Document:

Exhibit 10.2

 

AMENDMENT
NO. 17 dated as of June 29, 2010 (this “Amendment”) to the Credit,
Security, Guaranty and Pledge Agreement dated as of August 31, 2001 as
amended by Amendments 1 through 15 thereto, dated as of December 14,
2001, December 31, 2001, March 29, 2002, May 14, 2002,
February 5, 2003, August 4, 2003, October 28, 2004, March 1,
2005, March 21, 2006, April 28, 2006, December 8, 2006, March 2, 2007, July 27,
2007, March 10, 2008, March 2, 2009 and March 2, 2010, among Crown Media
Holdings, Inc. (the “Borrower”), the Guarantors named therein, the
Lenders referred to therein and JPMorgan Chase Bank, N.A. (formerly known as
JPMorgan Chase Bank), as Administrative Agent and as Issuing Bank for the
Lenders (the “Agent”) (as the same may be further amended, supplemented
or otherwise modified, the “Credit Agreement”).

 

INTRODUCTORY STATEMENT

 

WHEREAS,
the Lenders have made available to the Borrower a credit facility pursuant to
the terms of the Credit Agreement;

 

WHEREAS,
the Borrower intends to effectuate a recapitalization of its intercompany
Indebtedness pursuant to a Master Recapitalization Agreement dated as of
February 26, 2010 among Hallmark Cards, HCC and certain other parties
pursuant to which, among other things, it is contemplated that various of the
Borrowers’ Subordinated Debt to HCC and its Affiliates will be converted into
reduced intercompany Indebtedness, common stock and preferred stock;

 

WHEREAS,
in connection with a condition precedent to the effectiveness of the
Recapitalization Agreement, the Borrower has requested that the Maturity Date
of the Credit Agreement be extended from August 31, 2010 to June 30, 2011.

 

WHEREAS,
the Administrative Agent and each of the Lenders have agreed to make certain
modifications to the Credit Agreement in order to accommodate the items
described in the preceding recitals.

 

NOW
THEREFORE, the parties hereto hereby agree as follows:

 

Section 1.               Defined
Terms.  Capitalized terms used herein
and not otherwise defined herein shall have the meaning given them in the
Credit Agreement.

 

Section 2.               Amendments
to Credit Agreement.  Upon the
Amendment Effective Date (as defined below):

 

(A)          the
Credit Agreement is hereby amended by (i) inserting all of the words and/or
provisions which appear with computerized underscoring in the document annexed
hereto 

 

 

as Exhibit A and (ii) deleting each of the
words and/or provisions which appear with computerized strike-through in the
document annexed hereto as Exhibit A (with the Credit Agreement as to be
so amended reflecting the changes set forth on Exhibit A referred to
herein as the “Revised Credit Agreement”).  It is understood and agreed that this
Amendment and the marked document attached hereto as Exhibit A
intentionally omit Section 4.1 and all of the pre-existing Exhibits to the
Credit Agreement, which shall be unaffected by this Amendment;

 

(B)           Schedules
3.1, 3.6(a), 3.6(b), 3.7(a), 3.7(b), 3.8, 3.10, 3.11, 3.17, 3.18(a), 3.18(b),
3.18(c), 3.23, 3.25 and 8.3 of the Credit Agreement are hereby replaced with
Schedules 3.1, 3.6(a), 3.6(b), 3.7(a), 3.7(b), 3.8, 3.10, 3.11, 3.17, 3.18(a),
3.18(b), 3.18(c), 3.23, 3.25 and 8.3, respectively, to this Amendment, which
replacement schedules reflect the Equity Interests of the Credit Parties on a
pro forma basis upon the consummation of the Recapitalization and the
intercompany mergers contemplated in connection therewith;

 

(C)           The
Hallmark Cards Subordination and Support Agreement is hereby terminated;

 

(D)          Notwithstanding
anything to the contrary in the Credit Agreement, the Required Lenders consent
to the merger of Hallmark Holdings and Hallmark Entertainment Investments Co.
with and into the Borrower in connection with the Recapitalization (as defined
in the Revised Credit Agreement);

 

(E)           An
Exhibit T is hereby added to the Credit Agreement [“Recapitalized Debt
Intercreditor Agreement”] in the form of Exhibit T to this
Agreement, and the Table of Contents of the Credit Agreement is hereby updated
as appropriate;

 

(F)           A
Schedule 3.17B [“Material Affiliate Transactions”] is hereby added to
the Credit Agreement in the form of Schedule 3.17B to this Amendment,
and the Table of Contents of the Credit Agreement is hereby updated as
appropriate.

 

Section 3.               Conditions
to Effectiveness.  The effectiveness
of this Amendment is subject to the satisfaction in full of each of the
conditions precedent set forth below (the date on which all such conditions
have been satisfied being herein called the “Amendment Effective Date”):

 

(A)          the
Agent shall have received counterparts of this Amendment which, when taken
together, bear the signatures of the Borrower, Hallmark Cards, each Guarantor
and each of the Lenders;

 

(B)           the
Agent shall have received for the account of the Lenders a fee of $25,000 in
consideration for the extensions of the Maturity Date to be implemented
hereunder;

 

(C)           the
representations and warranties in Section 4 hereof shall be true on the
Amendment Effective Date as if made on such date;

 

(D)          all
legal matters incident to this Amendment shall be satisfactory to Morgan, Lewis
& Bockius, LLP, counsel for the Agent;

 

2

 

(E)           the
Agent has received a fully-executed Recapitalized Debt Intercreditor Agreement
in the form of Exhibit T to this Amendment;

 

(F)           the
prior or simultaneous consummation of the Recapitalization on terms and
conditions satisfactory to the Agent including that (i) criteria set forth
under the definition of Recapitalization as set forth in the Revised Credit
Agreement are satisfied in connection therewith, (ii) that each
Recapitalization Credit Document (as defined in the Revised Credit Agreement)
is satisfactory in form and substance to the Agent; and (iii) the Agent is
satisfied with any and all liabilities of Hallmark Holdings and Hallmark
Entertainment Investments Co., who are contemplated to be merged with and into
the Borrower in connection with the consummation of the Recapitalization;

 

(G)           the
Agent shall have received evidence satisfactory to it that Hallmark Cards
and/or its Affiliates shall have, pursuant to documentation satisfactory to the
Administrative Agent, extended through no earlier than the Maturity Date (as
the same is being extended in the Revised Credit Agreement) the license
agreement which provides the Borrower and its Subsidiaries with the right to
use the “Hallmark” name and the “Crown” name in their respective television
series or on or with respect to any channels owned or operated by the Borrower
or any of its Subsidiaries; and

 

Section 4.               Representations
and Warranties of the Credit Parties. 
Each Credit Party represents and warrants that:

 

(A)          before
and after giving effect to this Amendment, the representations and warranties
contained in Section 3 of the Credit Agreement and in the other Fundamental
Documents (including with respect to the accuracy of Schedules 3.6(a) and
3.6(b)) are true and correct in all material respects (except to the extent
that any such representations and warranties specifically relate to an earlier
date, in which case they shall be true and correct as of such earlier date, or
changed circumstances specifically contemplated by, and allowed pursuant to,
the Revised Credit Agreement) with the same effect as if made on and as of the
date hereof;

 

(B)           before
and after giving effect to this Amendment, no Event of Default or Default will
have occurred and be continuing on and as of the date hereof; and

 

(C)           the
Service Agreement referred to in Section 4.1(h) of the Credit Agreement has
heretofore been terminated..

 

Section 5.               Acknowledgment
re: Hallmark Cards Facility Guarantee. 
By its execution of this Amendment, Hallmark Cards, in its capacity as
guarantor under the Hallmark Cards Facility Guarantee, hereby acknowledges the
extension of the Maturity Date which is being implemented under the Credit
Agreement pursuant to this Amendment, and hereby acknowledges and agrees that
the provisions of the Hallmark Cards Facility Guarantee shall be in full force
and effect both prior and subsequent to the Amendment Effective Date, and
regardless of whether any Change in Control (as defined in the Revised Credit
Agreement) may occur subsequent to the date hereof.

 

Section 6.               Further
Assurances.  At any time and from
time to time, upon the Agent’s request and at the sole expense of the Credit
Parties, each Credit Party will promptly and duly 

 

3

 

execute and deliver any and all further instruments
and documents and take such further action as the Agent shall reasonably
request.

 

Section 7.               Fundamental
Documents.  This Amendment is designated
a Fundamental Document by the Agent.

 

Section 8.               Full
Force and Effect.  Except as
expressly amended hereby, the Credit Agreement and the other Fundamental
Documents shall continue in full force and effect in accordance with the
provisions thereof on the date hereof. 
As used in the Credit Agreement, the terms “Agreement”, “this Agreement”,
“herein”,  “hereafter”, “hereto”, “hereof”,
and words of similar import, shall, unless the context otherwise requires, mean
the Credit Agreement as amended by this Amendment.

 

Section 9.               APPLICABLE
LAW.  THIS AMENDMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

Section 10.             Counterparts.  This Amendment may be executed in two or more
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute but one instrument.

 

Section 11.             Expenses.  The Borrower agrees to pay all out-of-pocket
expenses incurred by the Agent in connection with the preparation, execution
and delivery of this Amendment, including, but not limited to, the reasonable
fees and disbursements of counsel for the Agent.

 

Section 12.             Headings.  The headings of this Amendment are for the
purposes of reference only and shall not affect the construction of or be taken
into consideration in interpreting this Amendment.

 

IN WITNESS WHEREOF, the parties hereby have caused
this Amendment to be duly executed as of the date first written above.

 

[Signature Pages Follow]

 

4

 

	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  CROWN
  MEDIA HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By
  

  	
  /s/
  Brian Stewart

  
	
   

  	
  Name:
  Brian Stewart

  
	
   

  	
  Title:
  EVP/CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GUARANTORS:

  
	
   

  	
  CM
  INTERMEDIARY, LLC

  
	
   

  	
  CROWN
  MEDIA UNITED STATES, LLC

  
	
   

  	
  CITI
  TEEVEE, LLC

  
	
   

  	
  DOONE
  CITY PICTURES, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By
  

  	
  /s/
  Brian Stewart

  
	
   

  	
  Name:
  Brian Stewart

  
	
   

  	
  Title:
  EVP/CFO

  

 

Signature Page to
Amendment No. 17

 

 

	
   

  	
   

  	
  LENDER:

  
	
   

  	
   

  	
  JPMORGAN
  CHASE BANK, N.A., individually and as Agent and Issuing Bank

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
  /s/
  Gregory T. Martin

  
	
   

  	
   

  	
   

  	
  Name:
  Gregory T. Martin

  
	
   

  	
   

  	
   

  	
  Title:   Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Acknowledged
  and Agreed, solely with 

  Respect to Section 5 hereof: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  HALLMARK
  CARDS, INCORPORATED

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
  /s/
  Timothy Griffith

  	
   

  	
   

  
	
   

  	
  Name:
  Timothy Griffith

  	
   

  	
   

  
	
   

  	
  Title:
  Executive Vice President

  	
   

  	
   

  

 

Signature Page to
Amendment No. 17

 

 

EXHIBIT A

to Amendment No. 17

 

FORM OF REVISED CREDIT AGREEMENT

 

[Please see attached]

 

HIGHLIGHTING CHANGES TO BE IMPLEMENTED

TO THE CREDIT AGREEMENT  (AS THE
SAME HAD

PREVIOUSLY BEEN AMENDED THROUGH

AMENDMENT NO. 16 DATED AS OF MARCH 2, 2010) VIA

AMENDMENT NO. 17 DATED AS OF JUNE 29, 2010

 

CREDIT, SECURITY, GUARANTY AND PLEDGE AGREEMENT

 

Dated as of August 31, 2001

among

 

CROWN MEDIA HOLDINGS, INC.

as Borrower

 

and

 

ITS SUBSIDIARIES NAMED HEREIN

as Guarantors

 

and

 

THE LENDERS NAMED HEREIN

 

and

 

JPMORGAN CHASE

 

BANK, N.A.

 

 

(f/k/a THE CHASE MANHATTAN BANK)

 

as Administrative Agent and Issuing Bank

 

ii

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  INTRODUCTORY STATEMENT

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  DEFINITIONS

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  THE LOANS

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.1.

  	
  REVOLVING CREDIT LOANS

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.2.

  	
  TERM LOANS

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.3.

  	
  MAKING OF LOANS

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.4.

  	
  LETTERS OF CREDIT

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.5.

  	
  NOTES; REPAYMENT

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.6.

  	
  INTEREST ON LOANS

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.7.

  	
  COMMITMENT FEES AND OTHER
  FEES

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.8.

  	
  TERMINATION OR REDUCTION
  OF REVOLVING CREDIT COMMITMENTS

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.9.

  	
  DEFAULT INTEREST;
  ALTERNATE RATE OF INTEREST

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.10.

  	
  CONTINUATION AND
  CONVERSION OF LOANS

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.11.

  	
  PREPAYMENT OF LOANS;
  REIMBURSEMENT OF LENDERS

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.12.

  	
  CHANGE IN CIRCUMSTANCES

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.13.

  	
  CHANGE IN LEGALITY

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.14.

  	
  MANNER OF PAYMENTS

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.15.

  	
  UNITED STATES WITHHOLDING

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.16.

  	
  INTEREST ADJUSTMENTS

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  REPRESENTATIONS AND
  WARRANTIES

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.1.

  	
  CORPORATE EXISTENCE AND
  POWER

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.2.

  	
  AUTHORITY AND NO VIOLATION

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.3.

  	
  GOVERNMENTAL AND OTHER
  APPROVALS

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.4.

  	
  FINANCIAL STATEMENTS

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.5.

  	
  NO MATERIAL ADVERSE CHANGE

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.6.

  	
  OWNERSHIP OF PLEDGED
  SECURITIES, SUBSIDIARIES, ETC

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.7.

  	
  COPYRIGHTS, TRADEMARKS AND
  OTHER RIGHTS

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.8.

  	
  FICTITIOUS NAMES

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.9.

  	
  TITLE TO PROPERTIES

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.10.

  	
  UCC FILING INFORMATION

  	
   

  	
  41

  

 

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.11.

  	
  LITIGATION

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.12.

  	
  FEDERAL RESERVE REGULATIONS

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.13.

  	
  INVESTMENT COMPANY ACT

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.14.

  	
  BINDING AGREEMENTS

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.15.

  	
  TAXES

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.16.

  	
  COMPLIANCE WITH ERISA AND APPLICABLE LAW

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.17.

  	
  AGREEMENTS

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.18.

  	
  INDEBTEDNESS; GUARANTIES; LIENS

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.19.

  	
  SECURITY INTEREST; OTHER SECURITY

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.20.

  	
  DISCLOSURE

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.21.

  	
  LICENSED RIGHTS

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.22.

  	
  ENVIRONMENTAL LIABILITIES

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.23.

  	
  PLEDGED SECURITIES

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.24.

  	
  COMPLIANCE WITH LAWS

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.25.

  	
  BANK ACCOUNTS

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  4. 

  	
  CONDITIONS OF LENDING

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION
  4.1.[THE TEXT OF SECTION 4.1 OF THE CREDIT AGREEMENT IS INTENTIONALLY OMITTED
  FROM THIS EXHIBIT A TO AMENDMENT NO. 17; NO CHANGES ARE BEING EFFECTUATED TO
  SECTION 4.1 OF THE CREDIT AGREEMENT FROM THOSE PREVIOUSLY IN EFFECT VIA
  AMENDMENT NO. 17, AND THE CONDITIONS PRECEDENT SET FORTH IN SECTION 4.1 WERE
  SATISFIED OR WAIVED ON OR ABOUT AUGUST 31, 2001]

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 4.2.

  	
  CONDITIONS PRECEDENT TO EACH LOAN AND LETTER OF CREDIT

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  5. 

  	
  AFFIRMATIVE COVENANTS

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.1.

  	
  FINANCIAL STATEMENTS AND REPORTS

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.2.

  	
  CORPORATE EXISTENCE

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.3.

  	
  MAINTENANCE OF PROPERTIES

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.4.

  	
  NOTICE OF MATERIAL EVENTS

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.5.

  	
  INSURANCE

  	
   

  	
  49

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.6.

  	
  [INTENTIONALLY OMITTED.]

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.7.

  	
  [INTENTIONALLY OMITTED.]

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.8.

  	
  BOOKS AND RECORDS

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.9.

  	
  OBSERVANCE OF AGREEMENTS

  	
   

  	
  50

  

 

ii

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.10.

  	
  LABORATORIES; NO REMOVAL

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.11.

  	
  TAXES AND CHARGES; INDEBTEDNESS IN ORDINARY COURSE OF BUSINESS

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.12.

  	
  LIENS

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.13.

  	
  CASH RECEIPTS

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.14.

  	
  [INTENTIONALLY OMITTED.]

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.15.

  	
  [INTENTIONALLY OMITTED.]

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.16.

  	
  ENVIRONMENTAL LAWS

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.17.

  	
  [INTENTIONALLY OMITTED.]

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.18.

  	
  FURTHER ASSURANCES; SECURITY INTERESTS

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.19.

  	
  [INTENTIONALLY OMITTED.]

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  NEGATIVE COVENANTS

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.1.

  	
  LIMITATIONS ON INDEBTEDNESS

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.2.

  	
  LIMITATIONS ON LIENS

  	
   

  	
  54

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.3.

  	
  GUARANTIES

  	
   

  	
  56

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.4.

  	
  LIMITATIONS ON INVESTMENTS

  	
   

  	
  56

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.5.

  	
  RESTRICTED PAYMENTS

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.6.

  	
  LIMITATIONS ON SALE OF ASSETS

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.7.

  	
  RECEIVABLES

  	
   

  	
  58

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.8.

  	
  TAX SHELTERS, SALE AND LEASEBACK ETC

  	
   

  	
  58

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.9.

  	
  [INTENTIONALLY OMITTED.]

  	
   

  	
  58

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.10.

  	
  [INTENTIONALLY OMITTED.]

  	
   

  	
  58

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.11.

  	
  TRANSACTIONS WITH AFFILIATES

  	
   

  	
  58

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.12.

  	
  PROHIBITION OF AMENDMENTS OR WAIVERS

  	
   

  	
  59

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.13.

  	
  NO NEGATIVE PLEDGE

  	
   

  	
  59

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.14.

  	
  ACQUISITIONS OR MERGERS, ETC

  	
   

  	
  59

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.15.

  	
  PRODUCTION

  	
   

  	
  59

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.16.

  	
  CHANGE IN BUSINESS

  	
   

  	
  60

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.17.

  	
  ERISA COMPLIANCE

  	
   

  	
  60

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.18.

  	
  INTEREST RATE PROTECTION AGREEMENTS, ETC

  	
   

  	
  60

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.19.

  	
  SUBSIDIARIES

  	
   

  	
  60

  

 

iii

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.20.

  	
  HAZARDOUS MATERIALS

  	
   

  	
  60

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.21.

  	
  [INTENTIONALLY OMITTED.]

  	
   

  	
  60

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.22.

  	
  [INTENTIONALLY OMITTED.]

  	
   

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.23.

  	
  [INTENTIONALLY OMITTED.]

  	
   

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.24.

  	
  [INTENTIONALLY OMITTED.]

  	
   

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.25.

  	
  [INTENTIONALLY OMITTED.]

  	
   

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.26.

  	
  CORPORATE STRUCTURE

  	
   

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.27.

  	
  [INTENTIONALLY OMITTED.]

  	
   

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.28.

  	
  NO NEW LIENS

  	
   

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
  7. 

  	
  EVENTS OF DEFAULT

  	
   

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
  8. 

  	
  GRANT OF SECURITY INTEREST; REMEDIES

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8.1.

  	
  SECURITY INTERESTS

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8.2.

  	
  USE OF COLLATERAL

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8.3.

  	
  COLLECTION ACCOUNTS

  	
   

  	
  65

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8.4.

  	
  CREDIT PARTIES TO HOLD IN TRUST

  	
   

  	
  65

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8.5.

  	
  COLLECTIONS, ETC

  	
   

  	
  65

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8.6.

  	
  POSSESSION, SALE OF COLLATERAL, ETC

  	
   

  	
  66

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8.7.

  	
  APPLICATION OF PROCEEDS ON DEFAULT

  	
   

  	
  67

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8.8.

  	
  POWER OF ATTORNEY

  	
   

  	
  67

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8.9.

  	
  FINANCING STATEMENTS, DIRECT PAYMENTS, CONFIRMATION OF RECEIVABLES
  AND AUDIT RIGHTS

  	
   

  	
  68

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8.10.

  	
  FURTHER ASSURANCES

  	
   

  	
  68

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8.11.

  	
  TERMINATION AND RELEASE

  	
   

  	
  68

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8.12.

  	
  REMEDIES NOT EXCLUSIVE

  	
   

  	
  69

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8.13.

  	
  CONTINUATION AND REINSTATEMENT

  	
   

  	
  69

  
	
   

  	
   

  	
   

  	
   

  
	
  9. 

  	
  CASH COLLATERAL

  	
   

  	
  69

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 9.1.

  	
  CASH COLLATERAL ACCOUNT

  	
   

  	
  69

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 9.2.

  	
  GRANT OF SECURITY INTEREST

  	
   

  	
  70

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 9.3.

  	
  REMEDIES

  	
   

  	
  70

  
	
   

  	
   

  	
   

  	
   

  
	
  10. 

  	
  GUARANTY

  	
   

  	
  70

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 10.1.

  	
  GUARANTY

  	
   

  	
  70

  

 

iv

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 10.2.

  	
  NO IMPAIRMENT OF GUARANTY, ETC

  	
   

  	
  71

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 10.3.

  	
  CONTINUATION AND REINSTATEMENT, ETC

  	
   

  	
  72

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 10.4.

  	
  LIMITATION ON GUARANTEED AMOUNT ETC

  	
   

  	
  72

  
	
   

  	
   

  	
   

  	
   

  
	
  11. 

  	
  PLEDGE

  	
   

  	
  73

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 11.1.

  	
  PLEDGE

  	
   

  	
  73

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 11.2.

  	
  REGISTRATION IN NOMINEE NAME; DENOMINATIONS

  	
   

  	
  73

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 11.3.

  	
  COVENANT

  	
   

  	
  73

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 11.4.

  	
  VOTING RIGHTS; DIVIDENDS; ETC

  	
   

  	
  73

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 11.5.

  	
  REMEDIES UPON DEFAULT

  	
   

  	
  74

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 11.6.

  	
  APPLICATION OF PROCEEDS OF SALE AND CASH

  	
   

  	
  75

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 11.7.

  	
  SECURITIES ACT, ETC

  	
   

  	
  76

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 11.8.

  	
  CONTINUATION AND REINSTATEMENT

  	
   

  	
  76

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 11.9.

  	
  TERMINATION

  	
   

  	
  76

  
	
   

  	
   

  	
   

  	
   

  
	
  12. 

  	
  THE AGENT AND THE ISSUING BANK

  	
   

  	
  77

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 12.1.

  	
  ADMINISTRATION BY AGENT

  	
   

  	
  77

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 12.2.

  	
  ADVANCES AND PAYMENTS

  	
   

  	
  79

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 12.3.

  	
  SHARING OF SETOFFS, CASH COLLATERAL AND SHARING EVENTS

  	
   

  	
  79

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 12.4.

  	
  NOTICE TO THE LENDERS

  	
   

  	
  80

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 12.5.

  	
  LIABILITY OF THE AGENT

  	
   

  	
  80

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 12.6.

  	
  REIMBURSEMENT AND INDEMNIFICATION

  	
   

  	
  81

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 12.7.

  	
  RIGHTS OF AGENT AND ISSUING BANK

  	
   

  	
  81

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 12.8.

  	
  INDEPENDENT INVESTIGATION BY LENDERS

  	
   

  	
  82

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 12.9.

  	
  AGREEMENT OF REQUIRED LENDERS

  	
   

  	
  82

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 12.10.

  	
  NOTICE OF TRANSFER

  	
   

  	
  82

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 12.11.

  	
  SUCCESSOR AGENT

  	
   

  	
  82

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 12.12.

  	
  SUCCESSOR ISSUING BANK

  	
   

  	
  83

  
	
   

  	
   

  	
   

  	
   

  
	
  13. 

  	
  MISCELLANEOUS

  	
   

  	
  83

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13.1.

  	
  NOTICES

  	
   

  	
  83

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13.2.

  	
  SURVIVAL OF AGREEMENT, REPRESENTATIONS AND WARRANTIES, ETC

  	
   

  	
  84

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13.3.

  	
  SUCCESSORS AND ASSIGNS; SYNDICATIONS; LOAN SALES; PARTICIPATIONS

  	
   

  	
  84

  

 

v

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13.4.

  	
  EXPENSES; DOCUMENTARY TAXES

  	
   

  	
  89

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13.5.

  	
  INDEMNIFICATION OF THE AGENT, THE ISSUING BANK AND THE LENDERS

  	
   

  	
  89

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13.6.

  	
  CHOICE OF LAW

  	
   

  	
  90

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13.7.

  	
  WAIVER OF JURY TRIAL

  	
   

  	
  91

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13.8.

  	
  WAIVER WITH RESPECT TO DAMAGES

  	
   

  	
  91

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13.9.

  	
  NO WAIVER

  	
   

  	
  91

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13.10.

