                                   By:  /s/  William F. Duhamel
                                        ----------------------------------------
                                        Name:  William F. Duhamel
                                        Title: Managing Member

                                       35
<PAGE>

                                   FARALLON CAPITAL INSTITUTIONAL PARTNERS III,
                                   L.P.
                                   By:  FARALLON PARTNERS, L.L.C., its General
                                   Partner

                                   Number of Units: 5,000

                                   By:  /s/  William F. Duhamel
                                        ----------------------------------------
                                        Name:  William F. Duhamel
                                        Title: Managing Member

                                   RR CAPITAL PARTNERS, L.P.
                                   By:  FARALLON PARTNERS, L.L.C., its General
                                   Partner

                                   Number of Units: 1,000

                                   By:  /s/  William F. Duhamel
                                        ----------------------------------------
                                        Name:  William F. Duhamel
                                        Title: Managing Member

                                       36
<PAGE>

                                   DLJ INVESTMENT PARTNERS II, L.P.

                                   Number of Units: 22,731

                                   By:  /s/  Edward Tam
                                        ----------------------------------------
                                        Name:  Edward Tam
                                        Title: Principal

                                   DLJ INVESTMENT PARTNERS, L.P.

                                   Number of Units: 10,102

                                   By:  /s/  Edward Tam
                                        ----------------------------------------
                                        Name:  Edward Tam
                                        Title: Principal

                                   DLJIP II Holdings, L.P.

                                   Number of Units: 7,167

                                   By:  /s/  Edward Tam
                                        ----------------------------------------
                                        Name:  Edward Tam
                                        Title: Principal

                                       37
<PAGE>

                                   TORONTO DOMINION INVESTMENTS, INC.

                                   Number of Units: 35,000

                                   By:  /S/  Martha L. Gariepy
                                        ----------------------------------------
                                        Name:  Martha L. Gariepy
                                        Title: Vice President

                                       38
<PAGE>

                                   JOHN HANCOCK LIFE INSURANCE COMPANY

                                   Number of Units: 25,000

                                   By:  /s/  Stephen J. Blewitt
                                        ----------------------------------------
                                        Name:  Stephen J. Blewitt
                                        Title: Managing Director

                                   JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

                                   Number of Units: 2,000

                                   By:  /s/  Stephen J. Blewitt
                                        ----------------------------------------
                                        Name:  Stephen J. Blewitt
                                        Title: Authorized Signatory

                                   SIGNATURE 5 L.P.

                                   Number of Units: 3,000

                                   By:  /S/  Stephen J. Blewitt
                                        ----------------------------------------
                                        Name:  Stephen J. Blewitt
                                        Title: Managing Director

                                       39
<PAGE>

                                   TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF
                                   AMERICA

                                   Number of Units: 30,000

                                   By:  /s/  Estelle Simsolo
                                        ----------------------------------------
                                        Name:  Estelle Simsolo
                                        Title: Director - Private Placement

                                       40
<PAGE>

                                   NEW YORK LIFE INSURANCE COMPANY

                                   Number of Units: 25,000

                                   By:  /s/  S. Thomas Knoff
                                        ----------------------------------------
                                        Name:  S. Thomas Knoff
                                        Title: Investment Vice President

                                       41
<PAGE>

                                   ALLSTATE LIFE INSURANCE COMPANY

                                   Number of Units: 15,000

                                   By:  /s/  Ronald A. Mendel
                                        ----------------------------------------
                                        Name: Ronald A. Mendel

                                   By:  /s/  Patricia W. Wilson
                                        ----------------------------------------
                                        Name: Patricia W. Wilson

                                               Authorized Signatories

                                       42
<PAGE>

                                   MAGNETITE ASSET INVESTORS III L.L.C.

                                   By: BLACKROCK FINANCIAL MANAGEMENT, INC.
                                   As Managing Member

                                   Number of Units: 7,500

                                   By:  /s/  Dennis M. Schaney
                                        ----------------------------------------
                                        Name:  Dennis M. Schaney
                                        Title: Managing Director

                                   MAGNETITE ASSET INVESTORS L.L.C.

                                   By: BLACKROCK FINANCIAL MANAGEMENT, INC.
                                   As Managing Member

                                   Number of Units: 7,500

                                   By:  /s/  Dennis M. Schaney
                                        ----------------------------------------
                                        Name:  Dennis M. Schaney
                                        Title: Managing Director

                                       43
<PAGE>

                                ARTHUR STREET FUND, L.P.

                                By: MLIM DivPEP I, LLC, its
                                       general partner

                                       By: MLIM Private Equity, L.P., its member
                                           manager

                                       By: Portfolio Administration & Management
                                           Ltd., its general partner

                                Number of Units: 2,028

                                By:  /s/  Piers W. W. Cheyne
                                     -------------------------------------------
                                     Name:  Piers W. W. Cheyne
                                     Title: Vice President

                                ARTHUR STREET PORTFOLIO, L.P.

                                By: MLIM DivPEP I, LLC, its managing
                                       general partner

                                       By: MLIM Private Equity, L.P., its member
                                           manager

                                       By: Portfolio Administration & Management
                                           Ltd., its general partner

                                Number of Units: 1,146

                                By:  /s/  Piers W. W. Cheyne
                                     -------------------------------------------
                                     Name:  Piers W. W. Cheyne
                                     Title: Vice President

                                       44
<PAGE>

                                VESEY STREET FUND, L.P.

                                By: MLIM DivPEP I, LLC, its
                                       general partner

                                       By: MLIM Private Equity, L.P., its member
                                           manager

                                       By: Portfolio Administration & Management
                                           Ltd., its general partner

                                Number of Units: 4,413

                                By:  /s/  Piers W. W. Cheyne
                                     -------------------------------------------
                                     Name:  Piers W. W. Cheyne
                                     Title: Vice President

                                VESEY STREET PORTFOLIO, L.P.

                                By: MLIM DivPEP I, LLC, its managing
                                       general partner

                                       By: MLIM Private Equity, L.P., its member
                                           manager

                                       By: Portfolio Administration & Management
                                           Ltd., its general partner

                                Number of Units: 5,711

                                By:  /s/  Piers W. W. Cheyne
                                     -------------------------------------------
                                     Name:  Piers W. W. Cheyne
                                     Title: Vice President

                                       45
<PAGE>

                                PASSAGE PORTFOLIO, L.P.

                                By: MLIM DivPEP I, LLC, its managing
                                       general partner

                                       By: MLIM Private Equity, L.P., its member
                                           manager

                                       By: Portfolio Administration & Management
                                           Ltd., its general partner

                                Number of Units: 1,702

                                By:  /s/  Piers W. W. Cheyne
                                     -------------------------------------------
                                     Name:  Piers W. W. Cheyne
                                     Title: Vice President

                                       46
<PAGE>

                                MONY LIFE INSURANCE COMPANY OF AMERICA

                                Number of Units: 10,000

                                By:  /s/  Leonard Mazlish
                                     -------------------------------------------
                                     Name:  Leonard Mazlish
                                     Title: Authorized Agent

                                       47
<PAGE>
                                     ANNEX A

                         FARALLON CAPITAL PARTNERS, L.P.

PAYMENT INFORMATION

1.  Wire information                   Bank:    Chase Manhattan Bank
                                       ABA#:    021-000-021
                                       F/A/O:   Goldman, Sachs & Co., NY
                                       A/C#:    930-1-011483
                                       F/F/C:   Farallon Capital Management Bulk

                                       A/C:     002-10167-3

2.  Registered Name of Securities      Farallon Capital Partners, L.P.

3.  Tax Identification Number          94-3106322

NOTICE INFORMATION

4.  Scheduled Payments,                Farallon Capital Management LLC
     Unscheduled Prepayments           1 Maritime Plaza Suite 1325
     Notice of Maturity                San Francisco, CA  94111
                                       Attn: Monica Landry, Colby Trexler,
                                       Kurt Billick and Richard Voon
                                       Fax: (415) 421-2133

5.  Financial Statements and           Farallon Capital Management LLC
     Certificates of Compliance        1 Maritime Plaza Suite 1325
     With financial covenants          San Francisco, CA  94111
                                       Attn: Kurt Billick and Richard Voon
                                       Fax: (415) 421-2133

6.  Change in Issuer's name,           Farallon Capital Management LLC
     address or principal place        1 Maritime Plaza Suite 1325
     of business, Change in            San Francisco, CA  94111
     location of collateral and        Attn: Kurt Billick and Richard Voon
     Copies of legal opinions          Fax: (415) 421-2133

                                      A-1
<PAGE>

DOCUMENT DELIVERY INFORMATION

7.  Delivery of Securities             Farallon Capital Management LLC
                                       1 Maritime Plaza Suite 1325
                                       San Francisco, CA 94111
                                       Attn: Monica Landry and Colby Trexler
                                       Fax: (415) 421-2133

                                      A-2
<PAGE>

                  FARALLON CAPITAL INSTITUTIONAL PARTNERS, L.P.

PAYMENT INFORMATION

1.  Wire information                   Bank:    Chase Manhattan Bank
                                       ABA#:    021-000-021
                                       F/A/O:   Goldman, Sachs & Co., NY
                                       A/C#:    930-1-011483
                                       F/F/C:   Farallon Capital Management Bulk

                                       A/C:     002-10167-3

2.  Registered Name of Securities      Farallon Capital Institutional Partners,
                                       L.P.

3.  Tax Identification Number          94-3106323

NOTICE INFORMATION

4.  Scheduled Payments,                Farallon Capital Management LLC
     Unscheduled Prepayments           1 Maritime Plaza Suite 1325
     Notice of Maturity                San Francisco, CA  94111
                                       Attn: Monica Landry, Colby Trexler,
                                       Kurt Billick and Richard Voon
                                       Fax: (415) 421-2133

5.  Financial Statements and           Farallon Capital Management LLC
     Certificates of Compliance        1 Maritime Plaza Suite 1325
     With financial covenants          San Francisco, CA  94111
                                       Attn: Kurt Billick and Richard Voon
                                       Fax: (415) 421-2133

6.  Change in Issuer's name,           Farallon Capital Management LLC
     address or principal place        1 Maritime Plaza Suite 1325
     of business, Change in            San Francisco, CA  94111
     location of collateral and        Attn: Kurt Billick and Richard Voon
     Copies of legal opinions          Fax: (415) 421-2133

DOCUMENT DELIVERY INFORMATION

7.  Delivery of Securities             Farallon Capital Management LLC
                                       1 Maritime Plaza Suite 1325
                                       San Francisco, CA 94111
                                       Attn: Monica Landry and Colby Trexler
                                       Fax: (415) 421-2133

                                      A-3
<PAGE>

                FARALLON CAPITAL INSTITUTIONAL PARTNERS II, L.P.

PAYMENT INFORMATION

1.  Wire information                   Bank:    Chase Manhattan Bank
                                       ABA#:    021-000-021
                                       F/A/O:   Goldman, Sachs & Co., NY
                                       A/C#:    930-1-011483
                                       F/F/C:   Farallon Capital Management Bulk

                                       A/C:     002-10167-3

2.  Registered Name of Securities      Farallon Capital Institutional Partners
                                       II, L.P.

3.  Tax Identification Number          94-3106692

NOTICE INFORMATION

4.  Scheduled Payments,                Farallon Capital Management LLC
     Unscheduled Prepayments           1 Maritime Plaza Suite 1325
     Notice of Maturity                San Francisco, CA  94111
                                       Attn: Monica Landry, Colby Trexler,
                                       Kurt Billick and Richard Voon
                                       Fax: (415) 421-2133

5.  Financial Statements and           Farallon Capital Management LLC
     Certificates of Compliance        1 Maritime Plaza Suite 1325
     With financial covenants          San Francisco, CA  94111
                                       Attn: Kurt Billick and Richard Voon
                                       Fax: (415) 421-2133

6.  Change in Issuer's name,           Farallon Capital Management LLC
     address or principal place        1 Maritime Plaza Suite 1325
     of business, Change in            San Francisco, CA  94111
     location of collateral and        Attn: Kurt Billick and Richard Voon
     Copies of legal opinions          Fax: (415) 421-2133

DOCUMENT DELIVERY INFORMATION

7.  Delivery of Securities             Farallon Capital Management LLC
                                       1 Maritime Plaza Suite 1325
                                       San Francisco, CA 94111
                                       Attn: Monica Landry and Colby Trexler
                                       Fax: (415) 421-2133

                                      A-4
<PAGE>

                FARALLON CAPITAL INSTITUTIONAL PARTNERS III, L.P.

PAYMENT INFORMATION

1.  Wire information                   Bank:    Chase Manhattan Bank
                                       ABA#:    021-000-021
                                       F/A/O:   Goldman, Sachs & Co., NY
                                       A/C#:    930-1-011483
                                       F/F/C:   Farallon Capital Management Bulk

                                       A/C:     002-10167-3

2.  Registered Name of Securities      Farallon Capital Institutional Partners
                                       III, L.P.

3.  Tax Identification Number          94-3253905

NOTICE INFORMATION

4.  Scheduled Payments,                Farallon Capital Management LLC
     Unscheduled Prepayments           1 Maritime Plaza Suite 1325
     Notice of Maturity                San Francisco, CA  94111
                                       Attn: Monica Landry, Colby Trexler,
                                       Kurt Billick and Richard Voon
                                       Fax: (415) 421-2133

5.  Financial Statements and           Farallon Capital Management LLC
     Certificates of Compliance        1 Maritime Plaza Suite 1325
     With financial covenants          San Francisco, CA  94111
                                       Attn: Kurt Billick and Richard Voon
                                       Fax: (415) 421-2133

6.  Change in Issuer's name,           Farallon Capital Management LLC
     address or principal place        1 Maritime Plaza Suite 1325
     of business, Change in            San Francisco, CA  94111
     location of collateral and        Attn: Kurt Billick and Richard Voon
     Copies of legal opinions          Fax: (415) 421-2133

DOCUMENT DELIVERY INFORMATION

7.  Delivery of Securities             Farallon Capital Management LLC
                                       1 Maritime Plaza Suite 1325
                                       San Francisco, CA 94111
                                       Attn: Monica Landry and Colby Trexler
                                       Fax: (415) 421-2133

                                      A-5
<PAGE>

                            RR CAPITAL PARTNERS, L.P.

PAYMENT INFORMATION

1.  Wire information                   Bank:    Chase Manhattan Bank
                                       ABA#:    021-000-021
                                       F/A/O:   Goldman, Sachs & Co., NY
                                       A/C#:    930-1-011483
                                       F/F/C:   Farallon Capital Management Bulk

                                       A/C:     002-10167-3

2.  Registered Name of Securities      RR Capital Partners, L.P.

3.  Tax Identification Number          94-3235685

NOTICE INFORMATION

4.  Scheduled Payments,                Farallon Capital Management LLC
     Unscheduled Prepayments           1 Maritime Plaza Suite 1325
     Notice of Maturity                San Francisco, CA  94111
                                       Attn: Monica Landry, Colby Trexler,
                                       Kurt Billick and Richard Voon
                                       Fax: (415) 421-2133

5.  Financial Statements and           Farallon Capital Management LLC
     Certificates of Compliance        1 Maritime Plaza Suite 1325
     With financial covenants          San Francisco, CA  94111
                                       Attn: Kurt Billick and Richard Voon
                                       Fax: (415) 421-2133

6.  Change in Issuer's name,           Farallon Capital Management LLC
     address or principal place        1 Maritime Plaza Suite 1325
     of business, Change in            San Francisco, CA  94111
     location of collateral and        Attn: Kurt Billick and Richard Voon
     Copies of legal opinions          Fax: (415) 421-2133

DOCUMENT DELIVERY INFORMATION

7.  Delivery of Securities             Farallon Capital Management LLC
                                       1 Maritime Plaza Suite 1325
                                       San Francisco, CA 94111
                                       Attn: Monica Landry and Colby Trexler
                                       Fax: (415) 421-2133

                                      A-6
<PAGE>

                        DLJ INVESTMENT PARTNERS II, L.P.