  	
  EXTENSION OF PAYMENT DATE

  	
   

  	
  91

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13.11.

  	
  AMENDMENTS, ETC

  	
   

  	
  92

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13.12.

  	
  SEVERABILITY

  	
   

  	
  92

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13.13.

  	
  SERVICE OF PROCESS

  	
   

  	
  92

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13.14.

  	
  HEADINGS

  	
   

  	
  93

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13.15.

  	
  EXECUTION IN COUNTERPARTS

  	
   

  	
  93

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13.16.

  	
  SUBORDINATION OF INTERCOMPANY INDEBTEDNESS, RECEIVABLES AND ADVANCES

  	
   

  	
  94

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13.17.

  	
  CONFIDENTIALITY

  	
   

  	
  94

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13.18.

  	
  ENTIRE AGREEMENT

  	
   

  	
  95

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13.19.

  	
  RIGHT OF SET-OFF

  	
   

  	
  95

  
	
   

  	
   

  	
   

  	
   

  
	
  14. 

  	
  HALLMARK SUBORDINATED PARTICIPATION

  	
   

  	
  95

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 14.1.

  	
  SALE AND GENERAL TERMS OF PARTICIPATION UPON A PAYMENT UNDER THE
  HALLMARK CARDS FACILITY GUARANTEE

  	
   

  	
  95

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 14.2.

  	
  AGREEMENT TO SUBORDINATE

  	
   

  	
  96

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 14.3.

  	
  RESTRICTIONS ON PAYMENT OF THE JUNIOR OBLIGATIONS

  	
   

  	
  96

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 14.4.

  	
  ADDITIONAL PROVISIONS CONCERNING SUBORDINATION

  	
   

  	
  97

  

 

vi

 

Schedules

 

	
  1

  	
  Schedule
  of Commitments

  
	
  3.1

  	
  List
  of Jurisdictions Where Credit Parties and their Subsidiaries are Qualified

  
	
  3.6(a)

  	
  Credit
  Parties/Pledged Securities

  
	
  3.6(b)

  	
  Beneficial
  Interest

  
	
  3.7(a)

  	
  Items
  of Product

  
	
  3.7(b)

  	
  Trademarks

  
	
  3.8

  	
  Fictitious
  Names

  
	
  3.10

  	
  Principal
  Executive Office/Location of Collateral

  
	
  3.11

  	
  Litigation

  
	
  3.17

  	
  Material
  Agreements

  
	
  3.17B

  	
  Material
  Intercompany Transactions

  
	
  3.18(a)

  	
  Existing
  Indebtedness

  
	
  3.18(b)

  	
  Existing
  Guaranties

  
	
  3.18(c)

  	
  Existing
  Liens

  
	
  3.23

  	
  Pledged
  Securities

  
	
  3.25

  	
  Bank
  Accounts

  
	
  8.3

  	
  Collection
  Accounts

  

 

Exhibits

 

	
  A-1

  	
  Form
  of Revolving Note

  
	
  A-2

  	
  Form
  of Term Note

  
	
  B-1

  	
  Copyright
  Security Agreement

  
	
  B-2

  	
  Form
  of Copyright Security Agreement Supplement

  
	
  C

  	
  Form
  of Laboratory Pledgeholder Agreement

  
	
  D

  	
  Form
  of Borrowing Certificate

  
	
  E

  	
  Trademark
  Security Agreement

  
	
  F

  	
  Form
  of Laboratory Access Letter

  
	
  G

  	
  Opinions
  of Counsel to the Credit Parties, Hallmark Cards, Inc.

  
	
   

  	
  and
  Hallmark Entertainment Inc.

  
	
  H

  	
  Form
  of Assignment and Acceptance

  
	
  I

  	
  Contribution
  Agreement

  
	
  J

  	
  Form
  of Instrument of Assumption and Joinder

  
	
  K

  	
  Hallmark
  Cards Subordination and Support Agreement

  
	
  L

  	
  Limited
  Guarantee

  
	
  L-1

  	
  Hallmark
  Cards Letter of Credit

  
	
  M-1

  	
  Amended
  and Restated Program License Agreement (Crown Media International)

  
	
  M-2

  	
  Amended
  and Restated Program License Agreement (Crown Media United States)

  
	
  N

  	
  HEDC
  Purchase Agreement

  
	
  O

  	
  Hallmark
  Inducement Agreement

  
	
  P

  	
  Form
  of Sale/Leaseback Power of Attorney

  
	
  Q

  	
  Description
  of Foreign Asset Sale

  
	
  R

  	
  Hallmark
  L/C

  

 

 

	
  S

  	
  Form
  of Hallmark Cards Facility Guarantee

  
	
  T

  	
  Form
  of Recapitalized Debt Intercreditor Agreement

  

 

2

 

CREDIT,
SECURITY, GUARANTY AND PLEDGE AGREEMENT, dated as of August 31, 2001 among
(i) CROWN MEDIA HOLDINGS, INC., a Delaware corporation (the “Borrower”),
(ii) the GUARANTORS which are parties hereto from time to time, (iii) the
LENDERS which are parties hereto from time to time and (iv) JPMORGAN CHASE
BANK, N.A., a national banking corporation (f/k/a THE CHASE MANHATTAN BANK), as
Agent for the Lenders and as Issuing Bank.

 

INTRODUCTORY STATEMENT

 

All
terms not otherwise defined above or in this Introductory Statement are as
defined in Article 1 hereof, or as defined elsewhere herein.

 

The
Borrower requested that the Lenders make available a $320,000,000 five-year
secured credit facility consisting of a term loan of $100,000,000 and a
revolving credit facility of up to $240,000,000 (or such lesser amount as is
available based upon amounts actually committed) to be used (i) to pay
HEDC for the acquisition of certain rights in the HEDC Library in an amount not
to exceed $120,000,000 (or such lesser amount as represents the cash portion of
the purchase price of the HEDC Library), (ii) to repay intercompany loans
from Hallmark or HCC (subject to the limitations set forth herein), (iii) to
fund the development, distribution, exploitation and acquisition of intellectual
properties including feature films, television and video product and/or rights
therein or thereto; (iv) for general working capital purposes, including
acquisitions and the operation of the Borrower and its Subsidiaries; and (v) to
fund the acquisition, distribution, marketing and other exploitation of
movies-of-the-week, mini-series, cable, pay cable, first-run syndication,
network and video programming.

 

To provide security for the
repayment of the Loans and all other Obligations of the Credit Parties
hereunder, the Credit Parties provided the following to the Agent, for the
benefit of itself, the Issuing Bank and the Lenders: (i) a security
interest from the Credit Parties in the Collateral pursuant to Article 8
hereof which will include (x) the material contracts of the Credit
Parties, including but not limited to, Platform Agreements, and (y) all of
the Credit Parties’ rights in copyrights, trademarks, tradenames and service
marks; (ii) a guaranty from the Guarantors pursuant to Article 10
hereof; (iii) a pledge of the capital stock or other ownership interest of
the Guarantors, pursuant to Article 11 hereof and (iv) a security
interest from the Borrower in the Cash Collateral Account.

 

For the avoidance of doubt, (a) the
term loans described above were repaid in their entirety on or prior to October 28,
2004  and the term loan commitments
were permanently reduced to zero in connection with such repayment, (b) in
connection with Amendment No. 16 dated as of March 2, 2010 to this
Credit Agreement , the Total Commitments were reduced to $30,000,000 and (c) in
connection with Amendment No. 17 (defined below), the Maturity Date has
been extended to June 30, 2011.

 

 

The Borrower, Hallmark Cards, HCC and certain other
parties have entered into a Master Recapitalization Agreement dated as of February 26,
2010 (the “Recapitalization Agreement”) pursuant to which, among other things, (a) all
of Borrower’s existing Subordinated Debt to HCC and its Affiliates (excluding
certain intercompany payables and amounts due under the Tax Sharing Agreement)
is being converted into intercompany Indebtedness, common stock and preferred
stock in accordance with the following parameters: (i) $315 million
principal amount of Indebtedness of the Credit Parties will remain, with (a) $200
million of such Indebtedness constituting cash-pay interest-bearing
obligations, with an interest rate not to exceed 9.5% per annum through December 31,
2011 and 12% thereafter (the “Term A Loan Recapitalized Debt”) and (b) $115
million of such Indebtedness constituting obligations on which (1) the
applicable interest rate shall be a rate per annum equal to 11.5% through December 31,
2011, increasing to 14% thereafter and (2) interest through December 31,
2010 may be payable in kind by adding accrued interest to principal but which
shall become cash-pay beginning on January 1, 2011 (the “Term B Loan
Recapitalized Debt” and, together with the Term A Loan Recapitalized Debt, the “Recapitalized
Debt”); (ii) the Recapitalized Debt will be evidenced by the Credit
Agreement dated on or about the Amendment No. 17 Effective Date among
Borrower as borrower, HCC as lender and each of the other “Credit Parties” from
time to time party thereto (the “Recapitalization Credit Agreement”, and,
together with any other documentation to be established in connection
therewith, the “Recapitalization Credit Documents”); (iii) $185 million of
such existing intercompany Indebtedness will be converted into convertible
preferred stock of the Borrower (the “Series A Preferred Stock”); (iv) the
remaining intercompany Subordinated Debt of the Credit Parties shall be
converted into shares of class A common stock of the Borrower; and (v) two
intermediate holding companies above the Borrower will be merged with and into
the Borrower (the consummation of the transactions contemplated in the
Recapitalization Agreement, as described above, is referred to herein as the “Recapitalization”).

 

Subject
to the terms and conditions set forth herein, the Agent is willing to act as
agent for the Lenders and each Lender is willing to make Loans to the Borrower
and to participate in Letters of Credit in amounts in the aggregate at any one
time outstanding not in excess of the Commitment of that Lender hereunder.

 

Accordingly,
the parties hereto hereby agree as follows:

 

1.             DEFINITIONS

 

For
the purposes hereof unless the context otherwise requires, the following terms
shall have the meanings indicated, all accounting terms not otherwise defined
herein shall have the respective meanings accorded to them under GAAP and all
terms defined in the UCC and not otherwise defined herein shall have the
respective meanings accorded to them therein. 
Unless the content otherwise requires, any of the following terms may be
used in the singular or the plural, depending on the reference:

 

“Affiliate”
shall mean any Person which directly or indirectly holds a controlling interest
in, is controlled by, or is under common control with, another Person.  For purposes of this definition, a Person
shall be deemed to be “controlled by” another Person if such latter Person
possesses, directly or indirectly, the power to direct or cause the direction
of the management and policies of such controlled Person whether by contract or
otherwise.

 

 

“Agent”
and “Administrative Agent” shall mean JPMorgan Chase Bank, N.A. in its
capacity as agent for the Lenders hereunder, and any successor agent appointed
pursuant to Section 12.11 hereof.

 

“Agreement”
and “Credit Agreement” shall mean this Credit, Security, Guaranty and
Pledge Agreement, as it may be amended, supplemented or otherwise modified from
time to time.

 

“Alternate
Base Rate” shall mean for any day, a rate per annum equal to the greatest
of (a) the Prime Rate in effect on such day, (b) the Federal Funds
Effective Rate in effect for such day plus 1⁄2 of 1% and (c) the LIBO Rate
for a one month Interest Period on such day (or if such day is not a Business
Day, the immediately preceding Business Day) plus 1%.  For purposes hereof, “Prime Rate” shall mean
the rate of interest per annum publicly announced from time to time by the
Administrative Agent as its prime rate in effect at its principal office in New
York City.  “Federal Funds Effective Rate”
shall mean, for any day, the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers, as published on the next succeeding Business Day by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for the day of such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.  If
for any reason the Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Federal
Funds Effective Rate for any reason, including the inability or failure of the
Agent to obtain sufficient quotations in accordance with the terms hereof, the
Alternate Base Rate shall be determined without regard to clause (b) of
the first sentence of this definition, as appropriate, until the circumstances
giving rise to such inability no longer exist. 
Any change in the Alternate Base Rate due to a change in the Prime Rate,
the one-month LIBO Rate or the Federal Funds Effective Rate shall be effective
on the effective date of such change in the Prime Rate, the one-month LIBO Rate
or the Federal Funds Effective Rate, respectively.

 

“Alternate
Base Rate Loan” shall mean a Loan bearing interest based on the Alternate
Base Rate in accordance with the provisions of Article 2 hereof.

 

“Amendment
No. 12 Effective Date” shall mean the Amendment Effective Date, as
such term is defined in that certain Amendment No. 12 dated as of March 2,
2007 to this Credit Agreement.

 

“Amendment
No. 13” shall mean that certain Amendment No. 13 dated as of July 27,
2007 to this Credit Agreement.

 

“Amendment
No. 15” shall mean that certain Amendment No. 15 dated as of March 2,
2009 to this Credit Agreement.

 

 

“Amendment No. 17” shall mean that certain Amendment No. 17
dated as of June     , 2010 to this Credit Agreement.

 

“Amendment
No. 17 Effective Date” shall mean the Amendment Effective Date (as defined
in Amendment No. 17).

 

“Applicable
Law” shall mean all provisions of statutes, rules, regulations and orders
of governmental bodies or regulatory agencies applicable to a Person, and all
orders and decrees of all courts and arbitrators in proceedings or actions in
which the Person in question is a party.

 

“Applicable
Margin” shall mean (i) in the case of Alternative Base Rate Loans,
1.25% per annum and (ii) in the case of Eurodollar Loans 2.25% per annum.

 

“Assessment
Rate” shall mean, for any date, the net annual assessment rate (rounded
upwards, if necessary, to the next higher 1/100 of 1%) as most recently
estimated by the Agent for determining the then current net annual assessment
rate that will be employed in determining amounts payable by The Chase
Manhattan Bank to the Federal Deposit Insurance Corporation (or any successor)
for insurance by such Corporation (or such successor) of time deposits made in
dollars at The Chase Manhattan Bank’s domestic offices.

 

“Assignment
and Acceptance” shall mean an agreement substantially in the form of Exhibit H
hereto, executed by the assignor, assignee and other parties as contemplated
thereby.

 

“Authorized
Officer” shall mean, with respect to any Person, its chief executive
officer, chief operating officer or chief financial officer.

 

“Bankruptcy
Code” shall mean the Bankruptcy Reform Act of 1978, as heretofore and
hereafter amended, as codified at 11 U.S.C. 101 et  seq.

 

“Board”
shall mean the Board of Governors of the Federal Reserve System of the United
States of America.

 

“Borrowing”
shall mean a group of Loans of a single Interest Rate Type and as to which a
single Interest Period is in effect on any given day.

 

“Borrowing
Certificate” shall be as defined in Section 4.2(d).

 

“Business
Day” shall mean any day other than a Saturday, Sunday or other day on which
banks in The City of New York or the City of Los Angeles are permitted to
close; provided, however, that when used in connection with a Eurodollar Loan, the
term “Business Day” shall also exclude any day on which banks are not open for
dealings in Dollar deposits on the London interbank market.

 

“Capital
Expenditures” shall mean, with respect to any Person for any period,  the sum of (i) the aggregate of all
expenditures (whether paid in cash or accrued as a liability) by such Person
during that period which, in accordance with GAAP, are or should be included in

 

 

“additions
to property, plant or equipment” or similar items included in cash flows
(including Capital Leases) and (ii) to the extent not covered by clause (i) hereof,
the aggregate of all expenditures properly capitalized in accordance with GAAP
by such Person to acquire, by purchase or otherwise, the business, property or
fixed assets of, or stock or other evidence of beneficial ownership of, any
other Person (other than the portion of such expenditures allocable in accordance
with GAAP to net current assets or which is allocable to the acquisition of
items of Product).

 

“Capital
Lease”, as applied to any Person, shall mean any lease of any property
(whether real, personal or mixed) by that Person as lessee which, in accordance
with GAAP, is or should be accounted for as a capital lease on the balance
sheet of that Person.

 

“Cash
Collateral Account” shall be as defined in Section 9.1 hereof.

 

“Cash
Equivalents” shall mean (i) marketable securities issued or directly
and fully guaranteed or insured by the United States of America or any agency
or instrumentality thereof (provided that the full faith and credit of
the United States of America is pledged in support thereof) having maturities
of not more than twelve months from the date of acquisition, (ii) time
deposits, demand deposits, certificates of deposit, acceptances or prime
commercial paper or repurchase obligations for underlying securities of the
types described in clause (i) entered into with any Lender or any commercial
bank organized under the laws of the United States or a state thereof having a
short-term deposit rating at the time of acquisition of at least A-2 or the
equivalent thereof by Standard & Poor’s Ratings Services or at least
P-2 or the equivalent thereof by Moody’s Investors Service, Inc., (iii) commercial
paper issued by a Lender or the parent of a Lender with a rating at the time of
acquisition of A-1 or A-2 or the equivalent thereof by Standard & Poor’s
Ratings Services or P-1 or P-2 or the equivalent thereof by Moody’s Investors
Service, Inc. and in each case maturing within twelve months after the
date of acquisition, (iv) repurchase agreements and reverse repurchase
agreements with any Lender or any Affiliate of any Lender relating to marketable
direct obligations issued or unconditionally backed by the full faith and
credit of the United States, in each case maturing within one year from the
date thereof and (v) marketable direct obligations issued by any state of
the United States or any agency or instrumentality thereof maturing within
twelve months from the date of acquisition thereof and, at the time of
acquisition, having one of the two highest ratings generally obtainable from
either Standard & Poor’s Ratings Services or Moody’s Investors Service, Inc.

 

“Change
in Control” shall mean (a) Hallmark Cards shall cease to own (directly
or indirectly) at least 80% of the Equity Interests of the Borrower, (b) Hallmark
Cards shall cease to have (i) sufficient voting power to elect a majority
of the Borrower’s Board of Directors or (ii) beneficial ownership over a
majority of the issued and outstanding Equity Interests of the Borrower having
voting power or (c) the 

 

 

consummation
by the Borrower of any transaction that would constitute a “Rule 13e-3
transaction” as defined in the Exchange Act.

 

“Charge
Over Shares” shall mean a charge over shares to be delivered by the
Borrower in favor of the Agent, in form and substance satisfactory to the
Agent; it being understood that the Charge Over Shares was terminated and
released in connection with the consummation of the Foreign Asset Sale.

 

“Clearing
Account” shall mean the account of the Borrower maintained at the office of
the Agent at 270 Park Avenue, New York, New York 10017-2070, designated as the “Crown
Media, Inc. - Clearing Account”, Account No. 323224679.

 

“Closing
Date” shall mean the date on which the conditions precedent set forth in Section 4.1
have been satisfied or waived, which occurred on or about August 31, 2001.

 

“CM
Intermediary” shall mean CM Intermediary, LLC, a Delaware limited liability
company.

 

“Code”
shall mean the Internal Revenue Code of 1986 and the rules and regulations
issued thereunder, as heretofore and hereafter amended, as codified at 26
U.S.C. et  seq., or any successor provision thereto.

 

“Collateral”
shall mean with respect to each Credit Party, all of such Credit Party’s right,
title and interest in and to all personal property, tangible and intangible,
wherever located or situated and whether now owned, presently existing or
hereafter acquired or created, including, but not limited to, all goods,
accounts, instruments, intercompany obligations, contract rights, partnership
and joint venture interests, documents, chattel paper, general intangibles,
goodwill, equipment, machinery, inventory, investment property, copyrights,
trademarks (other than any rights which such Credit Party may have in and to
the “Hallmark” and “Odyssey” trademarks), trade names, insurance proceeds,
cash, deposit accounts and the Pledged Securities, and any proceeds thereof,
products thereof or income therefrom, further including, but not limited to,
all of such Credit Party’s right, title and interest in and to each and every
item and type of Product, the scenario, screenplay or script upon which an item
of Product is based, all of the properties thereof, tangible and intangible,
and all domestic and foreign copyrights and all other rights therein and
thereto, of every kind and character, whether now in existence or hereafter to
be made or produced, and whether or not in possession of such Credit Party,
including with respect to each and every item of Product and without limiting
the foregoing language, each and all of the following particular rights and
properties (to the extent they are now owned or hereafter owned by such Credit
Party):

 

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

 

(ii)           all common law and/or statutory
copyright and other rights in all literary and other properties (hereinafter
called “said literary properties”) which form the basis of such item of
Product and/or which are or will be incorporated into such item of Product, all
component parts of such item of Product consisting of said literary properties,
all motion picture rights in and to the story, all treatments of said story and
said literary properties, together with all preliminary and final screenplays
used and to be used in connection with such item of Product,

 

 

and
all other literary material upon which such item of Product is based or from
which it is adapted;

 

(iii)          all motion picture rights in and to
all music and musical compositions used and to be used in such item of Product,
if any, including, each without limitation, all rights to record, rerecord,
produce, reproduce or synchronize all of said music and musical compositions in
and in connection with motion pictures;

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

(xi)           the name or title of such item of
Product and all rights of such Credit Party to the use thereof, including,
without limitation, rights protected pursuant to trademark, service mark,
unfair competition and/or any other applicable statutes, common law, or other rule or
principle of law;

 

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

 

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

 

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

 

 

intangibles
related to or which grow out of the exhibition of such item of Product and the
exploitation of any and all other rights in such item of Product set out in
this definition;

 

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

 

(xvi)        all and each of the rights, regardless
of denomination, which arise in connection with the acquisition, creation,
production, completion of production, delivery, distribution, or other
exploitation of such item of Product, including, without limitation, any and
all rights in favor of such Credit Party, the ownership or control of which are
or may become necessary or desirable, in the opinion of the Administrative
Agent, in order to complete production of such item of Product in the event
that the Administrative Agent exercises any rights it may have to take over and
complete production of such item of Product;

 

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

 

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

 

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

 

(xx)          any and all rights of such Credit Party
under contracts relating to the production or acquisition of such item of
Product, including, but not limited to, all contracts which have been delivered
to the Agent pursuant to this Credit Agreement.

 

“Collection
Account” shall have the meaning given such term in Section 8.3 hereof.

 

“Commitment”
shall mean, collectively, the Term Loan Commitment and the Revolving Loan
Commitment of each Lender.

 

“Commitment
Fees” shall have the meaning given such term in Section 2.7 hereof.

 

“Commitment
Termination Date” shall mean the earlier to occur of (i) June 30,
2011 and (ii) such earlier date on which the Total Commitment shall
terminate in accordance with Section 2.8(a) or Article 7 hereof.

 

“Consolidated
Net Income” shall mean, for any period for which such amount is being
determined, the consolidated net income of such Person for such period in
accordance with GAAP.

 

 

“Consolidated
Subsidiaries” shall mean, for any Person, all subsidiaries of such Person
which are required or permitted to be consolidated with such Person for
financial reporting purposes in accordance with GAAP.

 

“Contribution
Agreement” shall mean the Contribution Agreement substantially in the form
of Exhibit I hereto to be entered into by the Guarantors, as such
Contribution Agreement may be amended, supplemented or otherwise modified from
time to time.

 

“Controlled
Foreign Corporation” shall mean a Subsidiary of the Borrower which is a “controlled
foreign corporation” as defined in Section 957(a) of the Code or any
successor provision thereto.

 

“Copyright
Security Agreement” shall mean the Copyright Security Agreement,
substantially in the form of Exhibit B-1 hereto, as the same may be
amended or supplemented from time to time by delivery of a Copyright Security
Agreement Supplement or otherwise.

 

“Copyright
Security Agreement Supplement” shall mean a Supplement to the Copyright
Security Agreement substantially in the form of Exhibit B-2 hereto.

 

“Credit
Exposure” shall mean, without duplication, with respect to any Lender, the
sum of such Lender’s (i) aggregate outstanding Loans hereunder and (ii) Pro
Rata Share of the then current L/C Exposure.

 

“Credit
Parties” shall mean the Borrower and the Guarantors.

 

“Crown
Media US” shall mean Crown Media United States, LLC, a Delaware limited
liability company.

 

 

“Currency
Agreement” shall mean any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement designed to protect the Borrower against fluctuations in currency
values.

 

“Debenture”
shall mean a debenture to be delivered by any U.K. Credit Party in favor of the
Agent, in form and substance satisfactory to the Agent; it being understood
that the Debenture(s) was terminated and released in connection with the
consummation of the Foreign Asset Sale.

 

“Default”
shall mean any event, act or condition which with notice or lapse of time, or
both, would constitute an Event of Default.

 

“Dollars”
and “$” shall mean lawful money of the United States of America.

 

“Environmental
Laws” shall mean any and all federal, state, local or municipal laws,
rules, orders, regulations, statutes, ordinances, codes, decrees or
requirements of any Governmental Authority regulating, relating to, or imposing
liability or standards of conduct concerning, any Hazardous Material or
environmental protection or health and safety, as now or at any time hereafter
in effect, including without limitation, the Clean Water Act also known as the
Federal Water Pollution Control Act (“FWPCA”), 33 U.S.C. § 1251 et  seq.,
the Clean Air Act (“CAA”), 42 U.S.C. §§ 7401 et  seq., the Federal
Insecticide, Fungicide and Rodenticide Act (“FIFRA”), 7 U.S.C. §§ 136 et
seq., the Surface Mining Control and Reclamation Act (“SMCRA”), 30
U.S.C. §§ 1201 et  seq., the Comprehensive Environmental Response,
Compensation and Liability Act (“CERCLA”), 42 U.S.C. § 9601 et  seq.,
the Superfund Amendments and Reauthorization Act of 1986 (“SARA”), Public Law
99-499, 100 Stat. 1613, the Emergency Planning and Community Right to Know Act
(“EPCRA”), 42 U.S.C. § 11001 et  seq., the Resource Conservation
and Recovery Act (“RCRA”), 42 U.S.C. § 6901 et  seq., the
Occupational Safety and Health Act as amended (“OSHA”), 29 U.S.C. § 655 and §
657, and other such laws relating to the storage, transportation, treatment and
disposal of Hazardous Materials into the air, surface water, ground water, land
surface, subsurface strata or any building or structure and, together, in each
case, with any amendment thereto, and the regulations adopted pursuant thereto.