PAYMENT INFORMATION AND SIGNING PERSONS

1.        Wire information             Citibank, N.A.
                                       New York, NY
                                       ABA No.: 021-000-089
                                       Account Name:  DLJ Securities Corp.
                                       Account No.: 3889-6041
                                       For further credit to: DLJ Investment
                                       Partners II, L.P.
                                       DLJ Internal Account #275-004471
                                       Reference: Crown Media
                                       Contact:  Ruchi Khurana (212) 538-3818

NOTICE INFORMATION
                                       DLJ Investment Partners II, Inc.
                                       Eleven Madison Avenue
                                       New York, NY  10010
                                       Attn: John Moriarty / Edward Tam
                                       Tel: (212) 538-3514 / (212) 538-7099
                                       Fax (212) 538-0422
                                       e-Mail: john.moriarty@csfb.com /
                                               ed.tam@csfb.com
ADDRESS FOR DELIVERY OF SECURITIES
                                       Credit Suisse First Boston
                                       Eleven Madison Avenue
                                       New York, NY 10010
                                       Attn: Ana Byrne - 13th Floor
                                       Tel: (212) 538-7297

                          DLJ INVESTMENT PARTNERS, L.P.

PAYMENT INFORMATION AND SIGNING PERSONS

2.        Wire information             Citibank, N.A.
                                       New York, NY
                                       ABA No.: 021-000-089
                                       Account Name:  DLJ Securities Corp.
                                       Account No.: 3889-6041
                                       For further credit to: DLJ Investment
                                       Partners, L.P.
                                       DLJ Internal Account #275-004521
                                       Reference: Crown Media
                                       Contact:  Ruchi Khurana (212) 538-3818

                                      A-7
<PAGE>

NOTICE INFORMATION
                                       DLJ Investment Partners II, Inc.
                                       Eleven Madison Avenue
                                       New York, NY  10010
                                       Attn: John Moriarty / Edward Tam
                                       Tel: (212) 538-3514 / (212) 538-7099
                                       Fax (212) 538-0422
                                       e-Mail: john.moriarty@csfb.com /
                                               ed.tam@csfb.com
ADDRESS FOR DELIVERY OF SECURITIES
                                       Credit Suisse First Boston
                                       Eleven Madison Avenue
                                       New York, NY 10010
                                       Attn: Ana Byrne - 13th Floor
                                       Tel: (212) 538-7297

                                      A-8
<PAGE>

                             DLJIP II HOLDINGS, L.P.

                     PAYMENT INFORMATION AND SIGNING PERSONS

3.        Wire information             Citibank, N.A.
                                       New York, NY
                                       ABA No.: 021-000-089
                                       Account Name:  DLJ Securities Corp.
                                       Account No.: 3889-6041
                                       For further credit to: DLJIP II Holdings,
                                       L.P.
                                       DLJ Internal Account #275-007953
                                       Reference: Crown Media
                                       Contact:  Ruchi Khurana (212) 538-3818

NOTICE INFORMATION
                                       DLJ Investment Partners II, Inc.
                                       Eleven Madison Avenue
                                       New York, NY  10010
                                       Attn: John Moriarty / Edward Tam
                                       Tel: (212) 538-3514 / (212) 538-7099
                                       Fax (212) 538-0422
                                       e-Mail: john.moriarty@csfb.com /
                                               ed.tam@csfb.com
ADDRESS FOR DELIVERY OF SECURITIES
                                       Credit Suisse First Boston
                                       Eleven Madison Avenue
                                       New York, NY 10010
                                       Attn: Ana Byrne - 13th Floor
                                       Tel: (212) 538-7297

                                      A-9
<PAGE>

                       JOHN HANCOCK LIFE INSURANCE COMPANY

  General Account, Closed Block, Separate Account 3SA and Separate Account 3SB

PAYMENT INFORMATION

1.        Wire information             Fleet Boston
                                       ABA No.: 011000390
                                       Boston, Massachusetts 02110
                                       Account of: John Hancock Life Insurance
                                       Co. Private Placement Collection Acct.
                                       Account Number: 541-55417
                                       On Order of: Name of Issuer and CUSIP/PPN
                                       Full name, interest rate and maturity
                                       date of Notes or other obligations

          Wire Deadline                12 NOON, BOSTON TIME

                                       All payments on account of the Notes or
                                       other obligations in accordance with the
                                       provisions thereof shall be made by bank
                                       wire or transfer of immediately available
                                       funds for credit by 12 noon, Boston time.

2.        Registered Name of           John Hancock Life Insurance Company
          Securities

3.        Tax Identification Number    04-1414660

NOTICE INFORMATION

All notices shall be sent via fax AND mail according to the instructions below:

4.        Scheduled Payments,          John Hancock Life Insurance Company
          Unscheduled Prepayments      200 Clarendon St.
          Notice of Maturity           Boston, MA 02117
                                       Attn: Investment Accounting Division, B-3
                                       Fax:  (617) 572-0628

                                       Include:

                                       (a) full name, interest rate and maturity
                                       date of the Notes or other obligations

                                       (b) allocation of payment between
                                       principal and interest and any special
                                       payment

                                       (c) name and address of Bank (or Trustee)
                                       from which the wire transfer was sent

                                      A-10
<PAGE>

5.        Financial Statements and     John Hancock Life Insurance Company
          Certificates of Compliance   200 Clarendon St.
          with financial covenants     Boston, MA 02117
                                       Attn: Bond and Corporate Finance Group,
                                             T-57
                                       Fax:  (617) 572-1605

6.        Change in Issuer's name,     John Hancock Life Insurance Company
          address or principal place   200 Clarendon St.
          of business, Change in       Boston, MA 02117
          location of collateral and   Attn: Investment Law Division, T-30
          Copies of legal opinions     Fax:  (617) 572-9269

DOCUMENT DELIVERY INFORMATION

7.        Delivery of Securities       All securities are to be sent for receipt
                                       the day after the closing to:

                                       John Hancock Life Insurance Company
                                       200 Clarendon St., T-30
                                       Boston, MA 02117
                                       Attn:  Amy Weed

                                      A-11
<PAGE>

                  JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

PAYMENT INFORMATION

1.        Wire information             Fleet Boston
                                       ABA No.: 011000390
                                       Boston, Massachusetts 02110
                                       Account of: John Hancock Life Insurance
                                       Co. Private Placement Collection Acct.
                                       Account Number: 541-55417
                                       On Order of: Name of Issuer and CUSIP/PPN
                                       Full name, interest rate and maturity
                                       date of Notes or other obligations

          Wire Deadline                12 NOON, BOSTON TIME

                                       All payments on account of the Notes or
                                       other obligations in accordance with the
                                       provisions thereof shall be made by bank
                                       wire or transfer of immediately available
                                       funds for credit by 12 noon, Boston time.