 

“Equity
Interest” shall mean shares of the capital stock, partnership interests,
membership interest in a limited liability company, beneficial interests in a
trust or other equity interests in any Person or any warrants, options or other
rights to acquire such interests.

 

“ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as heretofore
and hereafter amended, as codified at 29 U.S.C. § 1001 et  seq.,
and the regulations promulgated thereunder.

 

 

“ERISA
Affiliate” shall mean each Person (as defined in Section 3(9) of ERISA)
which is treated as a single employer with any Credit Party under Section
414(b), (c), (m) or (o) of the Code.

 

“Eurodollar
Loan” shall mean a Loan bearing interest based on the LIBO Rate in
accordance with the provisions of Article 2 hereof.

 

“Events
of Default” shall have the meaning given such term in Article 7 hereof.

 

“Executive
Officer” shall mean, with respect to any Person, its chief executive
officer, chief operating officer, chief financial officer or executive or
senior vice president.

 

“Existing
Agreement” shall mean the Amended and Restated Credit and Security
Agreement dated as of August 31, 1995 as amended and restated as of October 16,
1998 among Hallmark, certain of its Subsidiaries, the lenders party thereto and
the Agent.

 

“Fee
Letter” shall mean the letter agreement dated June 27, 2001, between the
Borrower and the Agent.

 

“Foreign
Asset Sale” shall mean the sale by the Borrower of its foreign assets,
including its foreign Platform Agreements, foreign subsidiaries and foreign
distribution rights in its film library, as contemplated in Exhibit Q hereto,
as approved by the Agent.

 

“Fundamental
Documents” shall mean this Credit Agreement, the Notes, the Contribution
Agreement, the Pledgeholder Agreements, the Laboratory Access Letters, the
Copyright Security Agreement, the Copyright Security Agreement Supplements, the
Trademark Security Agreement, UCC Financing Statements, the Recapitalized Debt
Intercreditor Agreement, and any other ancillary agreement which is required to
be or otherwise executed by such Credit Party and delivered to the Agent in
connection with this Agreement and, in addition, with respect to the Borrower,
the Notes.

 

“GAAP”
shall mean generally accepted accounting principles in the United States of
America consistently applied as in effect on the date hereof; provided, however,
that if either the Required Lenders or the Borrower proposes that GAAP be
modified as a result of any changes allowed by or in response to FASB releases
or other authoritative pronouncements issued after the date hereof, the
Required Lenders or the Borrower (as applicable) agree not to unreasonably
withhold or delay their consent to any such proposal so long as such proposed
modification would not affect the calculation of any of the financial covenants
contained herein.

 

 

“Governmental
Authority” shall mean any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, or any court,
in each case whether of the United States or foreign.

 

“Granting
Lender” has the meaning specified in Section 13.3.

 

“Guarantors”
shall mean CM Intermediary, LLC, Crown Media United States, LLC, Citi Teevee,
LLC, Doone City Pictures, LLC and any other Subsidiaries which hereafter are
required to become signatories to this Agreement pursuant to Section 6.19
hereof.

 

“Guaranty”
shall mean, as to any Person, any direct or indirect obligation of such Person
guaranteeing or intended to guarantee any Indebtedness, Capital Lease, dividend
or other monetary obligation (“primary obligation”) of any other Person (the “primary
obligor”) in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent, (a) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the purchase
or payment of any such primary obligation or (ii) to maintain working capital
or equity capital of the primary obligor or otherwise to maintain the net worth
or solvency of the primary obligor, or (c) to purchase property, securities or
services, in each case, primarily for the purpose of assuring the owner of any
such primary obligation.  The amount of
any Guaranty shall be deemed to be an amount equal to (x) the stated or
determinable amount of the primary obligation in respect of which such Guaranty
is made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof (assuming such Person is required to perform
thereunder) or (y) the stated maximum liability under such Guaranty, whichever
is less.

 

 “Hallmark
Cards” shall mean Hallmark Cards, Incorporated, a Missouri corporation.

 

“Hallmark
Cards Facility Guarantee” shall mean a guarantee agreement substantially in
the form of Exhibit S hereto, as the same may be amended, supplemented,
extended or replaced from time to time, which shall provide for a guarantee by
Hallmark Cards in favor of the Agent (on behalf of itself, the Issuing Bank and
the Lenders) of any and all Obligations from time to time outstanding
hereunder.

 

 “Hallmark Cards Letter of Credit” shall
mean the Letter of Credit issued by Credit Suisse First Boston or an Affiliate
on behalf of HCC for the benefit of the Borrower, and substantially in the form
of Exhibit L-1 hereto; it being understood that the Hallmark Cards Letter of
Credit was terminated prior to the Amendment No. 17 Effective Date.

 

 

“Hallmark
Cards Subordination and Support Agreement” shall mean the subordination and
support agreement from Hallmark Cards substantially in the form of Exhibit K
hereto, as amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof; it being understood that the Hallmark Cards
Subordination and Support Agreement was terminated on the Amendment No. 17
Effective Date in connection with the consummation of the Recapitalization.

 

“Hallmark
Holdings” shall mean Hallmark Entertainment Holdings, Inc., a Delaware
corporation which is an indirect wholly-owned subsidiary of Hallmark Cards that
was merged with and into the Borrower in connection with the Recapitalization.

 

“Hallmark
Inducement Agreement” shall mean the Hallmark Inducement Agreement
substantially in the form of Exhibit O hereto, as amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof; it
being understood that the Hallmark Inducement Agreement was terminated prior to
the Amendment No. 17 Effective Date.

 

“Hallmark
L/C” shall mean an irrevocable letter of credit issued to the Agent by
Citibank, N.A. in the amount of the Total Commitment as credit support for the
Obligations of the Borrower, substantially in the form of Exhibit R hereto or a
replacement irrevocable letter of credit issued to the Agent by JPMorgan Chase
Bank, N.A. in substantially the form of Exhibit R-1 hereto; it being understood
that the Hallmark L/C was cancelled in connection with the effectiveness of
Amendment No. 15.

 

“Hallmark
Purchase” shall have the meaning given such term in Section 13.3(l) hereof.

 

“Hallmark
Subordinated Participation” shall have the meaning set forth in Section
14.1 hereof.

 

“Hazardous
Materials” shall mean any flammable materials, explosives, radioactive
materials, hazardous materials, hazardous wastes, hazardous or toxic
substances, or similar materials defined as such in any Environmental Law.

 

“Hallmark
Tax Note” shall mean that certain promissory note in favor of Hallmark
Cards in the original principal amount of $33,082.019 in consideration for its
obligations of repayments to Hallmark Cards arising under that certain Tax
Sharing Agreement dated March 11, 2003 as a result of the disallowance by the
Internal Revenue Service of the use of certain of Borrower’s losses for the
calendar years 2003 and 2004; it being understood that the obligations under
the Hallmark Tax Note were fully paid in December 2009.

 

“HCC”
shall mean HC Crown Corp., a Delaware corporation.

 

“HCC
Promissory Note” shall mean the promissory note dated as of August 31, 2001
among the Borrower, as borrower, Crown Media International, Inc. and Crown
Media United States, LLC, as guarantors, and HCC, as lender; it being
understood that the obligations under the HCC Promissory Note were converted
into Recapitalized Debt and/or Equity Interests in connection with the
consummation of the Recapitalization.

 

 

“HEDC”
shall mean Hallmark Entertainment Distribution, LLC, a Delaware limited
liability company, now known as RHI Entertainment Distribution, LLC, which
ceased to be an Affiliate of the Borrower in January 2008.

 

“HEDC
Library” shall mean the seven hundred two titles in which the Borrower is
to obtain certain rights pursuant to the HEDC Purchase Agreement.

 

“HEDC
License Agreements” shall mean (i) prior to the Closing Date, the Program
License Agreement dated as of July 1, 1999 between HEDC and Crown Media and,
subsequent to the Closing Date, the amended and restated version thereof
substantially in the form of Exhibit M-1 hereto and (ii) prior to the Closing
Date, the Program License Agreement dated as of November 13, 1998 between HEDC
and Crown Media US and, subsequent to the Closing Date, the amended and
restated version thereof substantially in the form of Exhibit M-2 hereto.

 

“HEDC
Purchase Agreement” shall mean the Purchase and Sale Agreement dated as of
April 10, 2001 between HEDC and the Borrower pursuant to which the Borrower is
acquiring rights in the HEDC Library, a copy of which is attached hereto as
Exhibit N.

 

“Indebtedness”
shall mean (without double counting), at any time and with respect to any
Person, (i) indebtedness of such Person for borrowed money (whether by loan or
the issuance and sale of debt securities) or for the deferred purchase price of
property or services purchased (other than amounts constituting trade payables
(payable within 90 days) arising in the ordinary course of business); (ii)
obligations of such Person in respect of letters of credit, acceptance
facilities, or drafts or similar instruments issued or accepted by banks and
other financial institutions for the account of such Person; (iii) obligations
of such Person under Capital Leases; (iv) deferred payment obligations of such
Person resulting from the adjudication or settlement of any litigation; (v)
obligations of such Person under synthetic leases or financing leases (but not
operating leases); and (vi) indebtedness of others of the type described in
clauses (i), (ii), (iii), (iv) and (v) hereof which such Person has (a)
directly or indirectly assumed or guaranteed in connection with a Guaranty or
(b) secured by a Lien on the assets of such Person, whether or not such Person
has assumed such indebtedness (provided, that if such Person has not
assumed such indebtedness of another Person then the amount of indebtedness of
such Person pursuant to this clause (vi) for purposes of this Credit Agreement
shall be equal to the lesser of the amount of the indebtedness of the other
Person and the fair market value of the assets of such Person which secure such
other indebtedness).

 

“Initial
Date” shall mean (i) in the case of the Agent and the Issuing Bank, the
date hereof, (ii) in the case of each Lender which is an original party to this
Credit Agreement, the date hereof and (iii) in the case of any other Lender,
the effective date of the Assignment and Acceptance pursuant to which it became
a Lender.

 

“Instrument
of Assumption and Joinder” shall mean an Instrument of Assumption and
Joinder substantially in the form of Exhibit J hereto.

 

 

“Interest
Deficit” shall have the meaning given such term in Section 2.16 hereof.

 

“Interest
Expense” shall mean, for any period in respect of the Borrower and its
Subsidiaries, the sum of (a) the interest expense (including the interest
component in respect of Capital Lease obligations), plus (b) all
commitment fees, letter of credit fees, issuing bank fees, or similar fees paid
by such Persons during such period in respect of any Indebtedness, plus
(c) the net amounts paid by such Persons during such period in connection with
any Interest Rate Protection Agreement, Currency Agreement or other hedging
arrangement, plus (d) any dividends or similar amounts paid by such
Persons during such period in respect of any preferred stock.

 

“Interest
Payment Date” shall mean (i) as to any Eurodollar Loan having an Interest
Period of one, two or three months, the last day of such Interest Period, (ii)
as to any Eurodollar Loan having an Interest Period of at least six months, the
last day of such Interest Period and, in addition, each date during such
Interest Period that is an integral multiple of three months from the
commencement of such Interest Period and (iii) with respect to Alternate Base
Rate Loans, the last Business Day of each March, June, September and December
(commencing the last Business Day of September 2001).

 

“Interest
Period” shall mean as to any Eurodollar Loan, the period commencing on the
date of such Loan or the last day of the preceding Interest Period and ending
on the numerically corresponding day (or if there is no corresponding day, the
last day) in the calendar month that is one, two, three, six or twelve months
thereafter as the Borrower may elect; provided,
however, that (i) if any Interest Period
would end on a day which shall not be a Business Day, such Interest Period
shall be extended to the next succeeding Business Day, unless such next
succeeding Business Day would fall in the next calendar month, in which case,
such Interest Period shall end on the next preceding Business Day, (ii) no
Interest Period may be selected which would end later than the Maturity Date,
(iii) interest shall accrue from and including the first day of such Interest
Period to but excluding the last date of such Interest Period and (iv) no
Interest Period of six or twelve months may be selected unless such Interest
Period is available from all of the Lenders.

 

“Interest
Rate Protection Agreement” shall mean any interest rate swap agreement,
interest rate cap agreement, synthetic cap, collar or floor or other financial
agreement or arrangement designed to protect a Credit Party against
fluctuations in interest rates.

 

“Interest
Rate Type” shall have the meaning given such term in Section 2.3 hereof.

 

“Investment”
shall mean any stock, evidence of indebtedness or other security of any Person,
any loan, advance, contribution of capital, extension of credit or commitment
therefor (including, without limitation, the Guaranty of loans made to others,
but excluding current trade and customer accounts receivable arising in the
ordinary course of business and

 

 

payable
in accordance with customary trading terms in the ordinary course of business),
any purchase of (i) any security of another Person or (ii) any business or
undertaking of any Person or any commitment to make any such purchase, or any
other investment.

 

“Issuing
Bank” shall mean (i) JPMorgan Chase Bank, N.A., a national banking
association, in its capacity as such or (ii) such successor as may be appointed
pursuant to Section 12.12 hereof.

 

“Junior
Creditor” shall mean the holder of the Hallmark Subordinated Participation.

 

“Junior
Obligations” shall mean the obligation of the Borrower to repay the
principal of, and accrued interest on, the Hallmark Subordinated Participation.

 

“Laboratory”
shall mean any laboratory acceptable to the Agent which is located in the
United States and is a party to a Pledgeholder Agreement or a Laboratory Access
Letter.

 

“Laboratory
Access Letter” shall mean a letter agreement among (i) a Laboratory holding
any elements of any Product to which any Credit Party has the right of access,
(ii) such Credit Party and (iii) the Agent, substantially in the form of
Exhibit F hereto or a form otherwise acceptable to the Agent.

 

“L/C
Exposure” shall mean, at any time, the amount expressed in Dollars of the
aggregate face amount of all drafts which may then or thereafter be presented
by beneficiaries under all Letters of Credit then outstanding, plus
(without duplication) the face amount of all drafts which have been presented
or accepted under Letters of Credit but have not yet been paid or have been
paid but not reimbursed, whether directly or from the proceeds of a Loan
hereunder.

 

“Lender”
and “Lenders” shall mean the financial institutions whose names appear
at the foot hereof and any assignee of a Lender pursuant to Section 13.3(b).

 

“Lending
Office” shall mean, with respect to any of the Lenders, the branch or
branches (or affiliate or affiliates) from which any such Lender’s Eurodollar
Loans or Alternate Base Rate Loans, as the case may be, are made or maintained
and for the account of which all payments of principal of, and interest on,
such Lender’s Eurodollar Loans or Alternate Base Rate Loans are made, as
notified to the Agent from time to time.

 

“Letter
of Credit” shall mean a letter of credit issued pursuant to Section 2.4.

 

 

 “LIBO Rate” shall mean, with respect to
the Interest Period for a Eurodollar Loan (or, as applicable, for purposes of
determining the Alternate Base Rate with respect to any Alternate Base Rate
Loan), an interest rate per annum equal to the quotient (rounded upwards, if
necessary to the next 1/100 of 1%) of (A) (i) the rate appearing on the Reuters
BBA LIBOR Rates Page 3750 (or on any successor or substitute page of such
Service, or any successor to or substitute for such Service, providing rate
quotations comparable to those currently provided on such page of such Service,
as determined by the Agent from time to time for purposes of providing
quotations of interest rates applicable to dollar deposits in the London
interbank market) at approximately 11:00 a.m., London time, two Business Days
prior to the commencement of such Interest Period, as the rate for dollar
deposits with a maturity comparable to such Interest Period or (ii) if the rate
described in clause (A)(i) is not available on any relevant date of
determination, the rate at which dollar deposits of $5,000,000 and for a
maturity comparable to such Interest Period are offered by the principal London
office of the Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, divided by (B) one minus the applicable
statutory reserve requirements of the Agent, expressed as a decimal (including
without duplication or limitation, basic, supplemental, marginal and emergency
reserves), from time to time in effect under Regulation D or similar
regulations of the Board of Governors of the Federal Reserve System.  It is agreed that for purposes of this
definition, Eurodollar Loans made hereunder shall be deemed to constitute
Eurocurrency Liabilities as defined in Regulation D and to be subject to the
reserve requirements of Regulation D.

 

“License
Agreements” shall mean any and all agreements entered into by any Credit
Party pursuant to which such Credit Party acquires license rights in any item
of Product (including the HEDC License Agreements).

 

“Lien”
shall mean any mortgage, pledge, security interest, copyright mortgage,
encumbrance, lien or charge of any kind whatsoever (including any conditional
sale or other title retention agreement, any lease in the nature thereof, and
the filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction).

 

“Limited
Guarantee” shall mean a Limited Guarantee Agreement and Acknowledgment by
Hallmark Cards in favor of the Agent substantially in the form attached hereto
as Exhibit L, as it may be amended, supplemented or otherwise modified from
time to time in accordance with the terms thereof it being understood that the
Limited Guarantee was terminated prior to the Amendment No. 17 Effective Date.

 

“Loans”
shall mean the Revolving Credit Loans and/or the Term Loans.

 

“Margin
Stock” shall be as defined in Regulation U of the Board.

 

“Material
Adverse Effect” shall mean any change or effect that (a) has a materially
adverse effect on the business, assets, properties, operations, condition
(financial or otherwise) or prospects of the Borrower and its Subsidiaries,
taken as a whole, (b) materially impairs the ability of any Credit Party to
perform its respective obligations under the Fundamental Documents to which it
is a party, (c) materially impairs the validity or enforceability of, or
materially impairs the security interests, rights, remedies or benefits

 

 

available
to the Agent or the Lenders under any of the Fundamental Documents; or (d) has
a material adverse effect on the Collateral or the Pledged Securities taken as
a whole.

 

“Maturity
Date” shall mean June 30, 2011.

 

“Multiemployer
Plan” shall mean a plan that is a multiemployer plan as defined in Section
4001(a)(3) of ERISA to which any Credit Party or ERISA Affiliate is making or
accruing an obligation to make contributions or has within any of the five
preceding plan years made or accrued an obligation to make contributions.

 

“Net
Cash Proceeds” shall mean cash payments received in exchange for the
issuance of any debt or equity security by any Credit Party net of commissions
and other reasonable fees and expenses incurred, any taxes payable and
reasonably estimated income taxes payable with respect to the fiscal year
during which such issuance occurs, as a consequence of any repatriation of such
cash payments.

 

 “Note” or “Notes” shall mean the
Term Note(s) and/or the Revolving Credit Note(s).

 

“Obligations”
shall mean the obligation of the Borrower to make due and punctual payment of
(i) principal of and interest on the Loans, the Commitment Fees, any
reimbursement obligations (current or contingent) in respect of Letters of
Credit, costs and attorneys’ fees and all other monetary obligations of the
Borrower to the Agent, the Issuing Bank or any Lender under this Agreement, the
Notes, any other Fundamental Document or the Fee Letter, (ii) all amounts
payable by the Borrower to any Lender under any Currency Agreement or Interest
Rate Protection Agreement, provided that the Administrative Agent shall
have received written notice thereof within ten (10) Business Days after
execution of such Currency Agreement or Interest Rate Protection Agreement and
(iii) amounts payable to any Lender or any of its Affiliates in connection with
any bank account maintained by the Borrower or any other Credit Party at any
Lender or any such Affiliate or any other banking services provided to the
Borrower or any other Credit Party by any Lender or any such Affiliate.

 

 

 “PBGC” shall mean the Pension Benefit
Guaranty Corporation established pursuant to Section 4002 of ERISA, or any
successor thereto.

 

“Percentage”
shall mean each Lender’s percentage share of the Total Commitment as set forth
in the Schedule of Commitments opposite the name of such Lender in the column
captioned “Percentage” (as the same may be modified pursuant to any Assignment
and Acceptance to which such Lender is a party).

 

“Permitted
Encumbrances” shall mean Liens permitted under Section 6.2 hereof.

 

“Person”
shall mean any natural person, corporation, division of a corporation,
partnership, trust, joint venture, association, company, estate, unincorporated
organization or government or any agency or political subdivision thereof.

 

“Physical
Materials” shall have the meaning given to such term in paragraph (iv) of
the definition of “Collateral” herein.

 

“Plan”
shall mean an employee benefit plan within the meaning of Section 3(3) of ERISA
(other than a Multiemployer Plan) which is maintained or contributed to by any
Credit Party or any ERISA Affiliates, or with respect to which any Credit Party
could otherwise have any liability.

 

“Platform
Agreements” shall mean any and all agreements entered into by a Credit
Party with a television distributor pursuant to which the television
distributor agrees to deliver channels owned by a Credit Party to subscribers
in exchange for a fee.

 

“Pledged
Collateral” shall mean the Pledged Securities and any proceeds (as defined
in Section 9-102(a)(64) of the UCC) of the Pledged Securities.

 

“Pledged
Securities” shall mean all of the issued and outstanding capital stock or
other equity interests of each of the Guarantors directly or indirectly owned
by the Borrower (other than any Controlled Foreign Corporation which the
Borrower has elected to pledge only 65% of the stock of such Controlled Foreign
Corporation) and all other equity securities or interests now owned or
hereafter acquired by any of the Credit Parties, including without limitation
the securities listed in Schedule 3.6(a) hereto.

 

“Pledgeholder
Agreement” shall mean a Laboratory Pledgeholder Agreement among a Credit
Party, the Agent, and one or more Laboratories located within the continental
United States, substantially in the form of Exhibit C hereto, or in such other
form as shall be acceptable to the Agent.

 

“Pledgor”
shall mean those Credit Parties that own any Pledged Securities.

 

“Prepayment
Date” shall have the meaning given to such term in Section 2.11(h) hereof.

 

 

“Product”
shall mean any movie-of-the-week, episode of a television series, mini-series,
motion picture, film, videotape or other program produced for television
release or for release in any other medium, shown on network, free, cable, pay
and/or other television medium (including without limitation first run
syndication) in each case whether recorded on film, videotape, cassette,
cartridge, disc or on or by any other means, method, process or device whether
now known or hereafter developed.  The
term “Product” shall include, without limitation, the scenario, screenplay or
script upon which such item of Product is based, all of the properties thereof,
tangible and intangible, and whether now in existence or hereafter to be made
or produced, whether or not in possession of any of the Credit Parties, and all
rights therein and thereto, of every kind and character.

 

“Pro
Rata Share” shall mean with respect to any Obligation or other amount, each
Lender’s pro rata share of such Obligation or other amount determined in
accordance with each Lender’s Percentage.

 

“Purchase
Price” shall have the meaning given such term in Section 13.3(l) hereof.

 

“Recapitalization”
shall have the meaning set forth in the Introductory Statement.

 

“Recapitalization
Agreement” shall have the meaning set forth in the Introductory Statement.

 

“Recapitalization
Credit Agreement” shall have the meaning set forth in the Introductory
Statement.

 

“Recapitalization
Credit Documents” shall have the meaning set forth in the Introductory
Statement, and shall include, without limitation, the Recapitalization Credit
Agreement and any other Fundamental Document referred to therein.

 

“Recapitalized
Debt Intercreditor Agreement” shall mean the intercreditor agreement between [HCC] and the Agent in the form of Exhibit
T hereto, as amended, supplemented or otherwise modified in accordance with the
terms hereof.

 

“Recapitalized
Debt” shall have the meaning set forth in the Introductory Statement.

 

“Redeemable Stock” shall mean any equity interest of the Borrower
or any of its Consolidated Subsidiaries that by its terms or otherwise is
required to be redeemed or is redeemable at the option of the holder thereof or
of any third party other than the Borrower or one of its Consolidated
Subsidiaries.

 

“Regulation
D”, “Regulation T”, “Regulation U” and “Regulation X”
shall mean such regulation of the Board.

 

 

 “Reportable Event” shall mean any
reportable event as described in Section 4043(c) of ERISA, other than a
reportable event as to which provision for 30-day notice to the PBGC would be
waived under applicable regulations had the regulations in effect on the
Closing Date been in effect on the date of occurrence of such reportable event.

 

“Required
Lenders” shall mean (i) the Lenders holding at least 51% of the outstanding
Credit Exposure or (ii) if at the time there is zero Credit Exposure, the
Lenders holding at least 51% of the Total Commitment.

 

“Restricted
Payment” shall mean (i) any distribution, dividend or other direct or
indirect payment on account of any Equity Interest in a Credit Party or an
Affiliate (including without limitation any Equity Interest issued in
connection with the Recapitalization), in each case whether now or hereafter
outstanding; (ii) any redemption or other acquisition or re-acquisition by a
Credit Party of any Equity Interest in a Credit Party or an Affiliate
(including without limitation any Equity Interest issued in connection with the
Recapitalization), in each case whether now or hereafter outstanding; (iii) any
payment by a Credit Party of principal of, premium or liquidated damages, if
any, interest on, fees in relation to, or any redemption, purchase, retirement,
defeasance, sinking fund, or any other payment with respect to, any
Subordinated Debt or any Recapitalized Debt; and  (v) any other payment (whether in cash or in kind) to
Hallmark Cards, HCC or any Affiliate thereof

 

“Revolving
Credit Commitment” shall mean the commitment of each Lender to make
Revolving Credit Loans to the Borrower and to participate in Letters of Credit
from the Initial Date applicable to such Lender through the Commitment
Termination Date up to an aggregate amount, at any one time, not in excess of
the amount set forth (i) opposite its name under the column entitled “Revolving
Credit Commitment” in the Schedule of Commitments appearing in Schedule 1, or
(ii) in any applicable Assignment and Acceptance(s) to which it may be a party,
as the case may be, as such amount may be reduced from time to time in
accordance with the terms of this Credit Agreement.

 

“Revolving
Credit Loans” shall mean the loans made hereunder in accordance with the
provisions of Section 2.1(a) or 2.1(b), whether made as a Eurodollar Loan or an
Alternate Base Rate Loan, as permitted hereby.

 

 

“Revolving
Credit Notes” shall have the meaning given such term in Section 2.5(a)
hereof.

 

 “S.E.C.”
shall mean the Securities and Exchange Commission or any successor thereto.

 

“Sale/Leaseback
Powers of Attorney” shall mean powers of attorney executed by HEDC
appointing the Borrower as its attorney-in-fact in connection with each
sale/leaseback transaction to which HEDC or any of its predecessors in interest
is a party, each substantially in the form of Exhibit P hereto.

 

“SPC”
has the meaning specified in Section 13.3.

 

“Senior
Obligations” shall mean all Obligations other than the Junior Obligations.

 

“Series
A Preferred Stock” shall have the meaning set forth in the Introductory
Statement.

 

“Subordinated
Debt” or “Subordinated Indebtedness” shall mean all Indebtedness or
other obligations of the Borrower subordinated to the Obligations pursuant to
written agreements, containing interest rates, payment terms, maturities,
amortization schedules, covenants, defaults, remedies, subordination provisions
and other material terms in form and substance satisfactory to the Agent and
the Required Lenders in their sole discretion.

 

“Subscriber”
shall mean any Person or location that receives a channel owned or operated by
a Credit Party either directly from a pay television distributor party to a
Platform Agreement or from cable operators to whom such pay television
distributors sublicense the right to distribute such channel.

 

“Subsidiary”
shall mean with respect to any Person, any corporation, association, joint
venture, partnership, limited liability company or other business entity
(whether now existing or hereafter organized) of which at least a majority of
the voting stock or other ownership interests having ordinary voting power for
the election of directors (or the equivalent) is, at the time as of which any
determination is being made, owned or controlled by such Person or one or more
subsidiaries of such Person or by such Person and one or more subsidiaries of
such Person.

 

 

  “Tax Sharing
Agreement” shall mean the Federal Income Tax Sharing Agreement dated as of
March 11, 2003 between the Borrower and Hallmark Cards, as amended.

 

“Term A Loan Recapitalized Debt” shall have the meaning set forth in
the Introductory Statement.

 

“Term
B Loan Recapitalized Debt” shall have the meaning set forth in the Introductory
Statement.

 

“Term
Loan Commitment” shall mean the commitment of each Lender to make a Term
Loan to the Borrower up to an aggregate amount not in excess of the amount set
forth (i) opposite its name under the column entitled “Term Loan Commitment” in
the Schedule of Commitments appearing in Schedule 1, or (ii) in any applicable
Assignment and Acceptance(s) to which it may be a party, as the case may be, as
such amount may be reduced from time to time in accordance with the terms of
this Credit Agreement.  For the avoidance
of doubt, the Term Loans were repaid in their entirety on or prior to October
28, 2004  and the Term Loan
Commitments were permanently reduced to zero in connection with such repayment.

 

“Term
Loans” shall mean the loans made hereunder in accordance with the
provisions of Section 2.2(a).  For the
avoidance of doubt, the Term Loans were repaid in their entirety on or prior to
October 28, 2004.

 

“Term
Notes” shall mean the promissory notes substantially in the form of Exhibit A-2
hereto which had been used to evidence the Term Loans.  For the avoidance of doubt, the Term Loans
were repaid in their entirety on or prior to October 28, 2004.

 

“Total
Commitment” shall mean the aggregate amount of the Commitments.

 

“Trademark
Security Agreement” shall mean the Trademark Security Agreement
substantially in the form of Exhibit E hereto, as the same may be amended or
supplemented from time to time in accordance with the terms hereof.

 

 

“UCC”
shall mean the Uniform Commercial Code as in effect in the State of New York on
the date of execution of this Agreement.

 

2.             THE LOANS

 

SECTION 2.1.  Revolving Credit
Loans.  (a)  Each Lender, severally and not jointly,
agrees, upon the terms and subject to the conditions hereof, to make its Pro
Rata Share of Revolving Credit Loans to the Borrower on any Business Day and
from time to time from the Closing Date and prior to the Commitment Termination
Date, each in an amount which when added to the aggregate principal amount of
all Revolving Credit Loans then outstanding to the Borrower from such Lender
and such Lender’s Pro Rata Share of the then-current L/C Exposure does not
exceed such Lender’s Revolving Credit Commitment.

 

(b)           Subject to the terms
hereof, the Borrower may borrow, repay and reborrow amounts constituting the
Revolving Credit Commitments.

 

(c)           Subject to Section
2.2 hereof, the Loans shall be made at such times as the Borrower shall
request, but the Lenders shall not be required to make Loans hereunder more
often than once each calendar week.

 

 

(d)           Payments of the
Revolving Credit Loans which are not made as a result of an optional or
mandatory termination or reduction of the Revolving Credit Commitments shall
not reduce the Revolving Credit Commitments.

 

SECTION 2.2.  Term Loans.  (a) 
Each Lender, severally and not jointly, agrees, upon the terms and
subject to the conditions hereof, to make its Pro Rata Share of the Term Loans
to the Borrower on the Closing Date in a principal amount not exceeding the
amount of such Lender’s Term Loan Commitment.

 

(b)           Once repaid, amounts
constituting the Term Loan Commitments may not be reborrowed.  For the avoidance of doubt, the Term Loans
were repaid in their entirety on or prior to October 28, 2004  and the Term Loan Commitments were
permanently reduced to zero in connection with such repayment.

 

SECTION 2.3.  Making of Loans.  (a) 
Each Loan shall be an Alternate Base Rate Loan or a Eurodollar Loan
(each such type of Loan, an “Interest Rate Type”) as the Borrower may
request subject to and in accordance with this Section.  The Borrower shall give the Agent prior
written, facsimile or telephonic (promptly confirmed in writing) notice of (i)
at least three Business Days for a Borrowing which is to consist of Eurodollar
Loans and (ii) at least one Business Day for a Borrowing which is to consist of
Alternate Base Rate Loans.  Each such
notice in order to be effective must be received by the Agent not later than
1:00 p.m., New York City time, on the day required and shall specify the date
(which shall be a Business Day) on which such Borrowing is to be made and the
aggregate principal amount of the requested Borrowing.  Each such notice shall be irrevocable and
shall specify whether the Borrowing then being requested is to consist of
Alternate Base Rate Loans or Eurodollar Loans, and in the case of Eurodollar
Loans, the Interest Period or Interest Periods with respect thereto.  If no election of an Interest Period is
specified in such notice in the case of a Borrowing consisting of Eurodollar
Loans, such notice shall be deemed to be a request for an Interest Period of
one month.  If no election is made as to
the Interest Rate Type of any Borrowing, such notice shall be deemed a request
for a Borrowing consisting of Alternate Base Rate Loans.  No Borrowing shall consist of Eurodollar
Loans if after giving effect thereto an aggregate of more than ten (10)
separate Eurodollar Loans would be outstanding hereunder with respect to each
Lender (determined in accordance with Section 2.10(c) hereof).

 

(b)           The Agent shall
promptly notify each Lender of its proportionate share of each Borrowing under
this Section, the date of such Borrowing, the Interest Rate Type of each Loan
being requested and the Interest Period or Interest Periods applicable thereto.  On the borrowing date specified in such
notice, each Lender shall make its share of the Borrowing available at the
offices of The Chase Manhattan Bank, Loan and Agency Services Group, One Chase
Manhattan Plaza, 8th Floor, New York, New York 10081, Attention:  Donna Montgomery, for credit to the Clearing
Account no later than 1:00 p.m., New York City time, in Federal or other
immediately available funds.  Upon
receipt of any funds to be made available by the Lenders to fund any Borrowing
hereunder, the Agent shall disburse such funds by depositing them into an
account specified by the Borrower.

 

(c)           Each Lender may at
its option fulfill its obligation to make Eurodollar Loans by causing a foreign
branch or affiliate to fund such Eurodollar Loans, provided that any

 

 

exercise
of such option shall not affect the obligation of the Borrower to repay the
Loans in accordance with the terms hereof and of the Notes.  Subject to the other provisions of this
Section, Loans of more than one type may be outstanding at the same time.

 

(d)           The amount of any
Borrowing of new funds hereunder shall be in an aggregate principal amount of
$500,000 for Alternate Base Rate Loans and $1,000,000 for Eurodollar Loans (or
such lesser amount as shall equal the available but unused portion of the Revolving
Credit Commitments) or such greater amount which is an integral multiple of
$500,000.

 

SECTION 2.4.  Letters of
Credit.  (a)  Upon the terms and subject to the conditions
hereof, the Issuing Bank agrees, upon the request of the Borrower, to issue
Letters of Credit, payable in Dollars from time to time after the Closing Date
and prior to the 30th day prior to the Commitment Termination Date, provided
that (i) the Borrower shall not request, and the Issuing Bank shall not issue,
any Letter of Credit, if after giving effect thereto, (A) [intentionally
omitted], (B) the sum of the then-current L/C Exposure plus the aggregate
amount of all outstanding Revolving Credit Loans would exceed the Revolving
Credit Commitment then in effect, or (C) the sum of the then-current L/C
Exposure would exceed $20,000,000 and (ii) in no event shall the Issuing Bank
be required to issue any Letter of Credit having an expiration date (x) later
than the tenth Business Day prior to the Commitment Termination Date or (y) more
than one year after its date of issuance.

 

(i)            Immediately upon
the issuance of each Letter of Credit, each Lender shall be deemed to, and
hereby agrees to, have irrevocably purchased from the Issuing Bank a
participation in such Letter of Credit in accordance with such Lender’s
Percentage.

 

(ii)           Each Letter of
Credit may, at the option of the Issuing Bank, provide that the Issuing Bank
may (but shall not be required to) pay all or any part of the maximum amount
which may at any time be available for drawing thereunder to the beneficiary
thereof upon the occurrence or continuation of an Event of Default and the
acceleration of the maturity of the Loans, provided that, if payment is not
then due to the beneficiary, the Issuing Bank shall deposit the funds in
question in a segregated account with the Issuing Bank to secure payment to the
beneficiary and any funds so deposited shall be paid to the beneficiary of the
Letter of Credit if conditions to such payment are satisfied or returned to the
Issuing Bank for distribution to the Lenders (or, if all Obligations shall have
been paid in full in cash, to the Borrower) if no payment to the beneficiary
has been made and the final date available for drawings under the Letter of
Credit has passed.  Each payment or deposit
of funds by the Issuing Bank as provided in this paragraph shall be treated for
all purposes of this Credit Agreement as a drawing duly honored by such Issuing
Bank under the related Letter of Credit.

 

(b)           Whenever the
Borrower desires the issuance of a Letter of Credit, it shall deliver to the
Agent and the Issuing Bank a written notice no later than 1:00 p.m. (New York
time) at least five Business Days prior to the proposed date of issuance.  That notice shall specify (i) the proposed
date of issuance (which shall be a Business Day), (ii) the face amount of the
Letter of Credit, (iii) the expiration date of the Letter of Credit and (iv)
the name and address of the beneficiary. 
Such notice shall be accompanied by a brief description of the
underlying transaction and upon reasonable request of the Issuing Bank or the
Agent, the Borrower shall

 

 

provide
additional details regarding the underlying transaction.  Concurrently with the giving of written
notice of a request for the issuance of a Letter of Credit, the Borrower shall
provide a precise description of the documents and the verbatim text of any
certificate to be presented by the beneficiary of such Letter of Credit which,
if presented by such beneficiary prior to the expiration date of the Letter of
Credit, would require the Issuing Bank to make payment under the Letter of
Credit; provided, however, that the Issuing Bank, in its
reasonable discretion, may require customary changes in any such documents and
certificates to be presented by the beneficiary.  Upon issuance of each Letter of Credit, the
Issuing Bank shall notify the Agent of the issuance of such Letter of
Credit.  Promptly after receipt of such
notice, the Agent shall notify each Lender of the issuance and the amount of
such Lender’s respective participation in the applicable Letter of Credit.

 

(c)           The acceptance and
payment of drafts under any Letter of Credit shall be made in accordance with
the terms of such Letter of Credit and the Uniform Customs and Practice for
Documentary Credits, International Chamber of Commerce Publication No. 500, as
adopted or amended from time to time. 
The Issuing Bank shall be entitled to honor any drafts and accept any
documents presented to it by the beneficiary of such Letter of Credit in
accordance with the terms of such Letter of Credit and believed by the Issuing
Bank in good faith to be genuine.  Except
as otherwise required by Applicable Law which cannot be waived, the Issuing
Bank shall not have any duty to inquire as to the accuracy or authenticity of
any draft or other drawing documents which may be presented to it, but shall be
responsible only to determine in accordance with customary commercial practices
that the documents which are required to be presented before payment or
acceptance of a draft under any Letter of Credit have been delivered and that
they comply on their face with the requirements of that Letter of Credit.

 

(d)           If the Issuing Bank
shall make payment on any draft presented under a Letter of Credit (regardless
of whether a Default, Event of Default or acceleration has occurred), the
Issuing Bank shall give notice of such payment to the Borrower, the Agent and
the Lenders and each Lender hereby authorizes and requests the Issuing Bank to
advance for its account, pursuant to the terms hereof, its share of such
payment based upon its participation in such Letter of Credit and agrees
promptly to reimburse the Issuing Bank in immediately available funds for the
Dollar equivalent of the amount so advanced on its behalf by the Issuing Bank.  If any such reimbursement is not made by any
Lender in immediately available funds on the same day on which the Issuing Bank
shall have made payment on any such draft, such Lender shall pay interest
thereon to the Issuing Bank at a rate per annum equal to the Issuing Bank’s
cost of obtaining overnight funds in the New York Federal Funds Market for the
three (3) Business Days following the time such Lender fails to make the
reimbursement and thereafter at a rate per annum equal to the Alternate Base
Rate plus the Applicable Margin.

 

(e)           The Borrower is
absolutely, unconditionally and irrevocably obligated to reimburse all amounts
drawn under each Letter of Credit.  If
any draft is presented under a Letter of Credit, the payment of which is
required to be made at any time on or before the Commitment Termination Date,
then payment by the Issuing Bank of such draft shall constitute an Alternate
Base Rate Loan hereunder and interest shall accrue from the date the Issuing
Bank makes payment on such draft under such Letter of Credit.  If any draft is presented under a Letter of
Credit, the payment of which is required to be made after the Commitment
Termination Date or at the time when an Event of Default or Default shall have
occurred and then be continuing, then

 

 

the
Borrower shall immediately pay to the Issuing Bank, in immediately available
funds, the full amount of such draft together with interest thereon at a rate
per annum of 2% in excess of the rate then in effect for Alternate Base Rate
Loans from the date on which the Issuing Bank makes such payment of such draft
until the date it receives full reimbursement for such payment from the
Borrower.  The Borrower further agrees
that the Issuing Bank may reimburse itself for such drawing, first, from
amounts in the Clearing Account, second, from amounts in the Collection
Account, and third, from the balance in any other account of the Borrower
maintained with the Issuing Bank.

 

(f)            The Borrower shall
pay the following amounts to the Issuing Bank for its own account with respect
to Letters of Credit issued by it hereunder:

 

(A)          with respect to the
issuance, amendment or transfer of each Letter of Credit and each drawing made
thereunder, documentary and processing charges in accordance with the Issuing
Bank’s standard schedule for such charges in effect at the time of such
issuance, amendment, transfer or drawing, as the case may be; and

 

(B)           a fronting fee
payable to the Issuing Bank equal to 1⁄4 of 1% of the face amount of any Letter
of Credit issued hereunder payable upon the issuance of such Letter of Credit.

 

(g)           The Borrower agrees
to pay to the Agent for distribution to each Lender in respect of its L/C
Exposure, such Lender’s Pro Rata Share of a commission (calculated on the basis
of a 360-day year) equal to 3% per annum of the daily average L/C
Exposure.  Such commission shall be due
and payable in arrears on and through the last Business Day of each March,
June, September and December (commencing the last Business Day of September,
2001) prior to the Commitment Termination Date or the expiration of the last
outstanding Letter of Credit (whichever is later) and on the later of the
Commitment Termination Date and the expiration of the last outstanding Letter
of Credit.

 

(h)           Promptly upon
receipt by the Issuing Bank or the Agent of any amount described in Section
2.4(g), or any amount described in Section 2.4(e) previously reimbursed to the
Issuing Bank by the Lenders, the Issuing Bank or the Agent (as applicable)
shall distribute to each Lender its Pro Rata Share of such amount.

 

(i)            [Intentionally
omitted.]

 

(j)            If, at any time
when an Event of Default shall have occurred and be continuing, any Letters of
Credit shall remain outstanding, then the Issuing Bank may, and if directed by
the Required Lenders shall, require the Borrower to deliver to the Issuing Bank
Cash Equivalents in an amount equal to the full amount of the L/C Exposure or
to furnish other security acceptable to the Required Lenders.  Any amounts so delivered pursuant to the
preceding sentence shall be applied to reimburse the Issuing Bank for the
amount of any drawings honored under Letters of Credit; provided, however,
that if prior to the Maturity Date, (i) no Default or Event of Default is then
continuing, then the Agent shall return all of such Cash Equivalents and
collateral relating to such deposit to the Borrower if requested by it or (ii)
Letters of Credit shall expire or be returned by the beneficiary so that the
amount of the Cash

 

 

Equivalents
delivered to the Agent hereunder shall exceed the then current L/C Exposure,
then such excess shall first be applied to pay any Obligations then due under
this Credit Agreement and the remainder shall be returned to the Borrower.

 

(k)           Notwithstanding the
termination of the Commitments and the payment of the Loans, the obligations of
the Borrower under this Section 2.4 shall remain in full force and effect until
the Agent, the Issuing Bank and the Lenders shall have been irrevocably
released from their obligations with regard to any and all Letters of Credit.

 

SECTION 2.5.  Notes; Repayment.  (a) 
The Revolving Credit Loans made by each Lender hereunder shall be
evidenced by a Revolving Credit promissory note substantially in the form of
Exhibit A-1 hereto (each a “Revolving Credit Note” and collectively the “Revolving
Credit Notes”) in the face amount of such Lender’s Revolving Credit
Commitment, payable to the order of such Lender, duly executed by the Borrower
and dated the date hereof.  The
outstanding principal balance of each Revolving Credit Loan as evidenced by a
Revolving Credit Note shall be payable in full on the Maturity Date, subject to
acceleration as provided in Article 7.

 

(b)           [Intentionally omitted.]

 

(c)           Each of the Notes
shall bear interest on the outstanding principal balance thereof as set forth
in Section 2.6 hereof.  Each Lender and
the Agent on its behalf is hereby authorized by the Borrower, but not
obligated, to enter the amount of each Loan and the amount of each payment or
prepayment of principal or interest thereon in the appropriate spaces on the
reverse of or on an attachment to the Notes; provided, however,
that the failure of any Lender or the Agent to set forth such Loans, principal
payments or other information shall not in any manner affect the obligations of
the Borrower to repay such Loans.

 

SECTION 2.6.  Interest on
Loans.  (a)  In the case of a Eurodollar Loan, interest
shall be payable at a rate per annum (computed on the basis of the actual
number of days elapsed over a year of 360 days) equal to the LIBO Rate plus the
Applicable Margin for Eurodollar Loans. 
Interest shall be payable on each Eurodollar Loan on each applicable
Interest Payment Date, on the Maturity Date and on the date of a conversion of
such Eurodollar Loan to an Alternate Base Rate Loan.  The Agent shall determine the applicable LIBO
Rate for each Interest Period as soon as practicable on the date when such
determination is to be made in respect of such Interest Period and shall notify
the Borrower and the Lenders of the applicable interest rate so
determined.  Such determination shall be
conclusive absent manifest error.

 

(b)           In the case of an Alternate Base Rate Loan, interest shall
be payable at a rate per annum (computed on the basis of the actual number of
days elapsed over a year of

 

 

365/366
days, as the case may be, during such times as the Alternate Base Rate is based
upon the Prime Rate, and over a year of 360 days at all other times) equal to
the Alternate Base Rate plus the Applicable Margin for Alternate Base Rate
Loans.  Interest shall be payable on each
Alternate Base Rate Loan on each applicable Interest Payment Date and on the
Maturity Date.

 

(c)           Anything in this
Credit Agreement or the Notes to the contrary notwithstanding, the interest
rate on the Loans or with respect to any drawing under a Letter of Credit shall
in no event be in excess of the maximum permitted by Applicable Law.

 

SECTION 2.7.  Commitment Fees
and Other Fees.  (a)  The Borrower agrees to pay to the Agent (for
the account of each Lender in accordance with its Percentage) on the last
Business Day of each March, June, September and December in each year
(commencing on the last Business Day of September 2001) prior to the Commitment
Termination Date and on the Commitment Termination Date, an aggregate fee (the “Commitment
Fees”) of 0.375% per annum, computed on the basis of the actual number of
days elapsed over a year of 360 days, on the average daily amount by which the
aggregate amount of the Revolving Credit Commitments, as they may be reduced in
accordance with the provisions of this Agreement, exceeds the sum of the
principal balance of Revolving Credit Loans outstanding plus the L/C Exposure
during the preceding period or quarter. 
Such Commitment Fees shall commence to accrue on the date on which this
Agreement is fully executed and shall cease to accrue on the Commitment
Termination Date.

 

(b)           In addition, the
Borrower agrees to pay to the Agent and/or the Lenders, as the case may be
(without duplication) the various fees referred to in the Fee Letter.

 

SECTION 2.8.  Termination or
Reduction of Revolving Credit Commitments. 
(a)  Upon written, facsimile or
telephonic (promptly confirmed in writing) notice to the Agent, which notice
must be received by the Agent not later than 1:00 p.m. New York City time on
the same Business Day, the Borrower may at any time permanently terminate the
Revolving Credit Commitments in their entirety or from time to time permanently
reduce the Revolving Credit Commitments in part.  Each such reduction shall be in a minimum
aggregate amount of $5,000,000 (or such lesser amount as is the aggregate of
the Revolving Credit Commitments) or such greater amount which is an integral
multiple of $1,000,000; provided, however, that the Revolving Credit Commitments
may not be reduced to an amount less than the sum of the aggregate principal
balance of the Revolving Credit Loans then outstanding plus the L/C Exposure.

 

 

(b)           Simultaneously with
each such termination or reduction of the Revolving Credit Commitments, the
Borrower shall pay to the Agent for the account of the Lenders all accrued and
unpaid Commitment Fees on the amount of the Revolving Credit Commitments so
terminated or reduced through the date of such termination or reduction.

 

(c)           Any reduction of the
Revolving Credit Commitments pursuant to this Section shall be made among the
Lenders ratably in accordance with their respective Percentages.

 

(d)           [Intentionally
omitted.]

 

SECTION 2.9.  Default
Interest; Alternate Rate of Interest. 
(a)  So long as an Event of
Default shall have occurred and be continuing (after, as well as before a
judgment), the Borrower shall on demand from time to time pay interest, to the
extent permitted by Applicable Law, on any then unpaid amount of the
Obligations at a rate per annum (i) for the remainder of the then current
Interest Period for each Eurodollar Loan, equal to 2% in excess of the rate
then in effect for such Eurodollar Loan and (ii) for all periods subsequent to
the then current Interest Period for each Eurodollar Loan, for all Alternate
Base Rate Loans and for all other overdue amounts hereunder, equal to 2% in
excess of the rate then in effect for Alternate Base Rate Loans.

 

(b)           In the event, and on
each occasion, that on the day two Business Days prior to the commencement of
any Interest Period for a Eurodollar Loan, (i) the Agent shall have received
notice from any Lender of such Lender’s determination (which determination,
absent manifest error, shall be conclusive) that Dollar deposits in the amount
of the principal amount of such Eurodollar Loan are not generally available in
the London interbank market or that the rate at which such Dollar deposits are
being offered will not adequately and fairly reflect the cost to such Lender of
making or maintaining the principal amount of such Eurodollar Loan during such
Interest Period or (ii) the Agent shall have determined that reasonable means
do not exist for ascertaining the applicable LIBO Rate, the Agent shall, as
soon as practicable thereafter, give written or facsimile notice of such
determination by such Lender or the Agent, as applicable, to the Borrower and
the Lenders, and any request by the Borrower for a Borrowing of Eurodollar
Loans (or conversion to or continuation as Eurodollar Loans pursuant to Section
2.10), made after receipt of such notice and until the circumstances giving
rise to such notice no longer exist, shall be deemed a request for Alternate
Base Rate Loans; provided, however, that in the circumstances described
in clause (i) above such deemed request shall only apply to the affected Lender’s
Loan.