2.        Registered Name of           John Hancock Variable Life Insurance
          Securities                   Company

3.        Tax Identification Number    04-2664016

NOTICE INFORMATION

All notices shall be sent via fax AND mail according to the instructions below:

4.        Scheduled Payments,          John Hancock Variable Life Insurance
          Unscheduled Prepayments      Company
          and                          200 Clarendon St.
          Notice of Maturity           Boston, MA 02117
                                       Attn: Investment Accounting Division, B-3
                                       Fax:  (617) 572-0628

                                       Include:

                                       (a) full name, interest rate and maturity
                                       date of the Notes or other obligations

                                       (b) allocation of payment between
                                       principal and interest and any special
                                       payment

                                       (c) name and address of Bank (or Trustee)
                                       from which the wire transfer was sent

                                      A-12
<PAGE>

5.        Financial Statements and     John Hancock Life Insurance Company
          Certificates of Compliance   200 Clarendon St.
          with financial covenants     Boston, MA 02117
                                       Attn: Bond and Corporate Finance Group,
                                             T-57
                                       Fax:  (617) 572-1605

6.        Change in Issuer's name,     John Hancock Life Insurance Company
          address or principal place   200 Clarendon St.
          of business change in        Boston, MA 02117
          location                     Attn: Investment Law Division, T-30
          of collateral and copies     Fax:  (617) 572-9269
          of legal opinions

DOCUMENT DELIVERY INFORMATION

7.        Delivery of Securities       All securities are to be sent for receipt
                                       the day after the closing to:

                                       John Hancock Life Insurance Company
                                       200 Clarendon St., T-30
                                       Boston, MA 02117
                                       Attn:  Amy Weed

                                      A-13
<PAGE>

                                SIGNATURE 5 L.P.

PAYMENT INFORMATION

1.        Wire information             HARE & CO.
                                       c/o The Bank of New York
                                       ABA No.: 021000018
                                       BNF:  IOC566
                                       FFC:  Account No. 77634
                                       On Order of: Name of Issuer and CUSIP/PPN
                                       Full name, interest rate and maturity
                                       date of Notes or other obligations

          Wire Deadline                12 NOON, BOSTON TIME

                                       All payments on account of the Notes or
                                       other obligations in accordance with the
                                       provisions thereof shall be made by bank
                                       wire or transfer of immediately available
                                       funds for credit by 12 noon, Boston time.

2.        Registered Name of           HARE & CO
          Securities

3.        Tax Identification Number    N/A

NOTICE INFORMATION

All notices shall be sent via fax AND mail according to the instructions below:

4.        Scheduled Payments,          Investors Bank & Trust Company and:
          Unscheduled Prepayments      200 Clarendon St.        HARE & CO.
          and Notice of Maturity       Boston, MA 02116         c/o The Bank of
                                       Attn: Jackie Argenzio    New York
                                       Fax:  (617) 927-8302     P.O. Box 19266
                                                                Newark, NJ 07195

                                       Include:

                                       (a) full name, interest rate and maturity
                                       date of the Notes or other obligations

                                       (b) allocation of payment between
                                       principal and interest and any special
                                       payment

                                       (c) name and address of Bank (or Trustee)
                                       from which the wire transfer was sent

5.        Financial Statements and     John Hancock Life Insurance Company
          Certificates of Compliance   200 Clarendon St.
          with financial covenants     Boston, MA 02117
                                       Attn: Bond and Corporate Finance Group,
                                             T-57
                                       Fax:  (617) 572-1605

                                      A-14
<PAGE>

6.        Change in Issuer's name,     John Hancock Life Insurance Company
          address or principal place   200 Clarendon St.
          of business change in        Boston, MA 02117
          location                     Attn: Investment Law Division, T-30
          of collateral and copies     Fax:  (617) 572-9269
          of legal opinions

DOCUMENT DELIVERY INFORMATION

7.        Delivery of Securities       All securities are to be sent for receipt
                                       the day after the closing to:

                                       Bank of New York
                                       One Wall Street, Window A
                                       New York, NY 10268
                                       A/C Name:  Investors Bank & Trust Company
                                       Reference: 017001/Signature 5 L.P. 77634

                                      A-15
<PAGE>

                        MAGNETITE ASSET INVESTORS L.L.C.

PAYMENT INFORMATION AND SIGNING PERSONS

1.        Wire information            The Chase Manhattan Bank
                                      Houston, TX
                                      ABA No.: 113000609, Acct # 00102619468
                                      BNF: Wire Clearing Asset Backed Securities
                                      FFC: Re:  Magnetite Asset Investors, LLC
                                      Acct # 2303901
                                      Re: "Name of Investment" Interest or
                                      Principal

2.        Registered Name of          SIGLER & Co. (Nominee)
          Securities

3.        Tax Identification Number   SIGLER & Co. (Nominee) - 13-3641527
                                      MAGNETITE ASSET INVESTORS L.L.C. -
                                      13-4037650

NOTICE INFORMATION

4.        Contact persons
          Magnetite Asset Investors   Dennis M. Schaney
          III L.L.C.                  c/o:  BlackRock Financial Management, Inc.
                                      345 Park Avenue
                                      29th Floor
                                      New York, NY 10154
                                      Tel: (212) 754-5316
                                      Fax: (212) 754-8756

          Chase Manhattan Bank        Alysia S. Pickens
                                      Tel: (713) 216-3573
                                      fax: (713) 216-3712
MISCELLANEOUS

          Jurisdiction and form of    Delaware, Limited Liability Company
          organization

                                      A-16
<PAGE>

                      MAGNETITE ASSET INVESTORS III L.L.C.

PAYMENT INFORMATION AND SIGNING PERSONS

1.        Wire information           The Chase Manhattan Bank
                                     Houston, TX
                                     ABA No.: 113000609, Acct # 00102619468
                                     BNF: Wire Clearing Asset Backed Securities
                                     FFC: Re: Magnetite Asset Investors III, LLC
                                     A/C # 5503001 23633-00
                                     OBI: Alysia Pickens/Re: "Name of
                                     Investment" Interest or Principal

2.        Registered Name of         SIGLER & Co. (Nominee)
          Securities

3.        Tax Identification Number  SIGLER & Co. (Nominee) - 13-3641527
                                     MAGNETITE ASSET INVESTORS III L.L.C. -
                                     13-4149799

NOTICE INFORMATION

4.        Contact persons
          Magnetite Asset Investors  Dennis M. Schaney
          III L.L.C                  c/o:  BlackRock Financial Management, Inc.
                                     345 Park Avenue
                                     29th Floor
                                     New York, NY 10154
                                     Tel: (212) 754-5316
                                     Fax: (212) 754-8756

          Chase Manhattan Bank       Alysia S. Pickens
                                     Tel: (713) 216-3573
                                     fax: (713) 216-3712

                                      A-17
<PAGE>

                     MONY LIFE INSURANCE COMPANY OF AMERICA

PAYMENT INFORMATION

1.        Wire information             All payments to be made by bank wire or
                                       intra-bank transfer of Federal or other
                                       funds to:

                                       JP Morgan Chase Manhattan Bank
                                       ABA No.: 021000021
                                       For credit to Private Income Processing
                                       Account No. 900 9000 200
                                       For further credit to account G52964 with
                                       sufficient information (including issuer
                                       name, PPN number, interest rate, maturity
                                       and whether the payment is in respect of
                                       principal, interest, premium or
                                       otherwise) to identify the source and
                                       application of the funds.