 

SECTION 2.10.  Continuation
and Conversion of Loans.  The
continuation or conversion of any Loan pursuant to this Section 2.10 does not
constitute a repayment and a reborrowing hereunder and is not subject to the
conditions set forth in Section 4.2, and the designation of a Loan as an
Alternate Base Rate Loan or Eurodollar Loan, and the designation of applicable
Interest Periods, is merely a mechanism for determining the interest rate
applicable to such Loan.

 

The
Borrower shall have the right, at any time, (i) to convert any Eurodollar Loan
or portion thereof to an Alternate Base Rate Loan or to continue such
Eurodollar Loan for a successive Interest Period, or (ii) to convert any
Alternate Base Rate Loan to a Eurodollar Loan, subject to the following:

 

 

(a)           the Borrower shall
give the Agent prior written, facsimile or telephonic (promptly confirmed in
writing) notice of each continuation or conversion hereunder of at least three
(3) Business Days for each continuation or conversion hereunder; such notice
shall be irrevocable and to be effective must be received by the Agent on the
day required not later than 1:00 p.m., New York City time;

 

(b)           no Event of Default
or Default shall have occurred and be continuing at the time of any conversion
to a Eurodollar Loan or continuation of a Eurodollar Loan into a subsequent
Interest Period;

 

(c)           no Alternate Base
Rate Loan may be converted to a Eurodollar Loan and no Eurodollar Loan may be
continued as a Eurodollar Loan if, after such conversion and after giving effect
to any concurrent prepayment of Loans, an aggregate of more than ten (10)
separate Eurodollar Loans would be outstanding hereunder with respect to each
Lender (for purposes of determining the number of such Loans outstanding, Loans
with different Interest Periods shall be counted as different Loans even if
made on the same date);

 

(d)           if fewer than all
Eurodollar Loans and Alternate Base Rate Loans at the time outstanding shall be
continued or converted, such continuation or conversion shall be made pro rata
among the Lenders in accordance with the respective principal amounts of the
Loans held by the Lenders immediately prior to such continuation or conversion;

 

(e)           the aggregate
principal amount of Loans continued as or converted to Eurodollar Loans as part
of the same borrowing shall be $1,000,000 or such greater amount which is an
integral multiple of $500,000;

 

(f)            accrued interest on
any Eurodollar Loan (or portion thereof) being continued or converted shall be
paid by the Borrower at the time of continuation or conversion;

 

(g)           the Interest Period
with respect to a new Eurodollar Loan effected by a continuation or conversion
shall commence on the date of such continuation or conversion;

 

(h)           if a Eurodollar Loan
is converted to another type of Loan other than on the last day of the Interest
Period with respect thereto, the amounts required by Section 2.11(b) shall be
paid upon such conversion; and

 

(i)            each request for a
continuation as or conversion to a Eurodollar Loan which fails to state an applicable
Interest Period shall be deemed to be a request for an Interest Period of one
month.

 

In
the event that the Borrower shall not give notice to continue or convert any
Eurodollar Loan as provided above, such Loan (unless repaid) shall
automatically be (i) continued as a Eurodollar Loan with an Interest Period of
one month or (ii) converted to an Alternate Base Rate Loan at the expiration of
the then current Interest Period at the Agent’s discretion.  The Agent shall, after it receives notice
from the Borrower, promptly give the Lenders notice of any continuation or conversion.

 

 

SECTION 2.11.  Prepayment of
Loans; Reimbursement of Lenders. 
(a)  Subject to the terms of
paragraph (b) of this Section 2.11, the Borrower shall have the right at its
option at any time and from time to time to prepay (i) the Alternate Base Rate
Loans, in whole or in part, upon at least one Business Day’s written, facsimile
or telephonic (promptly confirmed in writing) notice, in the principal amount
of $500,000 or such greater amount which is an integral multiple of $500,000
and (ii) any Borrowings of Eurodollar Loans, in whole or in part, upon at least
three Business Days’ written, facsimile or telephonic (promptly confirmed in
writing) notice, in the principal amount of $1,000,000 or such greater amount
which is an integral multiple of $500,000. 
Each notice of prepayment shall specify the prepayment date, the Loans
to be prepaid and the principal amount thereof, shall be irrevocable and shall
commit the Borrower to prepay such Loans in the amount and on the date stated
therein.  Such notice shall also specify
the expected principal amount of Loans to be outstanding after giving effect to
such prepayment.

 

(b)           The Borrower shall
reimburse each Lender on demand for any loss incurred or to be incurred by it
in the reemployment of the funds released (i) by any prepayment (for any
reason) of any Eurodollar Loan if such Loan is repaid other than on the last
day of the Interest Period for such Loan or (ii) in the event that after the
Borrower delivers a notice of borrowing under Section 2.3(a) or continuation or
conversion under Section 2.10(a) in respect of Eurodollar Loans, such Loan is
not made, continued or converted on the first day of the Interest Period
specified in such notice for any reason other than (I) a suspension or
limitation under Section 2.9(b) of the right of the Borrower to select a
Eurodollar Loan or (II) a breach by the Lenders of their obligation
hereunder.  Such loss shall be the amount
as reasonably determined by such Lender as the excess, if any, of (A) the
amount of interest which would have accrued to such Lender on the amount so
paid or not borrowed, continued or converted at a rate of interest equal to the
interest rate applicable to such Loan pursuant to Section 2.6 hereof, for the
period from the date of such payment or failure to borrow, continue or convert
to the last day (x) in the case of a payment other than on the last day of the
Interest Period for such Loan, of the then current Interest Period for such
Loan or (y) in the case of such failure to borrow, continue or convert, of the
Interest Period for such Loan which would have commenced on the date of such
failure to borrow, continue or convert, over (B) the amount realized by such
Lender in reemploying the funds not advanced or the funds received in
prepayment or realized from the Loan so continued or converted during the
period referred to above.  Each Lender
shall deliver to the Borrower from time to time one or more certificates
setting forth the amount of such loss (and in reasonable detail the manner of
computation thereof) as determined by such Lender, which certificates shall be
conclusive absent manifest error.

 

(c)           In the event the
Borrower fails to prepay any Loan on the date specified in any prepayment
notice delivered pursuant to Section 2.11(a), the Borrower on demand by any
Lender shall pay to the Agent for the account of such Lender any amounts
required to compensate such Lender for any loss incurred by such Lender as a
result of such failure to prepay, including, without limitation, any loss, cost
or expenses incurred by reason of the acquisition of deposits or other funds by
such Lender to fulfill deposit obligations incurred in anticipation of such
prepayment.  Each Lender shall deliver to
the Borrower and the Agent from time to time one or more certificates setting
forth the amount of such loss (and in reasonable detail the manner of
computation thereof) as determined by such Lender, which certificates shall be
conclusive absent manifest error.

 

 

(d)           [Intentionally
omitted.]

 

(e)           The outstanding
principal amount of the Loans shall be repaid immediately to the extent that
the aggregate amount of the Loans plus the L/C Exposure exceeds the Total
Commitment then in effect.

 

(f)            [Intentionally
omitted.]

 

(g)           Simultaneously with
each termination and/or reduction of the Total Commitment pursuant to Section
2.8, the Borrower shall pay to the Agent for the account of the Lenders the
amount, if any, by which the sum of the aggregate outstanding principal amount
of the Loans and the L/C Exposure exceeds the reduced Total Commitment, all
accrued and unpaid interest thereon and the Commitment Fees on the amount of
the Total Commitment so terminated or reduced through the date thereof.

 

(h)           If on any day on
which the Loans would otherwise be required to be prepaid but for the operation
of this Section 2.11(h) (each, a “Prepayment Date”), the amount of such
required prepayment exceeds the then outstanding aggregate principal amount of
the Loans which consist of Alternate Base Rate Loans, and no Default or Event
of Default is then continuing, then on such Prepayment Date the Borrower may,
at its option, deposit Dollars into the Cash Collateral Account in an amount
equal to such excess.  If the Borrower makes
such deposit (i) only the outstanding Alternate Base Rate Loans that are also
Revolving Credit Loans shall be required to be prepaid on such Prepayment Date,
and (ii) on the last day of each Interest Period in effect after such
Prepayment Date the Agent is irrevocably authorized and directed to apply funds
from the Cash Collateral Account (and liquidate investments held in the Cash
Collateral Account as necessary) to prepay Eurodollar Loans that are also
Revolving Credit Loans for which the Interest Period is then ending until the
aggregate of such prepayments equals the prepayment which would have been
required on such Prepayment Date but for the operation of this Section 2.11(h);
provided, however, that if there are no outstanding Revolving
Credit Loans, or the amount of outstanding Revolving Credit Loans is less than
the required prepayment, then the outstanding Term Loans that are also
Alternate Base Rate Loans shall be required to be prepaid on such Prepayment
Date and on the last day of each Interest Period the Agent may apply funds in
the Cash Collateral Account to prepay Eurodollar Loans that are also Term Loans
as set forth in clause (ii) herein.

 

(i)            Unless otherwise
designated in writing by the Borrower, all prepayments shall be applied to the
applicable principal payment set forth in this Section 2.11, first to that
amount of such applicable principal payment then maintained as Alternate Base
Rate Loans, and then to that amount of such applicable principal payment
maintained as Eurodollar Loans in order of the scheduled expiry of Interest
Periods with respect thereto.

 

(j)            All prepayments
(other than prepayments of Alternate Base Rate Loans) shall be accompanied by
accrued but unpaid interest on the principal amount being prepaid to the date
of prepayment.

 

SECTION 2.12.  Change in
Circumstances.  (a)  In the event that after the Initial Date
hereof any change in Applicable Law or in the interpretation or administration
thereof

 

 

(including,
without limitation, any request, guideline or policy not having the force of
law) by any Governmental Authority charged with the administration or
interpretation thereof or, with respect to clause (ii), (iii) or (iv) below,
any change in conditions shall occur which shall:

 

(i)            subject any Lender
to, or increase the net amount of, any tax, levy, impost, duty, charge, fee,
deduction or withholding with respect to any Eurodollar Loan (other than
withholding tax imposed by the United States of America or any political
subdivision or taxing authority thereof or any other tax, levy, impost, duty,
charge, fee, deduction or withholding (x) that is measured with respect to the
overall net income of such Lender or of a Lending Office of such Lender, and
that is imposed by the United States of America, or by the jurisdiction in
which such Lender or Lending Office is incorporated, in which such Lending
Office is located, managed or controlled or in which such Lender has its
principal office (or any political subdivision or taxing authority thereof or
therein), or (y) that is imposed solely by reason of any Lender failing to make
a declaration of, or otherwise to establish, non-residence, or to make any
other claim for exemption, or otherwise to comply with any certification,
identification, information, documentation or reporting requirements prescribed
under the laws of the relevant jurisdiction, in those cases where a Lender may
properly make such declaration or claim or so establish non-residence or
otherwise comply); or

 

(ii)           change the basis of
taxation of any payment to any Lender of principal or any interest on any
Eurodollar Loan or other fees and amounts payable hereunder, or any combination
of the foregoing other than withholding tax imposed by the United States of
America as applicable, or any political subdivision or taxing authority thereof
or therein or any other tax, levy, impost, duty, charge, fee, deduction or
withholding that is measured with respect to the overall net income of such
Lender or of a Lending Office of such Lender, and that is imposed by the United
States of America or by the jurisdiction in which such Lender or Lending Office
is incorporated or carries on business, in which such Lending Office is
located, managed or controlled or in which such Lender has its principal office
or a presence not otherwise connected with, or required by, this transaction
(or any political subdivision or taxing authority thereof or therein); or

 

(iii)          impose, modify or
deem applicable any reserve, deposit or similar requirement against any assets
held by, deposits with or for the account of or loans or commitments by an
office of such Lender; or

 

(iv)          impose upon such
Lender or the London interbank market any other condition with respect to the
Eurodollar Loans, any Letter of Credit or this Agreement;

 

and
the result of any of the foregoing shall be to increase the actual cost to such
Lender of making or maintaining any Eurodollar Loan hereunder or to reduce the
amount of any payment (whether of principal, interest or otherwise) received or
receivable by such Lender, or to require such Lender to make any payment in
connection with any Eurodollar Loan, in each case by or in an amount which such
Lender in its sole judgment shall deem material, then and in each case the
Borrower shall pay to the Agent for the account of such Lender, as provided in
paragraph (c) below, such amounts as shall be necessary to compensate such
Lender for such cost, reduction or payment.

 

 

(b)           If at any time and
from time to time after the Initial Date any Lender shall have determined that
the applicability of any law, rule, regulation or guideline adopted after the
Initial Date regarding capital adequacy, or any change in any of the foregoing
or in the interpretation or administration of any of the foregoing by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or any
Lending Office of such Lender) or any Lender’s holding company with any request
or directive regarding capital adequacy (whether or not having the force of
law) of any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on such Lender’s capital or on
the capital of such Lender’s holding company, if any, as a consequence of this
Credit Agreement or the Loans made or Letters of Credit issued or participated
in by such Lender pursuant hereto to a level below that which such Lender or
such Lender’s holding company could have achieved but for such applicability,
adoption, change or compliance (taking into consideration such Lender’s
policies and the policies of such Lender’s holding company with respect to
capital adequacy), then from time to time the Borrower shall pay to such Lender
such additional amount or amounts as will compensate such Lender or such Lender’s
holding company for any such reduction suffered with respect to Loans made or
Letters of Credit issued or participated in by such Lender hereunder.

 

(c)           Each Lender shall
deliver to the Borrower and the Agent from time to time, one or more
certificates setting forth the amounts due to such Lender under paragraphs (a)
and (b) above, the changes as a result of which such amounts are due and the
manner of computing such amounts.  Each
such certificate shall be conclusive in the absence of manifest error.  The Borrower shall pay to the Agent for the
account of each such Lender the amounts shown as due on any such certificate
within ten Business Days after its receipt of the same.  No failure on the part of any Lender to
demand compensation under paragraph (a) or (b) above on any one occasion shall
constitute a waiver of its rights to demand compensation on any other
occasion.  The protection of this Section
shall be available to each Lender regardless of any possible contention of the
invalidity or inapplicability of any law, regulation or other condition which
shall give rise to any demand by such Lender for compensation thereunder.

 

(d)           Each Lender agrees
that, as promptly as practicable after it becomes aware of the occurrence of an
event or the existence of a condition that (i) would cause it to incur any
increased cost under Section 2.9(b) or this Section 2.12 or (ii) would require
the Borrower to pay an increased amount under Section 2.9(b) or this Section
2.12, it will use reasonable efforts to notify the Borrower of such event or
condition and, to the extent not inconsistent with such Lender’s internal
policies, will use its reasonable efforts to make, fund or maintain the
affected Loans of such Lender, or, if applicable, to participate in Letters of
Credit as required by Section 2.4, through another Lending Office of such
Lender if as a result thereof the additional monies which would otherwise be
required to be paid or the reduction of amounts receivable by such Lender thereunder
in respect of such Loans or Letters of Credit would be materially reduced, or
such inability to perform would cease to exist, or the increased costs which
would otherwise be required to be paid in respect of such Loans or Letters of
Credit pursuant to Section 2.11(b) or this Section 2.12 would be materially
reduced or the taxes or other amounts otherwise payable under Section 2.9(b) or
this Section 2.12 would be materially reduced, and if, as determined by such
Lender, in its sole discretion, the making, funding or maintaining of such
Loans or the participation in such Letters of Credit through such other Lending
Office would not otherwise materially adversely affect such Loans, such Letters
of Credit or such Lender.

 

 

SECTION 2.13.  Change in
Legality.  (a)  Notwithstanding anything to the contrary
contained elsewhere in this Agreement, if any change after the date hereof in
Applicable Law, guideline or order, or in the interpretation thereof by any
Governmental Authority charged with the administration thereof, shall make it
unlawful for any Lender to make or maintain any Eurodollar Loan or to give
effect to its obligations as contemplated hereby with respect to a Eurodollar
Loan, then, by written notice to the Borrower and the Agent, such Lender may (i)
declare that Eurodollar Loans will not thereafter be made by such Lender
hereunder and/or (ii) require that, subject to Section 2.11(b), all outstanding
Eurodollar Loans made by it be converted to Alternate Base Rate Loans,
whereupon all of such Eurodollar Loans shall automatically be converted to
Alternate Base Rate Loans as of the effective date of such notice as provided
in paragraph (b) below.  Such Lender’s
Pro Rata Share of any subsequent Borrowing of Eurodollar Loans shall, instead,
be an Alternate Base Rate Loan unless such declaration is subsequently
withdrawn.

 

(b)           A notice to the
Borrower by any Lender pursuant to paragraph (a) above shall be effective for
purposes of clause (ii) thereof, if lawful, on the last day of the current
Interest Period for each outstanding Eurodollar Loan and, in all other cases,
on the date of receipt of such notice by the Borrower.

 

SECTION 2.14.  Manner of
Payments.  All payments of principal
and interest in respect of any Loans shall be pro rata among the Lenders in
accordance with their Percentages.  All
payments by the Borrower hereunder and under the Notes shall be made without
offset or counterclaim in Dollars in Federal or other immediately available
funds at the office of The Chase Manhattan Bank, Loan and Agency Services
Group, One Chase Manhattan Plaza, 8th Floor, New York, New York 10081,
Attention: Donna Montgomery, for credit to the Clearing Account no later than
1:00 p.m., New York City time, on the date on which such payment shall be due.  Any payment received at such office after
such time shall be deemed received on the following Business Day.  Interest in respect of any Loan hereunder
shall accrue from and including the date of such Loan to but excluding the date
on which such Loan is paid or converted to a Loan of a different type.

 

SECTION 2.15.  United States
Withholding.  (a)  Prior to the date of the initial Loans
hereunder and prior to the effective date set forth in the Assignment and
Acceptance with respect to any Lender becoming a Lender after the date hereof,
and from time to time thereafter if requested by the Borrower or the Agent or
required because, as a result of a change in law or a change in circumstances
or otherwise, a previously delivered form or statement becomes incomplete or
incorrect in any material respect, each Lender organized under the laws of a
jurisdiction outside the United States shall provide, if applicable, the Agent
and the Borrower with complete, accurate and duly executed forms or other
statements prescribed by the Internal Revenue Service of the United States
certifying such Lender’s exemption from, or entitlement to a reduced rate of,
United States withholding taxes (including backup withholding taxes) with
respect to all payments to be made to such Lender hereunder and under any other
Fundamental Documents.

 

(b)           The Borrower and the
Agent shall be entitled to deduct and withhold any and all present or future
taxes or withholdings, and all liabilities with respect thereto, from payments
hereunder or under any other Fundamental Documents, if and to the extent that
the

 

 

Borrower
or the Agent in good faith determines that such deduction or withholding is
required by the law of the United States, including, without limitation, any
applicable treaty of the United States. 
In the event the Borrower or the Agent shall so determine that deduction
or withholding of taxes is required, it shall advise the affected Lender as to
the basis of such determination prior to actually deducting and withholding
such taxes.  In the event the Borrower or
the Agent shall so deduct or withhold taxes from amounts payable hereunder, it
(i) shall pay to or deposit with the appropriate taxing authority in a timely
manner the full amount of taxes it has deducted or withheld; (ii) shall provide
evidence of payment of such taxes to, or the deposit thereof with, the
appropriate taxing authority and a statement setting forth the amount of taxes
deducted or withheld, the applicable rate, and any other information or
documentation reasonably requested by the Lenders from whom the taxes were
deducted or withheld; and (iii) shall forward to such Lenders any receipt of
the deducted or withheld taxes as may be issued from time to time by the
appropriate taxing authority.  Unless the
Borrower and the Agent have received forms or other documents satisfactory to
them indicating that payments hereunder or under the Notes are not subject to
United States withholding tax or are subject to such tax at a rate reduced by
an applicable tax treaty, the Borrower or the Agent may withhold taxes from
such payments at the applicable statutory rate in the case of payments to or
for any Lender organized under the laws of a jurisdiction outside the United
States.

 

(c)           Each Lender agrees
(i) that as between it and the Borrower or the Agent, it shall be the Person to
deduct and withhold taxes, and to the extent required by law it shall deduct
and withhold taxes, on amounts that such Lender may remit to any other
Person(s) by reason of any undisclosed transfer or assignment of an interest in
this Agreement to such other Person(s) pursuant to paragraph (f) of Section
13.3 and (ii) to indemnify the Borrower and the Agent and any officers,
directors, agents, or employees of the Borrower or the Agent against and to
hold them harmless from any tax, interest, additions to tax, penalties,
reasonable counsel and accountants’ fees, disbursements or payments arising
from the assertion by any appropriate taxing authority of any claim against
them relating to a failure to withhold taxes as required by law with respect to
amounts described in clause (i) of this paragraph (c) or arising from the
reliance by the Borrower or the Agent on any form or other document furnished
by such Lender and purporting to establish a basis for not withholding, or for
withholding at a reduced rate, taxes with respect to payments hereunder or
under any other Fundamental Document.

 

(d)           Each assignee of a
Lender’s interest in this Credit Agreement in conformity with Section 13.3
shall be bound by this Section 2.15, so that such assignee will have all of the
obligations and provide all of the forms and statements and all indemnities,
representations and warranties required to be given under this Section 2.15.

 

(e)           Notwithstanding the
foregoing, in the event that any withholding taxes or additional withholding
taxes shall become payable solely as a result of any change in any statute,
treaty, ruling, determination or regulation (or interpretation of any of the
foregoing) occurring after the Initial Date in respect of any sum payable
hereunder or under any other Fundamental Document to any Lender or the Agent
(i) the sum payable by the Borrower (or, if applicable, the relevant Credit
Party) shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.15) such Lender or the Agent (as the case may be) receives an
amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrower (or, if applicable, the

 

 

relevant
Credit Party) shall make such deductions, (iii) the Borrower (or, if
applicable, the relevant Credit Party) shall pay the full amount deducted to
the relevant taxation authority or other authority in accordance with
Applicable Law and (iv) the Borrower (or, if applicable, the relevant Credit
Party) shall forward to such Lender or the Agent (as the case may be) the
official tax receipts or other documentation pursuant to Section 2.15(b).  In addition, the Borrower (and, if
applicable, the relevant Credit Party) shall indemnify each Lender and the
Agent for any additional withholding taxes paid by such Lender or the Agent, as
the case may be, or any liability (including penalties and interest) arising
therefrom or with respect thereto, whether or not such additional withholding
taxes were correctly or legally asserted.

 

(f)            In the event that a
Lender receives a refund of or credit for taxes withheld or paid pursuant to
clause (e) of this Section, which credit or refund is identifiable by such
Lender as being a result of taxes withheld or paid in connection with sums
payable hereunder or under any other Fundamental Document, such Lender shall
promptly notify the Agent and the Borrower and shall, if no Event of Default
has occurred and is continuing, remit to the Borrower the amount of such refund
or credit allocable to payments made hereunder or under any other Fundamental
Document.

 

(g)           Each Lender agrees
that after it becomes aware of the occurrence of an event that would cause the
Borrower or any other Credit Party to pay any amount pursuant to Section
2.15(d), it will use reasonable efforts to notify the Borrower of such event
and, to the extent not inconsistent with such Lender’s internal policies, will
use its reasonable efforts to make, fund or maintain the affected Loans of such
Lender, or, if applicable, to participate in Letters of Credit through another
Lending Office of such Lender if as a result thereof the additional monies
which would otherwise be required to be paid by reason of Section 2.15(d) in
respect of such Loans, Letters of Credit or participations therein would be
materially reduced, and if, as determined by such Lender, in its discretion,
the making, funding or maintaining of such Loans, Letters of Credit or
participations therein through such other Lending Office would not otherwise
materially adversely affect such Loans, Letters of Credit or participations
therein or such Lender.

 

SECTION 2.16.  Interest
Adjustments.  If the provisions of
this Credit Agreement or any Note would at any time require payment by the
Borrower to a Lender of any amount of interest in excess of the maximum amount
then permitted by Applicable Law, the interest payments to that Lender shall be
reduced to the extent necessary so that such Lender shall not receive interest
in excess of such maximum amount.  If, as
a result of the foregoing, a Lender shall receive interest payments hereunder
or under a Note in an amount less than the amount otherwise provided hereunder,
such deficit (hereinafter called the “Interest Deficit”) will, to the fullest
extent permitted by Applicable Law, cumulate and will be carried forward
(without interest) until the termination of this Agreement.  Interest otherwise payable to a Lender
hereunder and under a Note for any subsequent period shall be increased by the
maximum amount of the Interest Deficit that may be so added without causing
such Lender to receive interest in excess of the maximum amount then permitted
by Applicable Law.

 

The
amount of any Interest Deficit relating to a particular Loan and Note shall be
treated as a prepayment penalty and paid in full at the time of any optional
prepayment by the Borrower to the Lenders of all the Loans at that time
outstanding pursuant to Section 2.11(a) hereof and a

 

 

termination
of the Commitments under Section 2.8. 
The amount of any Interest Deficit relating to a particular Loan and
Note at the time of any complete payment of the Loans at that time outstanding
(other than an optional prepayment thereof pursuant to Section 2.10(a) hereof)
shall be cancelled and not paid.