2.        Registered Name on           J. ROMEO & CO.
          Securities

3.        Name of Purchaser            Mony Life Insurance Company of America

4.        Tax Identification Numbers   Mony Life Insurance Company of America -
                                       86-0222062

NOTICE INFORMATION AND DELIVERY OF SECURITIES

5.        All notices and conformation relating to payments

          If by mail or courier:       JP Morgan Chase Manhattan Bank
                                       14201 N. Dallas Parkway
                                       13th Floor
                                       Dallas, Texas 75254-2917

                                       with a copy to:

                                       MONY Life Insurance Company of America
                                       c/o MONY Life Insurance Company
                                       1740 Broadway
                                       New York, NY 10019
                                       Attention:  Securities Custody Division
                                                   M.D. 6-39A

                                      A-18
<PAGE>

          If by fax:                   JP Morgan Chase Manhattan Bank
                                       (469) 477-1904

                                       with a copy to:

                                       MONY Life Insurance Company of America
                                       c/o MONY Life Insurance Company
                                       Fax: (212) 708-2152
                                       Attention:  Securities Custody Division
                                                   M.D. 6-39A

6.        Addresses for all other Notices

          By mail, courier and fax:    MONY Life Insurance Company of America
                                       c/o MONY Life Insurance Company
                                       1740 Broadway
                                       New York, NY 10019
                                       Fax: (212) 708-2491
                                       Attention: Capital Management Unit

7.        Address for Delivery of Securities

                                       MONY Life Insurance Company of America
                                       c/o MONY Life Insurance Company
                                       1740 Broadway
                                       New York, NY 10019
                                       Attention: Daniel Gallagher, Esq., Law
                                                  Department

                                      A-19
<PAGE>

                         TEACHERS INSURANCE AND ANNUITY
                             ASSOCIATION OF AMERICA

PAYMENT INFORMATION

1.        Wire information            Chase Manhattan Bank
                                      ABA No.: 021-000-021
                                      Account of :  Teachers Insurance and
                                      Annuity
                                      Association of America
                                      Account No.: 900-9-000200
                                      For further Credit to the TIAA Account
                                      No.: G07040
                                      Reference: PPN#/Issuer/Mat. Date./Coupon
                                      Rate/P&I breakdown

                                      All payments shall be made in immediately
                                      available funds at the opening of
                                      business on the due date by electronic
                                      funds transfer through the Automated
                                      Clearing House System to the above
                                      referenced account

2.        Tax Identification Numbers  13-1624203

NOTICE INFORMATION AND DELIVERY OF SECURITIES

3.        Notices and conformation relating to payments

                                      Contemporaneously with electronic wire
                                      transfer of funds Issuer should advise by
                                      a written notice of (i) the full name of
                                      Issuer, private placement number, if any,
                                      and interest rate of the note; (ii)
                                      allocation of payment between principal.
                                      interest, premium and any special
                                      payment, if any; and (iii) name and
                                      address of Bank (or trustee) from which
                                      wire transfer was sent.

                                      The written Notice should be sent via
                                      mail or faxed to the following contact
                                      details:

                                      Teachers Insurance and Annuity
                                      Association of America
                                      730 Third Avenue
                                      New York, New York  10017-3206
                                      Attention: Securities Accounting Divisions
                                      Tel: (212) 916-6004
                                      Fax: (212) 916-6955

                                      A-20
<PAGE>

4.        All other Notices

                                      Teachers Insurance and Annuity Association
                                      of America
                                      730 Third Avenue
                                      New York, New York  10017-3206
                                      Attention: Securities Divisions, Private
                                                 Placements
                                      Tel: (212) 916-6372 (Cynthia Bush)
                                           (212) 916-4000 (General No.)
                                      Fax: (212) 916-6582

5.        Address for Delivery of Securities

                                      Teachers Insurance and Annuity Association
                                      of America
                                      730 Third Avenue (9th Floor)
                                      New York, New York  10017-3206
                                      Attention: Susan J. Goodman, Esq.
                                      Tel: (212) 916-6984
                                      Fax: (212) 916-6980

                                      A-21
<PAGE>

                         ALLSTATE LIFE INSURANCE COMPANY

PAYMENT INFORMATION AND SIGNING PERSONS

1.        Wire information            All payments by Fedwire transfer of
                                      immediately available funds, identifying
                                      the name of the Issuer, the Private
                                      Placement Number preceded by "DPP" and
                                      the payment as principal, interest or
                                      premium, in the format as follows:

                                           BBK: Harris Trust and Savings Bank
                                           ABA No.: 071000288
                                           BNF: Allstate Life Insurance Company
                                                Collection Account #168-117-0
                                           ORG: (Enter Issuer Name)
                                           OBI: DPP (Enter Private Placement
                                                No., if available)
                                      Payment Due Date 12/15/08 - P_____ (Enter
                                      "P" and amount of principal being
                                      remitted, for example, P5000000.00) - I
                                      (Enter "I" and amount of interest being
                                      remitted, for example, I225000.00)

2.        Registered Name of          Allstate Life Insurance Company
          Securities

3.        Tax Identification Number   36-2554642

NOTICE INFORMATION

4.       Notices of Scheduled Payments and written confirmations of wire
         transfers

                                      Allstate Insurance Company
                                      Investment Operations - Private Placements
                                      3075 Sanders Road, STE G4A
                                      Northbrook, IL 60062-7127
                                      Tel: (847) 402-6672 Private Placements
                                           (847) 402-3802 Bank Loans
                                      Fax: (847) 326-7032

5.       Notices regarding financial reports, compliance certificates and all
         other written communications, including notice of prepayments

                                      Allstate Life Insurance Company
                                      Private Placements Department
                                      3075 Sanders Road, STE G5D
                                      Northbrook, Illinois  60062-7127
                                      Tel: (847) 402-8922
                                      Fax: (847) 402-3092

                                      A-22
<PAGE>

DOCUMENT DELIVERY INFORMATION

6.        Delivery of Securities      All securities are to be sent for receipt
                                      the day after the closing to:

                                      Harris Trust and Savings Bank
                                      111 W. Monroe Street 6W
                                      Chicago, Illinois 60603
                                      Attention: Valerie Haney
                                      For Allstate Life Insurance
                                      Company/Safekeeping Account No. 846627

                                      A-23
<PAGE>

                       TORONTO DOMINION INVESTMENTS, INC.

         PAYMENT INFORMATION AND SIGNING PERSONS

          Wire information            Bank of New York
                                      ABA No.: 021000018
                                      Account No.: GLA111569
                                      TD Investments
                                      Reference: M. L. Gariepy

NOTICE INFORMATION AND ADDRESS FOR DELIVERY OF SECURITIES

                                      Toronto Dominion Investments, Inc.
                                      909 Fannin, Suite 1700
                                      Houston, TX 77010
                                      Attn: M. L. Gariepy
                                      Tel: (713) 653-8225
                                      Fax (713) 652-2647
                                      e-Mail: martha.gariepy@tdcapital.com

                                      With copy to:

                                      Toronto Dominion Capital
                                      TD Bank Tower
                                      66 Wellington Street, West
                                      10th Floor
                                      Toronto, Ontario M5K 1A2
                                      CANADA
                                      Tel: (416) 308-5305
                                      Fax: (416) 983-6817
                                      Attn: David Klass

                                      A-24
<PAGE>

                         NEW YORK LIFE INSURANCE COMPANY

         PAYMENT INFORMATION AND SIGNING PERSONS

1.        Wire information            All payments by wire or intrabank transfer
                                      of immediately available funds to:

                                      Chase Manhattan Bank
                                      New York, New York 10019
                                      ABA No. 021-000-021
                                      Credit: New York Life Insurance Company
                                      General Account No. 008-9-00687

                                      with sufficient information (including
                                      issuer, PPN number, interest rate,
                                      maturity and whether payment is of
                                      principal, premium, or interest) to
                                      identify the source and application of
                                      such funds.

2.        Registered Name of          New York Life Insurance Company
          Securities

3.        Tax Identification Number   13-5582869

NOTICE INFORMATION

4.       Notices of Payments

                                   New York Life Insurance Company
                                   c/o New York Life Investment Management LLC
                                   51 Madison Avenue
                                   New York, New York 10010-1603
                                   Attention: Financial Management and
                                   Operations Group
                                   Securities Operations
                                   2nd Floor
                                   Fax #: (212) 447-4160

                                      A-25
<PAGE>

6.   All other Notices

                                   New York Life Insurance Company
                                   c/o New York Life Investment Management LLC
                                   51 Madison Avenue
                                   New York, New York 10010

                                   Attention: Securities Investment Group
                                   Private Finance
                                   2nd Floor
                                   Fax: (212) 447-4122

                                   with a copy of any notices regarding
                                   defaults or Events of Default under the
                                   transaction documents to:

                                   Attention: Office of General Counsel
                                   Investment Section, Room 1107
                                   Fax #: (212) 576-8340

                                      A-26
<PAGE>

                            ARTHUR STREET FUND, L.P.

1.        Wire information         All payments by wire or intrabank transfer of
                                   immediately available funds to:

                                   Private Equity Partners
                                   800 Scudders Mill Road, Section 2F
                                   Plainsboro, NJ 08536

                                   EIN: 06-1587419

                                   SEND WIRES TO:
                                   PNC BANK, N.A.
                                   ATTENTION:
                                   Julie Whittaker (215) 749-4773

                                   ABA: #031000053
                                   A/C: #85-110-88160
                                   A/C NAME: PFPC Trust
                                   FBO/REF: 34-34-012-0389313
                                   FURTHER CREDIT TO: Arthur Street Fund, LP

                                   with sufficient information (including
                                   issuer, PPN number, interest rate, maturity
                                   and whether payment is of principal, premium,
                                   or interest) to identify the source and
                                   application of such funds.

NOTICE INFORMATION

2.       Notices of Payments

                                   Private Equity Partners
                                   800 Scudders Mill Road, Section 2F
                                   Plainsboro, NJ 08536
                                   Attention: John Lee

3.       All other Notices

                                   Private Equity Partners
                                   800 Scudders Mill Road, Section 2F
                                   Plainsboro, NJ 08536
                                   Attention: Lynn Baranski, Frank Macioce

                                      A-27
<PAGE>

                          ARTHUR STREET PORTFOLIO, L.P.

1.        Wire information         All payments by wire or intrabank transfer of
                                   immediately available funds to:

                                   Private Equity Partners
                                   800 Scudders Mill Road, Section 2F
                                   Plainsboro, NJ 08536

                                   EIN: 52-2255320

                                   SEND WIRES TO:
                                   PNC BANK, N.A.
                                   ATTENTION:
                                   Julie Whittaker (215) 749-4773

                                   ABA: #031000053
                                   A/C: #85-110-88160
                                   A/C NAME: PFPC Trust
                                   FBO/REF: 34-34-012-0389321
                                   FURTHER CREDIT TO: Arthur Street Portfolio,
                                   LP (Offshore)

                                   with sufficient information (including
                                   issuer, PPN number, interest rate, maturity
                                   and whether payment is of principal, premium,
                                   or interest) to identify the source and
                                   application of such funds.

NOTICE INFORMATION

2.       Notices of Payments

                                   Private Equity Partners
                                   800 Scudders Mill Road, Section 2F
                                   Plainsboro, NJ 08536
                                   Attention: John Lee

3.       All other Notices

                                   Private Equity Partners
                                   800 Scudders Mill Road, Section 2F
                                   Plainsboro, NJ 08536
                                   Attention: Lynn Baranski, Frank Macioce

                                      A-28
<PAGE>

                             PASSAGE PORTFOLIO, L.P.

1.        Wire information         All payments by wire or intrabank transfer of
                                   immediately available funds to:

                                   Private Equity Partners
                                   800 Scudders Mill Road, Section 2F
                                   Plainsboro, NJ 08536

                                   EIN: 98-0341134

                                   SEND WIRES TO:
                                   PNC BANK, N.A.
                                   ATTENTION: Julie Whittaker (215) 749-4773
                                   ABA: #031000053
                                   A/C: #85-110-88160
                                   A/C NAME: PFPC Trust
                                   FBO/REF: 34-34-012-0389339
                                   FURTHER CREDIT TO: Passage Portfolio, LP
                                   (Islamic)

                                   with sufficient information (including
                                   issuer, PPN number, interest rate, maturity
                                   and whether payment is of principal, premium,
                                   or interest) to identify the source and
                                   application of such funds.

NOTICE INFORMATION

2.       Notices of Payments

                                   Private Equity Partners
                                   800 Scudders Mill Road, Section 2F
                                   Plainsboro, NJ 08536
                                   Attention: John Lee

3.       All other Notices

                                   Private Equity Partners
                                   800 Scudders Mill Road, Section 2F
                                   Plainsboro, NJ 08536
                                   Attention: Lynn Baranski, Frank Macioce

                                      A-29
<PAGE>

                             VESEY STREET FUND, L.P.

1.        Wire information         All payments by wire or intrabank transfer of
                                   immediately available funds to:

                                   Private Equity Partners
                                   800 Scudders Mill Road, Section 2F
                                   Plainsboro, NJ 08536

                                   EIN: 06-1587420

                                   SEND WIRES TO:
                                   PNC BANK, N.A.
                                   ATTENTION: Julie Whittaker (215) 749-4773
                                   ABA: #031000053
                                   A/C: #85-110-88160
                                   A/C NAME: PFPC Trust
                                   FBO/REF: 34-34-012-0389355
                                   FURTHER CREDIT TO: Vesey Street Fund, LP
                                   (master)

                                   with sufficient information (including
                                   issuer, PPN number, interest rate, maturity
                                   and whether payment is of principal, premium,
                                   or interest) to identify the source and
                                   application of such funds.

NOTICE INFORMATION

2.       Notices of Payments

                                   Private Equity Partners
                                   800 Scudders Mill Road, Section 2F
                                   Plainsboro, NJ 08536
                                   Attention: John Lee

3.       All other Notices

                                   Private Equity Partners
                                   800 Scudders Mill Road, Section 2F
                                   Plainsboro, NJ 08536
                                   Attention: Lynn Baranski, Frank Macioce

                                      A-30
<PAGE>

                          VESEY STREET PORTFOLIO, L.P.

1.        Wire information         All payments by wire or intrabank transfer of
                                   immediately available funds to:

                                   Private Equity Partners
                                   800 Scudders Mill Road, Section 2F
                                   Plainsboro, NJ 08536

                                   EIN: 52-2255321

                                   SEND WIRES TO:
                                   PNC BANK, N.A.
                                   ATTENTION: Julie Whittaker (215) 749-4773
                                   ABA: #031000053
                                   A/C: #85-110-88160
                                   A/C NAME: PFPC Trust
                                   FBO/REF: 34-34-012-0389363
                                   FURTHER CREDIT TO: Vesey Street Portfolio, LP
                                   (offshore)

                                   with sufficient information (including
                                   issuer, PPN number, interest rate, maturity
                                   and whether payment is of principal, premium,
                                   or interest) to identify the source and
                                   application of such funds.

NOTICE INFORMATION

2.       Notices of Payments

                                   Private Equity Partners
                                   800 Scudders Mill Road, Section 2F
                                   Plainsboro, NJ 08536
                                   Attention: John Lee

3.       All other Notices

                                   Private Equity Partners
                                   800 Scudders Mill Road, Section 2F
                                   Plainsboro, NJ 08536
                                   Attention: Lynn Baranski, Frank Macioce

                                      A-31
<PAGE>
                                  Schedule 2.3
                                 Use of Proceeds

Use of Proceeds

     1.   $70,608,496.72 to HC Crown to repay outstanding intercompany
          indebtedness pursuant to demand notes dated November 19, 1999,
          February 23, 2000 (as amended on April 14, 2000) and July 10, 2001;

     2.   $69,391,503.28 to Hallmark Entertainment Distribution, LLC ("HEDC")
          pursuant to certain program license agreements between HEDC and
          subsidiaries of the Company;

     3.   $111,625,435.29 to JPMorgan Chase Bank (formerly known as The Chase
          Manhattan Bank), as Administrative Agent, ("Chase") to reduce amount
          outstanding under the Revolving Credit Loan ("Revolving Credit Loan")
          pursuant to that certain Credit, Security, Guaranty and Pledge
          Agreement, dated as of August 31, 2001, (the "Credit Agreement")
          executed by each of the Company, the Guarantors named therein, the
          Lenders named therein and Chase, as Administrative Agent.

     4.   $13,374,564.71 for fees and expenses related to the transactions
          contemplated by this Agreement.