 

3.             REPRESENTATIONS AND WARRANTIES

 

In
order to induce the Agent, Lenders and the Issuing Bank to enter into this
Credit Agreement and to make the Loans and issue or participate in the Letters
of Credit provided for herein, the Credit Parties, jointly and severally, make
the following representations and warranties to, and agreements with, the
Agent, the Lenders and the Issuing Bank, all of which shall survive the
execution and delivery of this Agreement, the issuance of the Notes and the
Letters of Credit and the making of the Loans:

 

SECTION 3.1.  Corporate
Existence and Power.  (a)  Each Credit Party is a corporation, limited
liability company or partnership, duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and is in good
standing or has applied for authority to operate as a foreign entity in all
jurisdictions where the nature of its properties or business so requires it and
where a failure to be in good standing as a foreign entity would have a
material adverse effect on the business, assets or condition, financial or
otherwise, of such Credit Party.  As of
the Closing Date, the Borrower is engaged in a U.S. trade or business.

 

(b)           Each Credit Party
has the power and authority (i) to own its respective properties and carry on
its respective businesses as now being conducted, (ii) to execute, deliver and
perform its obligations (as applicable) under this Credit Agreement and the
other Fundamental Documents and any other documents contemplated hereby, (iii)
in the case of the Borrower, to borrow hereunder, (iv) to grant to the Agent,
for the benefit of itself, the Issuing Bank and the Lenders, a security
interest in the Collateral including the Pledged Securities, to the extent
applicable, as contemplated by this Credit Agreement and the other Fundamental
Documents to which it is or will be a party and (v) in the case of the
Guarantors, to guarantee the Obligations as contemplated by Article 10 hereof.

 

(c)           A list of all of the
Credit Parties setting forth their jurisdictions of organization and the
jurisdictions in which they are in good standing as of the Amendment No. 17
Effective Date as provided in Section 3.1(a) hereof is attached hereto as
Schedule 3.1.

 

SECTION 3.2.  Authority and No
Violation.  (a)  The execution, delivery and performance of
this Credit Agreement and the other Fundamental Documents by each Credit Party
and the grant to the Agent for the benefit of itself, the Issuing Bank and the
Lenders of a security interest in the Collateral as contemplated herein or in
the other Fundamental Documents, and in the case of the Borrower, the
Borrowings hereunder and the execution, delivery and performance of the Notes
by the Borrower and, in the case of each Guarantor, the guaranty of the
Obligations as contemplated by Article 10 hereof, (a) have been duly authorized
by all necessary corporate or company (as applicable) action on the part of
each Credit Party, (b) will not violate any provision of any Applicable Law, or
any order of any court or other agency of the United States or any State
thereof, applicable to any Credit Party or any of its respective properties or
assets, (c) will not violate any provision of the Certificate of Incorporation
or By-Laws, limited

 

 

liability
company agreement or other organizational document of any Credit Party, or any
indenture, any agreement for borrowed money, any bond, note or other similar
instrument in any material respect or any other material agreement to which any
Credit Party is a party or by which any Credit Party or any of its properties
or assets are bound, (d) will not be in conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement, bond, note, instrument or other material agreement and
(e) will not result in the creation or imposition of any Lien, charge or
encumbrance of any nature whatsoever upon any property or assets of any Credit
Party other than pursuant to this Agreement or any other Fundamental Document.

 

(b)           There are no
restrictions on the transfer of any Pledged Securities other than as a result
of the Credit Agreement or applicable securities laws and the regulations
promulgated thereunder or such as would not prevent the Agent from exercising
its remedies with respect to such Pledged Securities in the case of an Event of
Default.

 

SECTION 3.3.  Governmental and
Other Approvals.  All authorizations,
approvals, registrations or filings with any Governmental Authority or public
regulatory body (other than UCC-1 Financing Statements, the Copyright Security
Agreement and the Trademark Security Agreement which will be delivered to the
Agent on or prior to the Closing Date), in form suitable for recording or
filing with the appropriate filing office, required for the execution, delivery
and performance by the Credit Parties of this Credit Agreement and the other
Fundamental Documents, and the execution and delivery by the Borrower of the
Notes, have been duly obtained or made and are in full force and effect or have
been duly applied for, and if any such further authorizations, approvals,
registrations or filings should hereafter become necessary, the Credit Parties
shall obtain or make all such authorizations, approvals, registrations or
filings.

 

SECTION 3.4.  Financial
Statements.  Each of the audited
financial statements of the Borrower and its Consolidated Subsidiaries at
December 31, 2009 together with the related statements of operations and cash
flow and the related notes and supplemental information are complete and
correct and have been prepared in accordance with GAAP in effect as of such
date consistently applied, except as otherwise indicated in the notes to such
financial statements and subject in the case of unaudited statements to changes
resulting from year-end audit adjustments. 
All of such financial statements fairly present the financial condition
or the results of operations of the Borrower and its Consolidated Subsidiaries
on a consolidated basis at the dates and for the periods indicated and (in the
case of the balance sheets) reflect (including the notes thereto) all known
liabilities and subject in the case of unaudited statements to changes
resulting from year-end audit adjustments, contingent or otherwise, as of such
dates required in accordance with GAAP to be shown or reserved against, or
disclosed in notes to financial statements.

 

SECTION 3.5.  No Material
Adverse Change.  (a)  Since December 31, 2009 there has been no
material adverse change in the business, assets, condition (financial or
otherwise), or results of operations of the Borrower and its Subsidiaries,
taken as a whole.

 

 

(b)           No Credit Party has entered or is
entering into the arrangements contemplated hereby and by the other Fundamental
Documents, or intends to make any transfer or incur any obligations hereunder
or thereunder, with actual intent to hinder, delay or defraud either present or
future creditors.  On and as of the
Closing Date, on a pro forma basis after giving effect to all Indebtedness
(including the Loans) expected to be borrowed or repaid on the Closing Date,
(i) each Credit Party expects the cash available to such Credit Party, after
taking into account all other anticipated uses of the cash of such Credit Party
(including the payments on or in respect of debt referred to in clause (iii) of
this Section 3.5(b)), will be sufficient to satisfy all final judgments for
money damages which have been docketed against such Credit Party or which may
be rendered against such Credit Party in any action in which such Credit Party
is a defendant (taking into account the reasonably anticipated maximum amount
of any such judgment and the earliest time at which such judgment might
reasonably be anticipated to be entered); (ii) the sum of the present fair
saleable value of the combined assets of all of the Credit Parties will exceed
the probable liability of the Credit Parties on their debts (including their
Guaranties); (iii) no Credit Party will have incurred or intends to, or
believes that it will, incur debts beyond its ability to pay such debts as such
debts mature (taking into account the timing and amounts of cash to be received
by such Credit Party from any source and of amounts to be payable on or in
respect of debts of such Credit Party and the amounts referred to in clause
(i)); and (iv) each Credit Party believes it will have sufficient capital with
which to conduct its present and proposed business and the property of such
Credit Party does not constitute unreasonably small capital with which to
conduct its present or proposed business. 
For purposes of this paragraph (b), “debt” means any liability or
a claim, and “claim” means (y) right to payment whether or not such
right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured or
unsecured, or (z) right to an equitable remedy for breach of performance if
such breach gives rise to a payment, whether or not such right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured.

 

SECTION
3.6.  Ownership of Pledged Securities,
Subsidiaries, etc.  (a)  Annexed hereto as Schedule 3.6(a) is a
correct and complete list as of the Amendment No. 17 Effective Date, of each
Credit Party showing, as to each, (i) its name, (ii) the type of entity it is,
(iii) the jurisdiction in which it was incorporated or otherwise organized,
(iv) in the case of each Credit Party which is a corporation, its authorized
capitalization, the number of shares of its capital stock outstanding and other
than as to the Borrower the ownership of its capital stock and (v) in the case
of each Credit Party which is a limited liability company, the ownership of its
membership interests.

 

(b)           Except as noted on Schedule 3.6(b),
as of the Amendment No. 17 Effective Date no Credit Party holds any Equity
Interest or other Investment, either directly or indirectly, in any Person
other than another Credit Party and no Credit Party is a general or limited
partner in any joint venture or partnership.

 

SECTION
3.7.  Copyrights, Trademarks and Other
Rights.  (a)  As of the Amendment No. 17 Effective Date,
the items of Product listed on Schedule 3.7(a) hereto comprise all of the
Product in which any Credit Party has any right, title or interest (either
directly, through a joint venture or partnership or otherwise).  The existing U.S. copyright registration
number (or if not yet obtained, the registration status) for each of the items
of Product

 

 

set
forth on Schedule 3.7(a) for which any Credit Party owns the underlying
copyright or an interest in copyright are as 
set forth on Schedule 3.7(a). 
Schedule 3.7(a) also identifies the location of the Physical Materials
related to each item of Product owned by any Credit Party or to which any
Credit Party has rights of access.  To
the best of each Credit Party’s knowledge, all items of Product and all
component parts thereof do not and will not violate or infringe upon any
copyright, right of privacy, trademark, patent, trade name, performing right or
any literary, dramatic, musical, artistic, personal, private, several, care,
contract, property or copyright right or any other right of any Person, in any
material respect or contain any libelous or slanderous material.  There is no claim, suit, action or proceeding
pending or, to the best of each Credit Party’s knowledge, threatened against
any Credit Party that involves a claim of infringement of any copyright with
respect to any item of Product listed on Schedule 3.7(a), and no Credit Party
has any knowledge of any existing infringement by any other Person of any
copyright held by any Credit Party with respect to any item of Product listed
on Schedule 3.7(a).

 

(b)           Schedule 3.7(b) hereto (i) lists all
the trademarks registered by any Credit Party as of the Amendment No. 17
Effective Date and identifies the Credit Party in whose name each such
trademark is registered and (ii) specifies as to each, the jurisdictions in
which such trademark has been issued or registered (or, if applicable, in which
an application for such issuance or registration has been filed), including the
respective registration or application numbers and applicable dates of
registration or application and (iii) specifies as to each, as applicable,
material licenses, sublicenses and other material agreements as of the
Amendment No. 17 Effective Date  (other
than any agreements which relate to the exploitation of an item of Product), to
which any Credit Party is a party and pursuant to which any Person, other than
a Credit Party, is authorized to use such trademark.

 

(c)           All applications and registrations
for all copyrights, trademarks, service marks, trade names and service names in
which any Credit Party has any right, title or interest are valid and in full
force and effect and are not subject to the payment of any taxes or maintenance
fees or the taking of any other actions by the Credit Parties (other than
standard renewals) to maintain their validity or effectiveness.

 

SECTION
3.8.  Fictitious Names.  None of the Credit Parties has done business,
is doing business or intends to do business other than under its full corporate
or company name (as applicable), including, without limitation, under any
tradename or other doing business name other than as listed on Schedule 3.8.

 

SECTION
3.9.  Title to Properties.  The Credit Parties have good title to each of
the properties and assets reflected on the financial statements referred to in
Section 3.4 or delivered pursuant to Section 5.1(a) hereof and all such
properties and assets will be free and clear of Liens, except Permitted
Encumbrances.

 

SECTION
3.10.  UCC Filing Information.  The chief executive office of each Credit
Party is, as of the Amendment No. 17 Effective Date, as set forth on Schedule
3.10 hereto, the state of incorporation or formation of each Credit Party is
listed on Schedule 3.10 hereto and the place where each Credit Party keeps the
records concerning the Collateral as of the Amendment  

 

 

No.
17 Effective Date or regularly keeps any goods included in the Collateral as of
the Amendment No. 17 Effective Date are also listed on Schedule 3.10 hereto.

 

SECTION
3.11.  Litigation.  Except as set forth on Schedule 3.11, there
are no actions, lawsuits or other proceedings pending (including, but not
limited to, matters relating to environmental liability), or, to the knowledge
of any Credit Party, threatened, against or affecting any Credit Party or any
of its respective properties, by or before any Governmental Authority,
arbitration panel, or arbitrator, which could reasonably be expected to have a
Material Adverse Effect on the financial condition or the business of any
Credit Party or which involve this Agreement or any of the transactions
contemplated hereby.  No Credit Party is
in default with respect to any order, writ, injunction, decree, rule or
regulation of any Governmental Authority, which default would have a Material
Adverse Effect.

 

SECTION
3.12.  Federal Reserve Regulations.  No Credit Party is engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any Margin Stock.  No part of the proceeds of the Loans will be
used, directly or indirectly, and whether immediately, incidentally or
ultimately to purchase or carry any Margin Stock, to extend credit to others for
the purpose of purchasing or carrying any Margin Stock or for any other purpose
violative of or inconsistent with any of the provisions of any regulations of
the Board of Governors of the Federal Reserve System, including, without
limitation, Regulations D, T, U and X.

 

SECTION
3.13.  Investment Company Act.  No Credit Party will during the term of this
Agreement be, (x) an “investment company”, within the meaning of the Investment
Company Act of 1940, as amended or (y) subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act or any foreign,
federal or local statute or regulation limiting its ability to incur
indebtedness for money borrowed as contemplated hereby or by any other
Fundamental Document.

 

SECTION
3.14.  Binding Agreements.  This Credit Agreement and the other
Fundamental Documents when executed will constitute, the legal, valid and
enforceable obligations of each Credit Party that is a party thereto
enforceable against such Credit Party in accordance with its respective terms,
subject, as to the enforcement of remedies, to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors’ rights generally and to general principles of equity.

 

SECTION
3.15.  Taxes.  All federal, state and local tax returns
which are required to be filed by or on behalf of the Credit Parties have been
filed, and the Credit Parties have paid or caused to be paid all taxes payable
by the Credit Parties as shown on said returns or on any assessment received by
them in writing, to the extent that such taxes have become due, except as
permitted by Section 5.11 hereof.  No
Credit Party knows of any material additional assessments or any basis
therefore.  The Credit Parties believe
that the charges, accruals and reserves on their books in respect of taxes or
other governmental charges are accurate in all material respects.

 

SECTION
3.16.  Compliance with ERISA and
Applicable Law.  (a)  Each Plan has been maintained and operated in
all material respects in accordance with all applicable laws, including 

 

 

ERISA
and the Code, and each Plan intended to qualify under section 401(a) of the
Code so qualifies.  No Reportable Event
has occurred in the last five years as to any Plan.  No Plan has any “accumulated funding deficiency”
as defined in section 302 of ERISA or Section 412 of the Code (whether or not
waived) and no application has been made to the Secretary of the Treasury for a
waiver or modification of the minimum funding standards (including required
installment payments) or an extension of any amortization period under Section
412 of the Code with respect to a Plan. 
No material liability has been, and no circumstances exist pursuant to
which any material liability could be, imposed upon any Credit Party or ERISA
Affiliate (i) under sections 4971 through 4980B of the Code, section 502(i) or
502(l) of ERISA, or Title IV of ERISA with respect to any Plan or Multiemployer
Plan or with respect to any plan heretofore maintained by any Credit Party or
ERISA Affiliate or any entity that heretofore was an ERISA Affiliate or (ii)
for the failure to fulfill any obligation to contribute to any Multiemployer
Plan.  No material liability has been,
and no circumstances exist pursuant to which any material liability could be,
imposed upon any Credit Party with respect to any Plan that provides
post-retirement welfare coverage (other than as required pursuant to Section
4980B of the Code).  Neither any Credit
Party nor any ERISA Affiliate has received any notification that any Multiemployer
Plan is in reorganization or has been terminated within the meaning of Title IV
of ERISA, and no Multiemployer Plan is reasonably expected to be in
reorganization or to be terminated.

 

(b)           The execution, delivery and
performance of the Fundamental Documents and the consummation of the
transactions contemplated hereby and thereby will not involve any “prohibited
transaction” within the meaning of ERISA or the Code.

 

SECTION
3.17.  Agreements.  (a)  No
Credit Party is in default in the performance, observance or fulfillment of any
of the obligations, covenants or conditions contained in any agreement or
instrument (including any License Agreement or Platform Agreement) to which it
is a party which could reasonably be expected to have a Material Adverse Effect
or result in the loss of more than 5,000,000 Subscribers.

 

(b)           Schedule 3.17 is a true and
complete listing as of the Amendment No. 17 Effective Date of (i) all credit
agreements, indentures, and other agreements related to any indebtedness for borrowed
money of any Credit Party, other than the Fundamental Documents and
intercompany indebtedness among the Credit Parties, (ii) all joint venture
agreements to which any Credit Party is a party, (iii) all material License
Agreements and Platform Agreements, (iv) all agreements or other arrangements
pursuant to which a Credit Party has granted a Lien to any Person other than
Permitted Encumbrances and (v) all other contractual arrangements entered into
by a Credit Party or by which any Credit Party is bound which arrangements are
material to any Credit Party, including but not limited to, Guaranties and
employment agreements.  For purposes of
this Section 3.17, a Platform Agreement or other contract, agreement or arrangement
shall be deemed “material” if the Credit Parties reasonably expect that
any Credit Party would, pursuant to the terms thereof, (A) recognize future
revenues in excess of US$1,000,000 per annum or, (B) incur liabilities,
obligations or expenses in excess of US$1,000,000 per annum.  Schedule 3.17B is a true and complete listing
as of the Amendment No. 17 Effective Date of all material (with materiality
determined in accordance with the preceding sentence) agreements between any
Credit Party and any of their non-Credit Party Affiliates.

 

 

SECTION
3.18.  Indebtedness; Guaranties; Liens.  (a) 
Except for this Agreement and as otherwise disclosed on Schedule
3.18(a), as of the Amendment No. 17 Effective Date no Credit Party has any
outstanding Indebtedness except for intercompany indebtedness among the Credit
Parties.

 

(b)           Except for this Agreement and as
otherwise disclosed on Schedule 3.18(b), as of the Amendment No. 17 Effective
Date no Credit Party is responsible for any Indebtedness of any other Person.

 

(c)           Except for (i) Liens arising under
this Agreement, (ii) Liens disclosed on Schedule 3.18(c) and (iii) Permitted
Encumbrances no Credit Party has granted or is aware of the existence of any
Liens on any property of any Credit Party.

 

SECTION
3.19.  Security Interest; Other
Security.  This Agreement and the
other Fundamental Documents, when executed and delivered and, to the extent
appropriate, filed in locations where required by law, in connection with the
execution and delivery hereof will create and grant to the Agent for the benefit
of itself, the Issuing Bank and the Lenders (upon the making of the first Loan
hereunder, the filing of the appropriate UCC-1 financing statements, the
Copyright Security Agreement with the United States Copyright Office, the
Trademark Security Agreement with the Patent and Trademark Office and delivery
of the Pledged Securities with appropriate stock powers to the Agent) a valid
and first priority perfected security interest in the Collateral located in the
United States subject only to Permitted Encumbrances.

 

SECTION
3.20.  Disclosure.  Neither this Credit Agreement nor any other
Fundamental Document nor any other agreement, document, certificate or
statement furnished to the Agent for the benefit of the Lenders by or on behalf
of any Credit Party in connection with the transactions contemplated hereby at
the time it was furnished contained any untrue statement of a material fact or
omitted to state a material fact, under the circumstances under which it was
made, necessary in order to make the statements contained herein or in any
other Fundamental Document not misleading in any material respect.  At the date hereof, there is no fact relating
to any Credit Party known to any Credit Party which would have a Material
Adverse Effect or would reasonably be expected to have a Material Adverse
Effect in the future.

 

SECTION
3.21.  Licensed Rights.  The License Agreements grant to the Credit
Parties sufficient rights in and to the items of Product licensed thereunder to
enable the Credit Parties to perform their respective obligations under the
Platform Agreements, and no Credit Party is in breach of any of its material
obligations under such agreements, nor does any Credit Party have any knowledge
of any breach or anticipated breach by any other parties thereto which could
reasonably be expected to result in any material adverse change in the
business, properties, assets, operations or condition (financial or otherwise)
of any Credit Party.

 

SECTION
3.22.  Environmental Liabilities.  (a)  No
Credit Party has used, stored, treated, transported, manufactured, refined,
handled, produced or disposed of any Hazardous Materials on, under, at, from or
in any way affecting, any properties or assets owned or leased by a Credit
Party, in any manner which at the time of the action in question violated in
any material respect any Environmental Law governing the use, storage,
treatment, transportation, manufacture, refinement, handling, production or
disposal of Hazardous Materials, and, to the

 

 

best
of each Credit Party’s knowledge, no prior owner of any such property or asset
or any tenant, subtenant, prior tenant or prior subtenant thereof has used
Hazardous Materials on or affecting such property or asset, or otherwise, in
any manner which at the time of the action in question violated in any material
respect any Environmental Law governing the use, storage, treatment,
transportation, manufacture, refinement, handling, production or disposal of
Hazardous Materials.

 

(b)           To the best of each Credit Party’s
knowledge, (i) no Credit Party has any obligations or liabilities, known or
unknown, matured or not matured, absolute or contingent, assessed or
unassessed, which could reasonably be expected to have a Material Adverse
Effect and (ii) no claims have been made against any of the Credit Parties in
the past five years and no presently outstanding citations or notices have been
issued against any of the Credit Parties, which could reasonably be expected to
have a Material Adverse Effect which in either case have been or are imposed by
reason of or based upon any provision of any Environmental Law, including,
without limitation, any such obligations or liabilities relating to or arising
out of or attributable, in whole or in part, to the manufacture, processing,
distribution, use, treatment, storage, disposal, transportation or handling of
any Hazardous Materials by any Credit Party, or any of its employees, agents,
representatives or predecessors in interest in connection with or in any way
arising from or relating to any of the Credit Parties or any of their
respective owned or leased properties, or relating to or arising from or
attributable, in whole or in part, to the manufacture, processing,
distribution, use, treatment, storage, disposal, transportation or handling of
any such substance, by any other Person at or on or under any of the real
properties owned or used by any of the Credit Parties or any other location
where such could reasonably be expected to have a Material Adverse Effect.

 

SECTION
3.23.  Pledged Securities.  (a) 
Annexed hereto as Schedule 3.23 is a correct and complete list as of the
Amendment No. 17 Effective Date,
of all the Pledged Securities hereunder showing, as to each, the entity whose
stock or other Equity Interests are being pledged, the Pledgor of such stock or
other Equity Interests, the stock certificate number (as applicable) and the
number of shares or amount of the capital stock or other Equity Interests being
pledged hereunder.  Each Pledgor (i) is
the legal and beneficial owner of, and has sole right, title and interest to,
the Pledged Securities owned by such Pledgor, free and clear of all Liens,
security interests or other encumbrances whatsoever, except the security
interests created by this Credit Agreement and the other Fundamental Documents
and (ii) has sole right and power to pledge, and grant the security interest
in, and Lien upon, such Pledged Securities pursuant to this Credit Agreement
and the other Fundamental Documents without the consent of any Person or
Governmental Authority whatsoever.

 

(b)           All of the Pledged Securities are
duly authorized, validly issued, fully paid and non-assessable.

 

(c)           Except for contractual restrictions
disclosed on Schedule 3.23 and restrictions created herein or under applicable
securities laws and the regulations promulgated thereunder, there are no
restrictions on the transfer of any of the Pledged Securities.

 

(d)           Except as set forth on Schedule 3.23,
there are no warrants, options, conversion or similar rights currently
outstanding with respect to, and no agreements to purchase

 

 

or
otherwise acquire, any shares of the capital stock or other Equity Interests of
any issuer of any of the Pledged Securities; and there are no securities or
obligations of any kind convertible into any shares of the capital stock or
other Equity Interests of any issuer of any of the Pledged Securities.

 

(e)           Article 11 of this Credit Agreement
creates in favor of the Agent (on behalf of the Agent, the Issuing Bank and the
Lenders) a valid, binding and enforceable security interest in, and Lien upon,
all right, title and interest of the Pledgors in the Pledged Securities and
constitutes a fully perfected first and prior security interest and Lien upon
all right, title and interest of the Pledgors in such Pledged Securities subject,
as to the enforcement of remedies, to applicable bankruptcy, insolvency,
reorganization and similar laws affecting creditors’ rights generally and to
general principles of equity.

 

SECTION
3.24.  Compliance with Laws.  No Credit Party is in violation of any
Applicable Law except for such violations which in the aggregate would not have
a Material Adverse Effect.  The
Borrowings hereunder, the intended use of the proceeds of the Loans as
described in the preamble hereto and as contemplated by Section 5.17 hereof and
any other transactions contemplated hereby will not violate any Applicable Law.

 

SECTION
3.25.  Bank Accounts. As of the
Amendment No. 17 Effective Date, the Credit Parties have no bank accounts other
than those listed on Schedule 3.25.

 

4.             CONDITIONS OF LENDING

 

SECTION
4.1.  [THE
TEXT OF SECTION 4.1 OF THE CREDIT AGREEMENT IS INTENTIONALLY OMITTED FROM THIS
EXHIBIT A TO AMENDMENT NO. 17; NO CHANGES ARE BEING EFFECTUATED TO SECTION 4.1
OF THE CREDIT AGREEMENT FROM THOSE PREVIOUSLY IN EFFECT VIA AMENDMENT NO. 17,
AND THE CONDITIONS PRECEDENT SET FORTH IN SECTION 4.1 WERE SATISFIED OR WAIVED
ON OR ABOUT AUGUST 31, 2001]

 

SECTION
4.2.  Conditions Precedent to Each
Loan and Letter of Credit.  The
obligation of the Lenders (including the Agent) to make each Loan (including
the initial Loan) and to participate in each Letter of Credit (including the
initial Letter of Credit) and of the Issuing Bank to issue each Letter of
Credit is subject to the following conditions precedent:

 

(a)           Notice.  The Agent shall have received a notice with
respect to such Borrowing or the Issuing Bank shall have received a notice with
respect to such Letter of Credit as required by Article 2 hereof.

 

(b)           Representations and Warranties.  The representations and warranties set forth
in Article 3 hereof and in the other Fundamental Documents shall be true and
correct in all material respects on and as of the date of each Borrowing or
issuance of a Letter of Credit hereunder (except to the extent that such
representations and warranties expressly relate to an earlier date, in which
case they shall be true and correct as of such earlier date, or changed
circumstances specifically contemplated by, and allowed pursuant to, this
Agreement) with the same effect as if made on and as of such date.

 

 

(c)           No Event of Default.  On the date of each Borrowing or issuance of
a Letter of Credit hereunder, the Credit Parties shall be in material
compliance with all of the terms and provisions set forth herein to be observed
or performed and no Event of Default or Default shall have occurred and be
continuing nor shall any such event occur by reason of the making of such Loans
or issuance of such Letter of Credit.

 

(d)           Borrowing Certificate.  On the date of each Borrowing hereunder, the
Agent shall have received a borrowing certificate, substantially in the form of
Exhibit D hereto (the “Borrowing Certificate”), executed by an
Authorized Officer of the Borrower, dated the date of such Borrowing,
containing a certification by the chief financial officer of the Borrower, that
(i) no Event of Default or Default has occurred or is continuing and (ii) no
Event of Default or Default will occur if the Lenders should make the Loans
requested.

 

(e)           Additional Documents.  The Lenders shall have received from the
Borrower on the date of such Borrowing or issuance of a Letter of Credit such
documents and information as they may reasonably request relating to the
satisfaction of the conditions in this Section 4.2.

 

Each
Borrowing or request for issuance of a Letter of Credit shall be deemed to be a
representation and warranty by the Borrower on the date of such Borrowing or
issuance as to the matters specified in paragraphs (b) and (c) of this Section.

 

5.             AFFIRMATIVE COVENANTS

 

From
the date hereof and for as long as the Commitments shall be in effect, any
amount shall remain outstanding under the Notes, any Letter of Credit shall
remain unpaid or unsatisfied, or any other Obligations remain unpaid or
unsatisfied, each Credit Party agrees that, unless the Required Lenders shall
otherwise consent in writing, each of them will:

 

SECTION
5.1.  Financial Statements and Reports.
Furnish or cause to be furnished to the Agent:

 

(a)           Within 90 days after the end of each
fiscal year, all audited financial statements that the Borrower was required to
submit to the S.E.C. as part of its public filings for such fiscal year;

 

(b)           Within 45 days after the end of each
of the first three fiscal quarters of each of its fiscal years, all unaudited
financial statements that the Borrower was required to submit to the S.E.C. as
part of its public filings for such fiscal quarter;

 

(c)           Simultaneously with the delivery of
the statements referred to in paragraphs (a) and (b) of this Section 5.1, a
certificate of an Authorized Officer of the Borrower, in form and substance
satisfactory to the Agent (i) stating that in the course of the performance of
his duties, he would normally have knowledge of any condition or event which
would

 

 

constitute
an Event of Default or Default and stating whether or not he has knowledge of
any such condition or event and, if so, specifying each such condition or event
of which he has knowledge and the nature thereof (ii) demonstrating in detail
satisfactory to the Agent compliance with the provisions of Sections 6.5(iv)(a)
and 6.15 hereof; and (iii) certifying that all filings required under Section
5.8 hereof have been made and listing each such filing that has been made since
the date of the last certificate delivered in accordance with this Section 5.1(c);

 

(d)           [Intentionally omitted;]

 

(e)           From time to time such additional
information regarding the financial condition, business or business prospects
of the Credit Parties, the amount of film inventory in which any of the Credit
Parties has rights on an individual or market basis or otherwise regarding the
Collateral, as any Lender may reasonably request.

 

SECTION
5.2.  Corporate Existence.  Do or cause to be done all things necessary
to preserve, renew and keep in full force and effect its corporate existence (provided,
that any Credit Party may merge into or consolidate with another Credit Party, provided
further that the Borrower, if it is a party thereto, is the surviving entity),
and material rights, licenses, permits and franchises, and comply in all material
respects with all applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, any Governmental Authority.

 

SECTION
5.3.  Maintenance of Properties.  Keep its tangible properties which are
material to its business in good repair, working order and condition subject to
ordinary wear and tear and, from time to time (i) make all necessary and proper
repairs, renewals, replacements, additions and improvements thereto and (ii)
comply at all times with the provisions of all material leases and other
material agreements to which it is a party so as to prevent any loss or
forfeiture thereof or thereunder unless compliance therewith is being currently
contested in good faith by appropriate proceedings and appropriate reserves have
been established in accordance with GAAP.

 

SECTION
5.4.  Notice of Material Events.  (a) 
Promptly upon any Executive Officer of a Credit Party obtaining
knowledge of (i) any Default or Event of Default, or becoming aware that the
Agent, the Issuing Bank or any Lender has given notice or taken any other
action with respect to a claimed Event of Default, (ii) any material adverse
change in the condition or operations of any Credit Party, financial or
otherwise, (iii) any action or event which could reasonably be expected to
materially and adversely affect the performance of the Credit Parties’
obligations under this Credit Agreement or any other Fundamental Document, the
repayment of the Notes, or the security interests granted to the Agent for the
benefit of itself, the Issuing Bank and the Lenders under this Credit Agreement
or any other Fundamental Document, (iv) any other event which could reasonably
be expected to result in a Material Adverse Effect, (v) the opening of any
office of a Credit Party or the change of the executive office, jurisdiction or
form of organization, or the principal place of business of any Credit Party or
of the location of any Credit Party’s books and records, (vi) any change in the
name of any Credit Party, (vii) any other event which could reasonably be
expected to materially and adversely impact upon the amount of collectability
of any material accounts receivable of the Credit Parties or materially
decrease the value of the Collateral or the Pledged Securities, (viii) any proposed
material amendment to any material agreements that are part of the Collateral
that could reasonably be anticipated to 

 

 

negatively
impact the value of the Collateral, or (ix) any Person giving any notice to any
Credit Party or taking any other action with respect to a claimed default or
event or condition of the type referred to in paragraph (e) of Article 7, such
Credit Party shall promptly give written notice thereof to the Agent specifying
the nature and period of existence of any such condition or event, or
specifying the notice given or action taken and the nature of such claimed
Event of Default or condition and what action such Credit Party has taken, is
taking and proposes to take with respect thereto.

 

(b)           [Intentionally omitted.]

 

SECTION
5.5.  Insurance.  (a) 
Keep its assets which are of an insurable character insured (to the
extent and for the time periods consistent with normal industry practices) by
financially sound and reputable insurers against loss or damage by fire,
explosion, theft or other hazards which are included under extended coverage in
amounts not less than the insurable value of the property insured or such
lesser amounts, and with such self-insured retention or deductible levels, as
are consistent with customary industry practices.

 

(b)           Maintain with financially sound and
reputable insurers, insurance against other hazards and risks and liability to
Persons and property to the extent and in the manner customary for companies in
similar businesses.

 

(c)           Maintain, or cause to be maintained,
in effect during the period from the date of acquisition of each item of
Product acquired by any Credit Party until such time as the Agent shall have
been provided with satisfactory evidence of the existence of one negative or
master tape in one location and in another location, an interpositive or
internegative or duplicate master tape of the final version of the completed
Product, insurance on the negatives and sound tracks of such item of Product in
an amount not less than the cost of re-shooting the principal photography of
the item of Product and otherwise recreating such item of Product.

 

(d)           Maintain, or cause to be maintained,
distributor’s “Errors and Omissions” insurance to the extent and in amounts
consistent with or greater than customary industry standards.

 

(e)           Maintain, or cause to be maintained,
broadcaster’s “Errors and Omissions” insurance to the extent and in amounts
consistent with or greater than customary industry standards.

 

(f)            Cause all such above-described
insurance (excluding worker’s compensation insurance) to (1) provide for the
benefit of the Lenders that 30 days’ prior written notice of suspension,
cancellation, termination, reduction, non-renewal or lapse or material change
of coverage shall be given to the Agent; (2) name the Agent for the benefit of
the Lenders as a loss payee (except for “Errors and Omissions” insurance and
other third party liability insurance), provided,
however, that so long as an Event of
Default has occurred and is continuing, property insurance proceeds may be used
to repair damage in respect of which such proceeds were received or so long as
no Default or Event of Default has occurred and is then continuing, to
reimburse a Credit Party for its own funds expended to repair the applicable
damage; and (3) to the extent that neither the Agent nor the Lenders shall be
liable for premiums

 

 

or
calls, name the Agent for the benefit of the Lenders as an additional insured
including, without limitation, under any “Errors and Omissions” insurance and
other third party liability insurance but only from claims arising from the
acts or omissions of any Credit Party or its employees, representatives or
contractors.

 

(g)           Upon the request of the Agent, the
Borrower will render to the Agent a statement in such detail as the Agent may
request as to all such insurance coverage.

 

SECTION
5.6.  [Intentionally omitted.]

 

SECTION
5.7.  [Intentionally omitted.]

 

SECTION
5.8.  Books and Records.  Maintain or cause to be maintained at all
times true and complete books and records of its financial operations and
provide the Agent and its representatives (and each Lender and its
representatives during the continuance of an Event of Default) access to such
books and records and to any of its properties or assets upon reasonable notice
and during regular business hours in order that the Agent (or such Lender) may
make such audits and examinations and make abstracts from such books, accounts,
records and other papers pertaining to the Collateral (including, but not
limited to, all on and off balance sheet receivables) and may discuss the
affairs, finances and accounts with, and be advised as to the same by the
Credit Parties’ officers and independent accountants, all as the Agent (or such
Lender) may deem appropriate for the purpose of verifying the various reports
delivered by any Credit Party to the Agent and/or the Lenders pursuant to this
Credit Agreement or for otherwise ascertaining compliance with this Credit
Agreement or any Fundamental Document.

 

SECTION
5.9.  Observance of Agreements.  Duly observe and perform in all material
respects all the terms and conditions of all material agreements with respect
to the distribution and/or exploitation of items of Product and diligently
protect and enforce the rights of the Credit Party under all such agreements in
a manner consistent with prudent business judgment and subject to the terms and
conditions of such agreements.

 

SECTION
5.10.  Laboratories; No Removal.  (a)  To
the extent any Credit Party has control over or rights to receive any of the
Physical Materials relating to any item of Product, deliver or cause to be delivered
to a Laboratory or Laboratories all negative and preprint material, master
tapes and all sound track materials with respect to each such item of Product
and deliver to the Agent a fully executed Pledgeholder Agreement with respect
to such materials.  To the extent that
any Credit Party has only rights of access to preprint material or master tapes
and has not created duplicate materials sufficient to exploit its rights and
has not stored such duplicate materials at a Laboratory that has delivered a
Pledgeholder Agreement to the Agent, then the Credit Parties will deliver to
the Agent a fully executed Laboratory Access Letter covering such
materials.  Prior to requesting any
Laboratory to deliver such negative or other preprint or sound track material
or master tapes to another Laboratory, any such Credit Party shall provide the
Agent with a Pledgeholder Agreement or Laboratory Access Letter, as
appropriate, executed by such other Laboratory and all other parties to such
Pledgeholder Agreement (including the Agent). 
Without the consent of the Agent, no Credit Party shall deliver or
remove or cause the delivery or removal of the original negative and film or
sound materials or master tapes with respect to any item of Product owned by
such Credit Party or in

 

 

which
such Credit Party has an interest (i) to a location outside the United States
or (ii) to any state or jurisdiction where UCC-1 financing statements have not
been filed against such Credit Party.

 

(b)           With respect to items of Product
acquired after the Closing Date, on at least a quarterly basis, deliver to the
Agent and the Laboratories which are signatories to Pledgeholder Agreements a
revised schedule of Product on deposit with such Laboratories.

 

SECTION
5.11.  Taxes and Charges; Indebtedness
in Ordinary Course of Business.  Duly
pay and discharge, or cause to be paid and discharged, before the same shall
become in arrears, all taxes, assessments, levies and other governmental
charges, imposed upon any Credit Party or its properties, sales and activities,
or any part thereof, or upon the income or profits therefrom, as well as all
claims for labor, materials, or supplies which if unpaid could reasonably be
expected to become by law a Lien upon any property of a Credit Party; provided, however,
that any such tax, assessment, charge, levy or claim need not be paid if the
validity or amount thereof shall currently be contested in good faith by
appropriate proceedings and if the Borrower shall have set aside on its books
reserves (the presentation of which is segregated to the extent required by
GAAP) adequate with respect thereto if reserves shall be deemed necessary; and provided, further, that such Credit
Party will pay all such taxes, assessments, levies or other governmental
charges forthwith upon the commencement of proceedings to foreclose any Lien
which may have attached as security therefor. 
The Credit Parties will pay when due, or in conformance with customary
trade terms all other obligations incident to their respective operations.

 

SECTION
5.12.  Liens.  Defend the Collateral (including, without
limitation, the Pledged Securities) to the extent commercially reasonable
against any and all Liens howsoever arising, other than Permitted Encumbrances
and in any event defend against any attempted foreclosure.

 

SECTION
5.13.  Cash Receipts.  In the event any Credit Party receives (i)
payment from any obligor, which payment should have been remitted to the Agent
or (ii) the proceeds of any sale of Product, whether in the form of cash or
otherwise, such Credit Party shall immediately remit such payment or proceeds
to the Agent for deposit to the Collection Account.

 

SECTION
5.14.  [Intentionally omitted.]

 

SECTION
5.15.  [Intentionally omitted.]

 

SECTION
5.16.  Environmental Laws.  (a) 
Promptly notify the Agent upon any Executive Officer becoming aware of
any violation or potential violation or non-compliance with, or liability or
potential liability under any Environmental Laws which, when taken together
with all other pending violations could reasonably be expected to have a
Material Adverse Effect, and promptly furnish to the Agent all notices of any
nature which any Credit Party or any Subsidiary may receive from any
Governmental Authority or other Person with respect to any violation, or potential
violation or non-compliance with, or liability or potential liability under any
Environmental Laws which, in any case or when taken together with all such
other notices, could reasonably be expected to have a Material Adverse Effect.

 

(b)           Comply in all material respects with
and use reasonable efforts to ensure compliance in all material respects by all
tenants and subtenants with all Environmental Laws, 

 

 

and
obtain and comply in all material respects with and maintain and use best
efforts to ensure that all tenants and subtenants obtain and comply in all
material respects with and maintain any and all licenses, approvals,
registrations or permits required by Environmental Laws.

 

(c)           Conduct and complete all
investigations, studies, sampling and testing, and all remedial, removal and
other actions required under all Environmental Laws and promptly comply in all
material respects with all lawful orders and directives of all Governmental
Authorities.  Any order or directive
whose lawfulness is being contested in good faith by appropriate proceedings
shall be considered a lawful order or directive when such proceedings,
including any judicial review of such proceedings, have been finally concluded
by the issuance of a final non-appealable order; provided, however,
that the appropriate Credit Party shall have set aside on its books reserves
(the presentation of which is segregated to the extent required by GAAP)
adequate with respect thereto if reserves shall be deemed necessary.

 

(d)           Defend, indemnify and hold harmless
the Agent, the Issuing Bank and the Lenders, and their respective employees,
agents, officers and directors, from and against any claims, demands,
penalties, fines, liabilities, settlements, damages, costs and expenses of
whatever kind or nature, known or unknown, contingent or otherwise, arising out
of, or in any way related to the violation of or non-compliance by any Credit
Party with any Environmental Laws, or any orders, requirements or demands of
Governmental Authorities related thereto, including, without limitation,
reasonable external attorney and consultant fees, investigation and laboratory
fees, court costs and litigation expenses, but excluding therefrom all claims,
demands, penalties, fines, liabilities, settlements, damages, costs and
expenses arising out of or resulting from (i) the gross negligence or willful
acts or willful misconduct of any indemnified party or (ii) any acts or
omissions of any indemnified party occurring after any indemnified party is in
possession of, or controls the operation of, any property or asset.

 

SECTION
5.17.  [Intentionally omitted.]

 

SECTION
5.18.  Further Assurances; Security
Interests.  (a)  Upon the request of the Agent, duly execute
and deliver, or cause to be duly executed and delivered, at the cost and
expense of the Borrower, such further instruments as may be necessary or
proper, in the reasonable judgment of the Agent, to provide the Agent (for the
benefit of itself, the Issuing Bank and the Lenders) a perfected Lien in the
Collateral and to carry out the provisions and purposes of this Agreement and
the other Fundamental Documents.

 

(b)           Upon the request of the Agent,
promptly perform or cause to be performed any and all acts and execute or cause
to be executed any and all documents (including, without limitation, the
execution, amendment or supplementation of any financing statement and
continuation statement or other statement) for filing under the provisions of
the UCC and the rules and regulations thereunder, or any other statute, rule or
regulation of any applicable foreign, federal, state or local jurisdiction,
which are necessary or advisable, from time to time, in order to grant and
maintain in favor of the Agent for the ratable benefit of itself, the Issuing
Bank and the Lenders as beneficiaries thereof the security interest in the
Collateral contemplated hereunder and under the other Fundamental Documents,
subject (other than in connection with the Pledged Securities) only to
Permitted Encumbrances.

 

 

(c)           Promptly undertake to deliver or
cause to be delivered to the Lenders from time to time such other
documentation, consents, authorizations and approvals in form and substance
satisfactory to the Agent, as the Agent shall deem reasonably necessary or
advisable to perfect or maintain the Liens of the Agent for the benefit of
itself, the Issuing Bank and the Lenders.

 

(d)           [Intentionally omitted.]

 

SECTION
5.19.  [Intentionally omitted.]

 

6.             NEGATIVE COVENANTS

 

From
the date hereof and for so long as the Commitments shall be in effect, any
amount shall remain outstanding under the Notes, any Letter of Credit shall
remain unpaid or unsatisfied, or any other Obligations remain unpaid or
unsatisfied, each Credit Party agrees that unless the Required Lenders shall
otherwise consent in writing, it will not, directly or indirectly, and will not
allow any Subsidiary, directly or indirectly, to:

 

SECTION
6.1.  Limitations on Indebtedness.  Incur, create, assume or suffer to exist any
Indebtedness other than:

 

(i)            the Indebtedness represented by the
Notes and the other Obligations;

 

(ii)           Indebtedness in respect of secured
purchase money financings, including Capital Leases, not to exceed $47,000,000
at any time outstanding;

 

(iii)          ordinary trade payables which are not
yet due and payable and are not the result of a transaction which is
essentially the borrowing of money;

 

(iv)          Indebtedness by any Credit Party to
any other Credit Party to the extent not otherwise prohibited by this Section
6.1;

 

(v)           existing Indebtedness listed on
Schedule 3.18(a) hereto but no increases thereof;

 

 

(vi)          Indebtedness to HCC or an Affiliate of
HCC (including the Recapitalized Debt) where the obligee of such indebtedness
acknowledges that same is subject to the subordination provisions of the
Recapitalized Debt Intercreditor Agreement;

 

(vii)         [Intentionally omitted.]

 

(viii)        convertible unsecured subordinated notes
issued subsequent to the Amendment No. 17 Effective Date in an amount and on
terms acceptable to the Required Lenders in their sole discretion;

 

(ix)           preferred stock (to the extent
classified as Indebtedness under GAAP);

 

(x)            [Intentionally omitted;]

 

(xi)           [Intentionally omitted;]

 

(xii)          [Intentionally omitted;]

 

SECTION
6.2.  Limitations on Liens.  Incur, create, assume or suffer to exist any
Lien on any of the Collateral, whether now owned or hereafter acquired, except:

 

(i)            [Intentionally omitted];

 

(ii)           with regard to all items of Product,
Liens pursuant to written security agreements (in form and substance acceptable
to the Agent) in favor of guilds as required pursuant to terms of collective
bargaining agreements, which Liens are (A) subordinated or junior to the claims
of the Lenders hereunder pursuant to documentation that is satisfactory in form
and substance to the Agent or (B) on terms otherwise acceptable to the Agent;

 

 

(iii)          deposits under workers’ compensation,
unemployment insurance and Social Security laws or to secure statutory
obligations or surety or appeal bonds or performance or other similar bonds in
the ordinary course of business (other than completion bonds);

 

(iv)          Liens for taxes, assessments or other
governmental charges or levies due and payable, the validity or amount of which
is currently being contested in good faith by appropriate proceedings pursuant
to the terms of Section 5.11 hereof;

 

(v)           Liens customarily granted or incurred
in the ordinary course of business to secure payment for services rendered by
laboratories and production houses and suppliers of materials and equipment;

 

(vi)          mechanic’s liens and Liens in
connection with secured purchase money financings to the extent permitted in
Section 6.1(ii) hereof;

 

(vii)         possessory Liens other than on Product
or physical properties of Product (other than of laboratories and production
houses) which (a) occur in the ordinary course of business, (b) secure normal
trade debt which is not yet due and payable, (c) do not secure Indebtedness for
borrowed money and (d) do not defer payment terms beyond 180 days;

 

(viii)        Liens arising out of attachments,
judgments or awards as to which an appeal or other appropriate proceedings for
contest or review are promptly commenced (and as to which foreclosure and other
enforcement proceedings (a) shall not have been commenced (unless fully bonded
or otherwise effectively stayed) or (b) in any event shall be promptly fully
bonded or otherwise effectively stayed);

 

(ix)           Liens arising from zoning
restrictions or easements;

 

(x)            the Liens of the Agent under this
Agreement, the other Fundamental Documents and other documents contemplated
hereby;

 

(xi)           existing Liens listed on Schedule
3.18(c) hereto; provided, however, that, without the consent of the
Required Lenders, any Indebtedness secured by any such Lien may not be
increased, extended or renewed and such Lien may not extend to any other
property of the Credit Party.

 

(xii)          interests of lessees and licensees in
property owned by the Borrower or any of its Subsidiaries where such interests
are created in the ordinary course of their respective leasing and licensing
activities and are not created directly or indirectly in connection with the
borrowing of money or the securing of Indebtedness by the Borrower or any of
its Subsidiaries;

 

(xiii)         Liens in favor of customs and revenue
authorities arising as a matter of law or regulation to secure the payment of
customs duties in connection with the importation of goods and deposits made to
secure statutory obligations in the form of excise taxes;

 

 

(xiv)        statutory Liens of depository or
collecting banks on items in collection and any accompanying documents or the
proceeds thereof;

 

(xv)         Liens arising from precautionary UCC
financing statement filings regarding operating leases;

 

(xvi)        statutory and contractual landlords
Liens securing amounts which are not delinquent beyond any applicable grace
period or which are being contested in good faith; and

 

(xvii)       from and after the Amendment No. 17
Effective Date, Liens granted by the Borrower or any other Credit Party in
favor of HCC or its Affiliates securing the Recapitalized Debt, so long as such
Liens are subject in all respects to the Recapitalized Debt Intercreditor
Agreement.

 

SECTION
6.3.  Guaranties.  Incur, create, assume or suffer to exist any
Guaranty, either directly or indirectly, or otherwise in any way become
responsible for any Indebtedness (including working capital maintenance, pay or
play contracts or other similar obligations) of any other Person, contingently
or otherwise, except (i) for the endorsement of negotiable instruments by a
Credit Party in the ordinary course of business, (ii) for Guaranties which
would constitute investments in items of Product not otherwise prohibited
hereunder, (iii) for existing Guaranties listed on Schedule 3.18(b) hereto,
(iv) as permitted in Section 6.1 hereof and (v) [Intentionally omitted].

 

SECTION
6.4.  Limitations on Investments.  Make any Investment (including any loans to
any shareholder or other Affiliate of the Borrower) except:

 

(i)            purchases of Cash Equivalents;

 

(ii)           loans to officers and travel advances
in the ordinary course of business to employees and/or officers; provided, however,
that the aggregate amount of such loans and/or advances may not exceed
$2,000,000 at any time;

 

(iii)          [Intentionally omitted;]

 

(iv)          additional Investments not in excess
of $5,000,000 in the aggregate in entities which are not wholly-owned
Subsidiaries;

 

 

(v)           with the prior written consent of the
Required Lenders, investments representing ownership interests (whether in cash
or otherwise) for acquisition purposes;

 

(vi)          intercompany advances from the
Borrower or any Guarantor to a Guarantor; and

 

(vii)         [Intentionally omitted.]