                                      S-1
<PAGE>
                                  Schedule 3.5
                                 Non-U.S. Person

         The following entities (which are investing the corresponding amounts
set forth next to each entity's name) are non-U.S. persons under the Internal
Revenue Code of 1986, as amended:

1.       Signature 5 L.P.  ($3,000,000)

2.       Vesey Street Portfolio, L.P.  ($5,711,000)

3.       Arthur Street Portfolio, L.P.  ($1,146,000)

4.       Passage Portfolio, L.P.  ($1,702,000)

                                      S-2
<PAGE>

                                  Schedule 3.8
                                      ERISA

1. John Hancock Life Insurance Company ("John Hancock") represents and warrants
that, with respect to its general account to be used by it to purchase Units
(the "Source"), the Source is an "insurance general account" as such term is
defined in section V(e) of Prohibited Transaction Class Exemption 95-60 (issued
July 12, 1995) ("PTE 95-60"), and there is no "plan" with respect to which the
aggregate amount of such general account's reserves and liabilities for the
contracts held by or on behalf of such "plan" and all other "plans" maintained
by the same employer (and affiliates thereof, as defined in section V(a) of PTE
95-60) or by the same employee organization (in each case determined under John
Hancock's NAIC Annual Statement as filed in its state of domicile) exceeds or is
expected to exceed 15% of the total of all liabilities and reserves of such
general account, plus surplus, as of the Issue Date (excluding any liabilities
of the John Hancock separate accounts). The John Hancock general account is
purchasing Units with an aggregate price of $25,000,000.

2. New York Life Insurance Company ("NY Life") represents and warrants that,
with respect to each Source, the Source (a) contains no "plan assets" as defined
under Title I of ERISA or (b) is an "insurance Company general account" as such
term is defined in section V(e) of PTE 95-60, and there is no "plan" with
respect to which the aggregate amount of such general account's reserves and
liabilities for the contracts held by or on behalf of such "plan" and all other
"plans" maintained by the same employer (and affiliates thereof, as defined in
section V(a) of PTE 95-60) or by the same employee organization (in each case
determined under each of the NY Life's NAIC Annual Statement as filed in its
state of domicile) exceeds or is expected to exceed 10% of the total of all
liabilities and reserves of such general account, plus surplus, as of the Issue
Date (excluding any liabilities of the NY Life separate accounts). The total
price of Units being purchased by the NY Life is $25,000,000.

3. Vesey Street Portfolio, L.P. ("Vesey Street") is utilizing assets of foreign
benefit plans to acquire Units and the total price of Units being purchased by
Vesey Street is $5,700,000.

4. MONY Life Insurance Company of America ("MONY") represents and warrants that,
with respect to each source of funds to be used by it to pay the purchase price
of the Units to be purchased by it, such source (a) contains no "plan assets" as
defined under Title I of ERISA or (b) is an "insurance general account" as such
term is defined in section V(e) of PTE 95-60, and there is no "plan" with
respect to which the aggregate amount of such general account's reserves and
liabilities for the contracts held by or on behalf of such "plan" and all other
"plans" maintained by the same employer (and affiliates thereof, as defined in
section V(a) of PTE 95-60) or by the same employee organization (in each case
determined under each of the MONY's NAIC Annual Statement as filed in its state
of domicile) exceeds or is expected to exceed 10% of the total of all
liabilities and reserves of such general account, plus surplus, as of the Issue
Date (excluding any liabilities of the MONY separate accounts). The total price
of Units being purchased by the MONY is $10,000,000.

                                      S-3
<PAGE>

                                 Schedule 4.1(c)
                                Preemptive Rights

Options to purchase shares of Class A Common Stock pursuant to the Amended and
Restated Crown Media Holdings, Inc. 2000 Long Term Incentive Plan.

                                      S-4
<PAGE>

                                  Schedule 4.16
                                  Subsidiaries

All of the capital stock or equity interests of each Significant Subsidiary has
been pledged to The Chase Manhattan Bank, as Agent, pursuant to, and as security
for the due and punctual payment by the Company under, that certain Credit,
Security, Guaranty and Pledge Agreement, dated as of August 30, 2001, executed
by each of the Company, the Guarantors named therein, the requisite Lenders
named therein and The Chase Manhattan Bank, as Administrative Agent.

                                      S-5
<PAGE>
                                  Schedule 4.20
                                  Benefit Plans

Section 1.        Stock Option Plan

                  Amended and Restated Crown Media Holdings, Inc. 2000 Long Term
Incentive Plan.

Section 2.        Health/Insurance Plans

(a)      Crown Media Holdings, Inc. (and subsidiaries where indicated)

         (i)      (Life Insurance, Short/Long Term Disability and AD&D) Unum
                  Life Insurance Company of America Group Insurance Policy No.
                  570847 001 in favor of Crown Media Holdings, Inc., Crown Media
                  International, Inc. and Crown Media United States, LLC.

         (ii)     (Long Term Care) Unum Life Insurance Company of America Group
                  Long Term Care Insurance Policy Number 571532-002 in favor of
                  Crown Media Holdings, Inc., Crown Media International, Inc.
                  and Crown Media United States, LLC.

         (iii)    (Cafeteria Plan) Service Agreement, dated June 12, 2001 by and
                  between Denver Reserve Corporation and Crown Media Holdings,
                  Inc. for Cafeteria Plan.

         (iv)     (EAP) Employee Assistance Program Agreement, dated August 20,
                  2001, by and between Health Resources Corporation and Crown
                  Media Holdings, Inc., Crown Media International, Inc. and
                  Crown Media United States, LLC.

         (v)      (COBRA) Administrative Services Agreement, dated July 1, 2000,
                  between Crown Media Holdings, Inc. and Cobra Compliance, Inc.

(b)      Crown Media International, Inc. (Colorado and International based
         employees)

         (i)      (Medical) United Healthcare Insurance Company Group Health
                  Insurance Policy Number GA-700456.

         (ii)     (Dental) Delta Dental Plan of Colorado Delta Preferred Option
                  Contract Group #6324, as amended, in favor of Crown Media
                  International, Inc., with amendment including Crown Media
                  Unites States, LLC.

         (iii)    (401(k)) Putnam Flexible 401(k) and Profit Sharing Plan
                  Agreement #001 in favor of Crown Media International, Inc.
                  (includes Crown Media Holdings, Inc.).

                                      S-6
<PAGE>

         (iv)     (Severance) Crown Media International, Inc. Employee Severance
                  Pay Plan for Fourth Quarter 2001.

(c)      Crown Media United States, LLC (US Employees)

         (i)      (Medical - CA Employees) Cigna Healthcare of California, Inc.
                  Group Service Agreement No. I696A852 in favor of Crown Media
                  United States, LLC (formerly Odyssey Holdings, LLC).

         (ii)     (Medical - NY Employees) Oxford Health Plans (NY), Inc. Group
                  Enrollment Agreement No. OH1029*01,01C and renewal in favor of
                  Crown Media United States, LLC (formerly Odyssey Holdings,
                  LLC).

         (iii)    (Vision) Vision Service Plan No. 12113787 in favor of Crown
                  Media United States, LLC (formerly Odyssey Holdings, LLC) (now
                  includes Crown Media Holdings, Inc. and Crown Media
                  International, Inc.).

         (iv)     (401(k)) Principal Financial Group.

         (v)      (Severance) Crown Media United States, LLC Employee Severance
                  Pay Plan for Fourth Quarter 2001.

(d)      U.K. Office

         (i)      (Pension Plan) Winterthur Life's Group Personal Pension in
                  favor of Crown Entertainment Limited.

(e)      Asia Offices

         (i)      (Medical - Hong Kong) American International Assurance Company
                  (Bermuda) Limited Group Hospital & Surgical Policy No.
                  GHS-20950, endorsed to cover Crown Media International (HK)
                  Limited.

         (ii)     (Medical, AD&D - Taiwan) William M. Mercer Policy NO. 290470
                  and 290471.

         (iii)    (Life Insurance - Hong Kong) CGU International Insurance plc
                  Employee's Compensation Insurance Policy No. 61025528 EC in
                  favor of Crown Media International (HK) Limited (formerly HEN
                  Asia Pacific (HK) Ltd.).

         (iv)     (Medical - India) United India Insurance Co. Ltd. Policy No.
                  040900/48/00/01250 in favor of Hallmark India Private Limited.

                                      S-7
<PAGE>

                                  Schedule 4.22
                                   Litigation

Stockholder Suit

1.       Anthony Kolton v. Crown Media Holdings, Inc., Robert A. Halmi, Jr.,
         David J. Evans, Wilford V. Bane, Jr., Arnold L. Chavkin, Robert J.
         Druten, Donald J. Hall, Jr., Irvine O. Hockaday, Jr., David B. Koff,
         Peter A. Lund, John P. Mascotte, William M. Haber, Hallmark Cards,
         Inc., Hallmark Entertainment Distribution, LLC, and Hallmark
         Entertainment, Inc. Del. Ch., C.A. No. 18949-NC. The Plaintiff claims
         that, inter alia, the purchase price agreed upon by Crown Media
         Holdings, Inc. and Hallmark Entertainment Distribution, LLC, for the
         purchase and sale of 702 film titles and related assets was not the
         result of an arms-length transaction and is not fair to the public
         stockholders of Crown Media Holdings, Inc.

                  Status: A Memorandum of Understanding ("MOU") was entered into
                  by all parties on June 29, 2001, and is awaiting confirmation
                  by the court. The proposed settlement terms of the MOU
                  provide, primarily, that the purchase price for the film
                  assets payable to Hallmark Entertainment Distribution, LLC be
                  reduced by 425,000 shares of Crown Media Holdings, Inc. Class
                  A Common Stock and that such shares be placed in escrow
                  pending final court approval, at which time the shares will be
                  returned to Crown Media Holdings, Inc.

Claims Related to Library Assets

2.       DGA, SAG & WGA CLAIMS AGAINST RHI ENTERTAINMENT, INC.

                  Tri-guild audit commenced seeking residuals allegedly unpaid
                  by RHI Entertainment Inc. for period 1990-1994. By the time
                  the audit was completed the guilds were provided with proof
                  that substantially all claimed residuals had been previously
                  paid. An outstanding balance of approximately $80,000 in
                  residuals has subsequently been paid.

                  Status: No further claims have been made by the guilds in
                  respect of this matter.

                  Separately, the DGA and SAG have asserted that RHI and related
                  entities have failed to provide adequate financial assurances
                  required by the guilds in order to secure their obligations
                  under the Basic Agreements and SAG filed a formal statement
                  with respect thereto in January, 1998.

                                      S-8
<PAGE>

                  Status: Formal hearings have been repeatedly postponed and
                  negotiations have continued intermittently regarding adequate
                  financial assurances and a security agreement acceptable to
                  all parties. Therefore, certain Films may be retroactively
                  subject to security interests by the DGA and SAG including the
                  following:

                           ASCENT
                           BYE BYE BIRDIE
                           CHRISTMAS, MEMORY, A
                           CRAYOLA: 20,000 LEAGUES UNDER THE SEA
                           CRAYOLA: TROJAN HORSE
                           FOLLOW THE RIVER
                           GYPSY
                           INCIDENT, THE
                           IN THE LATE OF THE WOODS
                           MY BROTHERS KEEPER
                           REUNION
                           SCARLETT
                           TAKING LIBERTY
                           TIME PIECE
                           TRUE WOMEN
                           WHITE DWARF
                           YEARLING, THE

                                      S-9
<PAGE>
                                Schedule 4.29(a)
                               Assumed Obligations

<Table>
<S>                                                              <C>
Feast of All Saints                                                 5,500,000
Further Tales of the City                                           2,000,000
My Louisiana Sky                                                    1,850,000
Red Sneakers, The                                                   1,819,000
Ruby's Bucket of Blood                                              2,500,000
Sea People                                                            190,910
Snow in August                                                      1,750,000
Summer's End                                                          250,000
Three AM                                                            2,000,000
Time at the Top                                                       250,000
Walter & Henry                                                      2,049,000
                                                                 ------------
                                  SUB-TOTAL SHOWTIME               20,158,910

Robert Greenwald Productions                                        2,100,000      Oct-01
Allied Irish Bank                                                   6,480,838      Jul-02
Mercantile National Bank                                            2,012,500      Jan-02
Dog Run Productions                                                   300,000         TBD
Jaffe Braunstein                                                    3,500,000      Jan-02
Allied Irish Bank                                                  11,910,512      Mar-02
VZS  Productions                                                      300,000         TBD
Babelsburg Commitments/ABN AMRO                                    14,090,905      Jun-02
Babelsburg Commitments/ABN AMRO                                    13,569,950      Sep-02
Babelsburg Commitments/ABN AMRO                                    13,048,735      Jun-03
Babelsburg Commitments/ABN AMRO                                    12,527,650      Sep-03
                                                                 ------------
            SUB-TOTAL OTHER & BABELSBURG COMMITMENTS               79,841,090
                                                                 ------------
                                         GRAND TOTAL             $100,000,000
                                                                 ============
</Table>

                                      S-10
<PAGE>

                                Schedule 4.29(b)
                            Outstanding Indebtedness

                  (1) $249,127,506 pursuant to that certain Credit, Security,
Guaranty and Pledge Agreement, dated as of August 31, 2001, executed by each of
the Company, the Guarantors named therein, the requisite Lenders named therein
and The Chase Manhattan Bank, as Administrative Agent.

                  (2) $20,000,000 pursuant to the $20,000,000 Promissory Note,
dated November 19, 1999, made by Crown Media International, Inc. in favor of HC
Crown Corporation.

                  (3) $16,800,000 pursuant to the $10,000,000 Promissory Note,
dated February 23, 2000, made by Crown Media International, Inc. in favor of HC
Crown Corporation, as amended on April 14, 2000 to increase amount of Note to
$20,000,000.

                  (4) $805,822 accrued interest payable pursuant to the
promissory notes in item 1, 2 and 3 above.

                  (5) $33,221,125, together with accrued interest of $322,183
pursuant to the $50,000,000 Promissory Note, dated July 10, 2001, made by the
Company in favor of HC Crown Corporation.

                  (6) $2,905,564 in principal and accrued interest pursuant to a
letter agreement, dated August 23, 1999, between The Chase Manhattan Bank and
Hallmark India Private Limited.

                  (7) $12,040,863 pursuant to Contract for a Combined Uplink and
Space Segment Service, dated as of December 17, 1999, by and between British
Telecommunications PLC and Hallmark Entertainment Networks (now known as Crown
Media International, Inc.).

                  (8) $44,483,718 pursuant to Program License Agreement, dated
as of July 1, 1999, by and between Hallmark Entertainment Distribution, LLC, as
successor to Hallmark Entertainment Distribution Company and Hallmark
Entertainment Networks, Inc. (now known as Crown Media International, Inc.).

                  (9) $85,137,061 pursuant to Program License Agreement, dated
as of November 13, 1998, by and between Hallmark Entertainment Distribution
Company and Odyssey Holdings, L.L.C. (now known as Crown Media United States,
LLC).

                  (10) $100,000,000 payables assumed pursuant to that certain
Purchase and Sale Agreement, dated as of April 10, 2001, by and between the
Company and Hallmark Entertainment Distribution, LLC with respect to the
acquisition of film library assets.

                                      S-11
<PAGE>

                  (11) $2,825,007 intercompany payable owed to Hallmark
Entertainment, Inc. for rent and various miscellaneous matters.

                  (12) $981,249 pursuant to the Amended and Restated
Intercompany Service Agreement, dated as of January 1, 2000, by and between
Hallmark Cards, Incorporated and the Company.

                  (13) $1,443,750 pursuant to the service agreement, dated
September 28, 2001, by and between Hallmark Entertainment, Inc. and the Company.

                                      S-12

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