 

SECTION
6.5.  Restricted Payments. Pay or
declare or enter into any agreement to pay or otherwise become obligated to
make any Restricted Payments other than:

 

(i)            stock dividends paid solely in shares
of stock of the Borrower or another Guarantor which stock is not subject to any
mandatory redemption or redemption at the option of the holder;

 

(ii)           payments by a Credit Party to another
Credit Party;

 

(iii)          [Intentionally omitted];

 

(iv)          payments to Hallmark, Hallmark Cards
or an Affiliate as described below:  (a)
any of the following payments with respect to the Recapitalized Debt: (1)
scheduled payments of interest on the Term A Loan Recapitalized Debt and on the
Term Loan B Recapitalized Debt, in each case to the extent set forth in the
Recapitalization Credit Agreement as in effect as of the Amendment No. 17
Effective Date (including that the Borrower may make scheduled interest
payments on the Term Loan B Recapitalized Debt in cash notwithstanding that the
Borrower has the option to pay interest thereon in kind through December 31,
2010) and (2) scheduled amortization of the Recapitalized Intercompany Debt and
mandatory prepayments of principal (i.e., with the proceeds of dispositions,
equity issuances, debt issuances and condemnations) on the Recapitalized
Intercompany Debt, in each case, to the extent set forth under the
Recapitalization Credit Agreement as in effect as of the Amendment No. 17
Effective Date; (b) payments with respect to any other valid outstanding
obligation other than obligations set forth in clause (a) above; or (c)
commercially reasonable fees to Hallmark Cards in consideration for Hallmark
Cards having extended the Hallmark Cards Facility Guarantee; provided that, it
shall be a condition to the making of any and all payments under this Section
6.5(iv), that (1) no Default or Event of Default has occurred and is continuing
after giving effect on a pro forma basis to such payments, and (2) the Borrower
is a public company;

 

(v)           issuance of common stock for or upon
conversion of preferred stock or debt of the Borrower;

 

 

(vi)          payments of dividends on the Series A
Preferred Stock pursuant to the terms applicable to the Series A Preferred
Stock as of the Amendment No. 17 Effective Date; provided that, it shall be a
condition to the making of any and all payments under this Section 6.5(vi),
that (1) no Default or Event of Default has occurred and is continuing after
giving effect on a pro forma basis to such payments, and (2) the Borrower is a
public company; and

 

(vii)         issuance of common stock or payment of
amounts pursuant to Restricted Stock Unit Agreements of the Borrower in
settlement of awards made to employees pursuant to the terms of those
Agreements.

 

SECTION
6.6.  Limitations on Sale of Assets.  Sell, lease, license, transfer or otherwise
dispose of:

 

(i)            items of Product other than in the
ordinary course of business, provided that the Credit Parties shall not
be entitled to sell, transfer or alienate their entire right, title or interest
in and to items of Product with an aggregate value in excess of $4,000,000; and

 

(ii)           any of the channels owned or operated
by a Credit Party (or any Subsidiary thereof), whether directly (e.g.,
by way of an outright sale or other disposition of the Credit Party’s rights as
owner or operator) or indirectly (e.g., by selling, assigning or
otherwise transferring the Credit Party’s rights in any Platform Agreement), provided
that a Credit Party shall at all times be entitled to dispose of some or all of
its rights as owner or operator of a channel in a territory to the extent such
disposition is required (x) by Applicable Law in the territory in which the
channel is available or (y) in order to comply with local practices and/or
customs in the relevant territory relating to the ownership or operation of
channels by non-residents; and

 

(iii)          any other property of the Credit
Parties, other than dispositions made in the ordinary course of business
involving property with an aggregate fair market value at the time of
disposition of less than $100,000.

 

The
limitation contained in clause (ii) of the preceding sentence shall not limit
the rights of the Credit Parties to shut down existing operations they believe
to be no longer financially beneficial or to acquire the ownership of, or
rights to operate, channels in new territories, or to expand existing channels
into new territories, through joint ventures or such other arrangements as may
be otherwise permitted by the terms of this Agreement, provided that any
disposition of such rights and interests (once so acquired) may only be made in
compliance with the terms of clause (ii) of the preceding sentence.

 

 

SECTION
6.7.  Receivables.  Sell, discount or otherwise dispose of notes,
accounts receivable or other obligations owing to a Credit Party except for the
purpose of collection in the ordinary course of business.

 

SECTION
6.8.  Tax Shelters, Sale and Leaseback
etc.  Enter into any arrangement with
any Person or Persons other than a Credit Party, whereby in contemporaneous
transactions a Credit Party sells essentially all of its right, title and
interest in an item of Product or upon which an item of Product is based and
acquires or licenses the right to distribute or exploit such item of Product in
media and markets accounting for substantially all the value of such item of
Product; except on terms customary in the entertainment industry and subject to
the Agent’s approval.

 

SECTION
6.9.  [Intentionally omitted.]

 

SECTION
6.10.  [Intentionally omitted.]

 

SECTION
6.11.  Transactions with Affiliates.  Effect any transaction with an Affiliate on a
basis less favorable to a Credit Party than would have been the case if such
transaction had been effected at arms-length with a Person other than an
Affiliate.

 

SECTION
6.12.  Prohibition of Amendments or
Waivers.  Amend, alter, modify, or
waive, or consent to any amendment, alteration, modification or waiver of any
material agreement to which any Credit Party is a party or the terms thereof in
any manner which would change, alter or waive any material term thereof and
which might (i) materially and adversely affect the collectability of accounts
receivable, (ii) materially and adversely affect the financial condition of the
Credit Party on a consolidated basis, (iii) materially and adversely affect the
rights of the Agent, the Issuing Bank or the Lenders under this Agreement, the
other Fundamental Documents and any other agreements contemplated hereby, (iv)
materially decrease the value of the Collateral, (v) with respect to any
Recapitalization Credit Document , increase the rate of interest on any of the
Recapitalized Debt, accelerate the date on which cash interest payments become
obligatory for the Term B Recapitalized Indebtedness, impose any required
amortization of any of the Recapitalized Debt or impose or tighten any
mandatory repayment provisions beyond those in effect as of the Amendment No.
17 Effective Date or shorten any maturity date with respect to any
Recapitalized Debt or which would otherwise modify any term thereof to the
detriment of 

 

 

any
Credit Party and/or the Lenders (and without limiting the foregoing, the Credit
Parties shall not enter into any amendment to any Recapitalized Credit Document
without having provided the Administrative Agent a substantially final draft
thereof at least five (5) Business Days prior to the proposed execution
thereof) or (vi) accelerate any date on which dividends on the Series A
Preferred Stock accrue, increase the rate of dividends on the Series A
Preferred Stock or reduce any flexibility of the Borrower to pay any dividend
on the Series A Preferred Stock in kind rather than in cash.

 

SECTION
6.13.  No Negative Pledge.  Enter into any agreement after the date
hereof (other than Fundamental Documents) which prohibits the creation or
assumption of any Lien upon the properties or assets of any Credit Party,
whether now owned or hereafter acquired or requiring an obligation to be
secured if some other obligation is secured.

 

SECTION
6.14.  Acquisitions or Mergers, etc.  Merge into or consolidate with a Person or
acquire substantially all the assets of another Person other than acquisitions
of cable channels provided that such acquisitions shall not be for cash
consideration and provided  further, that after giving effect to
any such transaction there would not exist any Default or Event of Default
hereunder and a Credit Party shall be the surviving entity.  In addition, (a) any Guarantor may merge with
any other Guarantor or with the Borrower and (b) Hallmark Holdings and Hallmark
Entertainment Investments Co. may merge into the Borrower, with the Borrower
being the surviving entity, in connection with the Recapitalization.

 

SECTION
6.15.  Production.  Engage in production of Items of Product in
any fiscal year having an aggregate budgeted negative cost in excess of $5
million.

 

SECTION
6.16.  Change in Business.  Engage in any business activity other than
(i) activities incident and related to the acquisition, distribution and
licensing of Product; (ii) the operation of television channels; or (iii) the
development and operation of the interactive television business.

 

SECTION
6.17.  ERISA Compliance.  Engage in a “prohibited transaction”, as
defined in Section 406 of ERISA or Section 4975 of the Code, with respect to any
Plan or Multiemployer Plan or knowingly consent to any other “party in interest”
or any “disqualified person”, as such terms are defined in Section 3(14) or
ERISA and Section 4975(e)(2) of the Code, respectively, engaging in any “prohibited
transaction”, with respect to any Plan or Multiemployer Plan; or permit any
Plan to incur any “accumulated funding deficiency”, as defined in Section 302
of ERISA or Section 412 of the Code, unless such incurrence shall have been
waived in advance by the Internal Revenue Service; or terminate any Plan
subject to Title IV of ERISA in a manner which could result in the imposition
of a Lien on any property of any Credit Party pursuant to

 

 

Section
4068 of ERISA; or breach or knowingly permit any employee or officer or any
trustee or administrator of any Plan to breach any fiduciary responsibility
imposed under Title I of ERISA with respect to any Plan; engage in any
transaction which would result in the incurrence of a liability under Section
4069 of ERISA; or fail to make contributions to a Plan or Multiemployer Plan
which could result in the imposition of a Lien on any property of any Credit
Party pursuant to Section 302(f) of ERISA or Section 412(n) of the Code, if the
occurrence of any of the foregoing events (alone or in the aggregate) could
result in a liability which has a Material Adverse Effect.

 

SECTION
6.18.  Interest Rate Protection
Agreements, etc.  Enter into any
Interest Rate Protection Agreement or Currency Agreement for other than bona
fide hedging purposes.

 

SECTION
6.19.  Subsidiaries.  Acquire or create any new direct or indirect
Subsidiary; provided, however, that a Credit Party may organize
additional Subsidiaries if each such Subsidiary executes an Instrument of
Assumption and Joinder in the form attached hereto as Exhibit J whereby such
Subsidiary becomes a Credit Party hereunder and the certificates representing
100% of the shares of capital stock or other Equity Interests, of such
Subsidiary held by such Credit Party become part of the Pledged Securities
hereunder and are delivered to the Agent together with stock powers for each
such certificate or such other documents that are necessary providing for the
transfer of a membership interest of a Subsidiary that is an LLC.

 

SECTION
6.20.  Hazardous Materials.  Cause or permit any of its properties or
assets to be used to generate, manufacture, refine, transport, treat, store,
handle, dispose, transfer, produce or process Hazardous Materials, except in
compliance in all material respects with all applicable Environmental Laws, nor
release, discharge, dispose of or permit or suffer any release or disposal as a
result of any intentional act or omission on its part of Hazardous Materials
onto any such property or asset in material violation of any Environmental Law.

 

SECTION
6.21.  [Intentionally omitted.]

 

SECTION
6.22.  [Intentionally omitted.]

 

SECTION
6.23.  [Intentionally omitted.]

 

SECTION
6.24.  [Intentionally omitted.]

 

SECTION
6.25.  [Intentionally omitted.]

 

SECTION
6.26.  Corporate Structure.  Create any first tier Subsidiary other than
CM Intermediary or have any asset relating to the channels at a corporate level
above CM Intermediary.

 

SECTION
6.27.  [Intentionally omitted.]

 

SECTION
6.28.  No New Liens.   Permit any portion of the Recapitalized Debt
or any Equity Interests issued in connection with the Recapitalization to be
secured by any asset which does not secure the Facility, or permit HCC or any
other holder of any of the Recapitalized Debt to file any document in order to
perfect any security interest under

 

 

any
Recapitalization Credit Document unless the Administrative Agent has filed a
similar document (but on a first lien basis).

 

7.             EVENTS OF DEFAULT

 

In
the case of the happening and during the continuance of any of the following
events (herein called “Events of Default”):

 

(a)           any representation
or warranty made by any Credit Party in this Credit Agreement or in any other
Fundamental Document or any statement or representation made by any Credit
Party in any report, financial statements, certificate or other document
furnished by or on behalf of any Credit Parties to the Agent or any Lender
pursuant to this Credit Agreement or any other Fundamental Document, shall
prove to have been false or misleading in any material respect when made or
delivered;

 

(b)           default shall be
made in the payment of any principal of or interest on the Loans or Letter of
Credit reimbursement obligations or of any fees or other amounts payable by the
Borrower hereunder, when and as the same shall become due and payable, whether
at the due date thereof or at a date fixed for prepayment thereof or by
acceleration thereof or otherwise, and, in the case of payments of interest,
such default shall continue unremedied for five (5) days after receipt by
the Borrower of an invoice therefor;

 

(c)           default shall be
made by any Credit Party in the due observance or performance of any covenant,
condition or agreement contained in Section 5.1(h), Section 5.4 or Article 6
(other than Sections 6.3, 6.7, 6.8, 6.11, 6.15, 6.17, and 6.18) of this Agreement;

 

(d)           default shall be
made by any Credit Party in the due observance or performance of any other
covenant, condition or agreement to be observed or performed pursuant to the
terms of this Agreement, or any other Fundamental Document and such default shall
continue unremedied for fifteen (15) consecutive days after any Credit Party
obtains knowledge or receives written notice from the Agent or any Lender
thereof;

 

(e)           default shall be
made with respect to any Indebtedness of any Credit Party in excess of
$1,000,000 when due or the performance of any other obligation incurred in
connection with any such Indebtedness, if the effect of such default is to
accelerate the maturity of such Indebtedness or to permit the holder thereof to
cause such Indebtedness to become due prior to its stated maturity and such
default shall not be remedied, cured, waived or consented to within the period
of grace with respect thereto;

 

(f)            any Credit Party or
Hallmark Cards  shall generally not
pay its debts as they become due or shall admit in writing its inability to pay
its debts, or shall make a general assignment for the benefit of creditors; or
any such Person shall commence any case, proceeding or other action seeking to
have an order for relief entered on its behalf or to adjudicate it a bankrupt
or insolvent, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of such Person or seeking appointment
of a receiver, trustee, custodian or other similar official for it or for all
or any substantial part of its property or shall file an answer or other
pleading in any such case, proceeding or other action 

 

 

admitting
the material allegations of any petition, complaint or similar pleading filed
against it or consenting to the relief sought therein; or any such Person shall
take any action to authorize any of the foregoing;

 

(g)           any involuntary
case, proceeding or other action against any Credit Party or Hallmark Cards
shall be commenced seeking to have an order for relief entered against it or to
adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, liquidation, dissolution or composition of it or its debts under
any law relating to bankruptcy, insolvency, reorganization or relief of such
Person, or seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its property, and
such case, proceeding or other action (i) results in the entry of any
order for relief against it or (ii) shall remain undismissed for a period
of thirty (30) days;

 

(h)           final judgment(s) for
the payment of money in excess of $100,000 shall be rendered in the aggregate
against any Credit Party which within thirty (30) days from the entry of such
judgment shall not have been discharged or stayed pending appeal or which shall
not have been discharged within thirty (30) days from the entry of a final
order of affirmance on appeal;

 

(i)            this Credit
Agreement, the Copyright Security Agreement, any Copyright Security Agreement
Supplement or any Trademark Security Agreement (each, a “Security Document”)
shall, for any reason, not be or shall cease to be in full force and effect or
shall be declared null and void or any of the Security Documents shall not give
or shall cease to give the Agent the Liens, rights, powers and privileges
purported to be created thereby in favor of the Agent for the benefit of the
Agent, the Issuing Bank and the Lenders, superior to and prior to the rights of
all third Persons and subject to no other Liens (other than Permitted
Encumbrances), or the validity or enforceability of the Liens granted, to be
granted, or purported to be granted, by any of the Security Documents shall be
contested by any Credit Party or any of their respective Affiliates;

 

(j)            [Intentionally
omitted;]

 

(k)           a Change in Control
shall occur;

 

(l)            [Intentionally
omitted.]

 

(m)          (i)  any Credit
Party or ERISA Affiliate shall fail to make any contributions required to be
made to a Plan subject to Title IV of ERISA or Multiemployer Plan, (ii) any
accumulated funding deficiency (within the meaning of Section 4971 of the
Code) shall exist with respect to any Plan (whether or not waived) or an application
shall have been made to the Secretary of the Treasury for a waiver or
modification of the minimum funding standards (including any required
installment payments) or an extension of any amortization period under Section 412
of the Code with respect to a Plan, (iii) any Credit Party or ERISA
Affiliate shall have been notified by the sponsor of a Multiemployer Plan that
it has incurred withdrawal liability to such Multiemployer Plan, or that a
Multiemployer Plan is in reorganization or is being terminated, (iv) a
Reportable Event with respect to a Plan shall have occurred, (v) any
Credit Party or ERISA Affiliate shall withdraw from a Plan during a plan year
in which it was a 

 

 

substantial
employer (within the meaning of section 4001(a)(2) or 4062(e) of
ERISA), (vi) a U.S. Plan subject to Title IV of ERISA shall be terminated,
or notice of intent to terminate a Plan under section 4041(c) of ERISA
shall be filed, (vii) proceedings to terminate, a Plan subject to Title IV
of ERISA shall be instituted by the PBGC or a trustee shall be appointed with
respect to any such Plan, (viii) any other event or condition which could
constitute grounds under section 4042(a) of ERISA for the termination of,
or the appointment of a trustee to administer, any Plan subject to Title IV of
ERISA shall occur, or (ix) a Lien pursuant to section 412 of the Code or
section 302 of ERISA shall be imposed as to any Credit Party or ERISA
Affiliate;

 

(n)           Hallmark Cards shall
have breached or disaffirmed any Fundamental Document to which it is a party or
its obligations thereunder shall cease to be in full force and effect or shall
be void or voidable or any such Person shall contest the enforceability of any
provision thereof;

 

(o)           [Intentionally
omitted;]

 

(p)           a termination by
Hallmark Cards or by any of its affiliates of (or any notice by any such Person
that it intends to terminate) the right of the Borrower or any of its
Subsidiaries to use the “Hallmark” name or the “Crown” name in their respective
television services or on or with respect to any channels owned or operated by
the Borrower or any of its Subsidiaries;

 

(q)           [Intentionally
omitted;]

 

(r)            [Intentionally
omitted;]

 

(s)           any default shall
occur in the performance of any obligation or agreement under any of the
Recapitalization Debt Documents, whether arising in connection with a failure
to make payments thereunder, in connection with any breach of representation,
warranty covenant or otherwise if the effect of such default is to accelerate
the maturity of such Recapitalized Debt or to permit the holder thereof to
cause such Indebtedness to become due prior to its stated maturity and such
default shall not be remedied, cured, waived or consented to within the period
of grace with respect thereto; or

 

(t)            the Hallmark Cards
Facility Guarantee shall have expired or otherwise terminated or Hallmark Cards
shall have disavowed its obligations thereunder or a default shall otherwise
have occurred in accordance with the terms thereof.

 

then,
in every such event and at any time thereafter during the continuance of such
event, the Agent may, or if directed by the Required Lenders shall, take any or
all of the following actions, at the same or different times: (x) terminate
forthwith the Commitments, (y) declare the principal of and the interest
on the Loans and the Notes and all other amounts payable hereunder or
thereunder to be forthwith due and payable, whereupon the same shall become and
be forthwith due and payable, without presentment, demand, protest, or other
notice of any kind, all of which are hereby expressly waived, anything in this
Agreement or in the Notes to the contrary notwithstanding and/or (z) require
the Borrower to deliver to the Agent from time to time Cash Equivalents in an
amount equal to the full amount of the L/C Exposure or to furnish other 

 

 

security
therefor acceptable to the Required Lenders. 
If an Event of Default specified in paragraphs (f) or (g) above
shall have occurred, the Commitments shall automatically terminate and the
Notes and all other amounts payable hereunder and thereunder shall
automatically become due and payable, without presentment, demand, protest, or
other notice of any kind, all of which are hereby expressly waived, anything in
this Credit Agreement or the Notes to the contrary notwithstanding.  Such remedies shall be in addition to any
other remedy available to the Agent, the Lenders or the Issuing Bank pursuant
to Applicable Law or otherwise.

 

8.             GRANT OF SECURITY INTEREST;
REMEDIES

 

SECTION 8.1.  Security
Interests.  The Borrower, as security
for the due and punctual payment of the Obligations (including interest
accruing on and after the filing of any petition in bankruptcy or of
reorganization of the Borrower whether or not post filing interest is allowed
in such proceeding) and each of the Guarantors, as security for its obligations
under Article 10 hereof, hereby mortgages, pledges, assigns, transfers,
sets over, conveys and delivers to the Agent (for the benefit of the Agent, the
Issuing Bank and the Lenders) and grants to the Agent (for the benefit of the
Agent, the Issuing Bank and the Lenders) a security interest in the Collateral.

 

SECTION 8.2.  Use of
Collateral.  So long as no Event of
Default shall have occurred and be continuing, and subject to the various
provisions of this Credit Agreement and the other Fundamental Documents, a
Credit Party may use the Collateral in any lawful manner except as otherwise
provided hereunder.

 

SECTION 8.3.  Collection
Accounts.  (a) The Credit
Parties will maintain or establish collection bank accounts (each, a “Collection
Account”) and will direct, by a notice of assignment and irrevocable
instructions in form acceptable to the Agent, all Persons who become licensees,
buyers or account debtors under receivables with respect to any item of Product
included in the Collateral to make payments under or in connection with the
license agreements, sales agreements or receivables directly to a Collection
Account.  Upon agreement between the
Agent and the Borrower, a Collection Account may also serve as the Cash
Collateral Account, provided that such Collection Account is in the name
of the Agent (for the benefit of itself, the Issuing Bank and the Lenders) and
is under the sole dominion and control of the Agent.  So long as no Event of Default is continuing
the Borrower shall have full and unfettered access to the Collection
Accounts.  A list of all Collection
Accounts of the Borrower existing as of the Amendment No. 17 Effective
Date is attached as Schedule 8.3.

 

(b)           The Credit Parties
will execute such documentation as may be reasonably required by the Agent in
order to effectuate the provisions of this Section 8.3.

 

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

 

(d)           All such Collection
Accounts shall be maintained with the Agent or with such other financial
institutions as may be approved by the Agent (subject to their willingness to 

 

 

execute
appropriate documentation as required by this Section 8.3), subject to the
right of the Agent to at any time withdraw such approval and transfer any such
Collection Account(s) to the Agent or another approved financial
institution acceptable to the Borrower.

 

SECTION 8.4.  Credit
Parties to Hold in Trust.  Upon the
occurrence and during the continuance of an Event of Default, each Credit Party
will, upon receipt by it of any revenue, income, profits or other sums in which
a security interest is granted by this Article 8, payable pursuant to any
agreement or otherwise, or of any check, draft, note, trade acceptance or other
instrument evidencing an obligation to pay any such sum, hold the sum in trust
for the Agent (for the benefit of the Agent, the Issuing Bank and the Lenders),
segregate such sum from its own assets and forthwith, without any notice or
demand whatsoever (all notices, demands, or other actions on the part of the
Agent, the Issuing Bank or the Lenders being expressly waived), endorse,
transfer and deliver any such sums or instruments or both to the Agent to be
applied to the repayment of the Obligations in accordance with the provisions
of Section 8.7 hereof.

 

SECTION 8.5.  Collections, etc.  Upon the occurrence and during the
continuance of an Event of Default, the Agent may, in its sole discretion, in
its name or in the name of any Credit Party or otherwise, demand, sue for,
collect or receive any money or property at any time payable or receivable on
account of or in exchange for, or make any compromise or settlement deemed
desirable with respect to, any of the Collateral, but shall be under no
obligation so to do, or the Agent may extend the time of payment, arrange for
payment in installments, or otherwise modify the terms of, or release, any of
the Collateral, without thereby incurring responsibility to, or discharging or
otherwise affecting any liability of, the Credit Parties.  The Agent will not be required to take any
steps to preserve any rights against prior parties to the Collateral.  If the Credit Parties fail to make any
payment or take any action required hereunder, the Agent may make such payments
and take all such actions as the Agent reasonably deems necessary to protect
the Agent’s (for the benefit of itself, the Issuing Bank and the Lenders)
security interests in the Collateral and/or the value thereof, and the Agent is
hereby authorized (without limiting the general nature of the authority herein
above conferred) to pay, purchase, contest or compromise any Liens that in the
judgment of the Agent appear to be equal to, prior to or superior to the
security interests of the Agent in the Collateral and any Liens not expressly
permitted by this Credit Agreement.

 

SECTION 8.6.  Possession,
Sale of Collateral, etc.  Upon
the occurrence and during the continuance of an Event of Default, the Agent may
enter upon the premises of any Credit Party or wherever the Collateral may be,
and take possession of the Collateral, and may demand and receive such
possession from any Person who has possession thereof, and the Agent may take
such measures as it may deem necessary or proper for the care or protection
thereof, including the right to remove all or any portion of the Collateral,
and with or without taking such possession may sell or cause to be sold,
whenever the Agent shall decide, in one or more sales or parcels, at such
prices as the Agent may deem best, and for cash or on credit or for future delivery,
without assumption of any credit risk, all or any portion of the Collateral, at
any broker’s board or at public or private sale, without demand of performance
or notice of intention to sell or of time or place of sale (except 7 days’
written notice to the Borrower of the time and place of any such public sale or
sales and such other notices as may be required by Applicable Law and cannot be
waived), and any Person may be the purchaser of all or any portion of the
Collateral so sold and thereafter hold the same absolutely, free (to the
fullest extent permitted by 

 

 

Applicable
Law) from any claim or right of whatever kind, including any equity of
redemption, of any Credit Party, any such demand, notice, claim, right or
equity being hereby expressly waived and released.  At any sale or sales made pursuant to this Article 8,
the Agent may bid for or purchase, free (to the fullest extent permitted by
Applicable Law) from any claim or right of whatever kind, including any equity
of redemption, of any Credit Party, any such demand, notice, claim, right or
equity being hereby expressly waived and released, any part of or all of the
Collateral offered for sale, and may make any payment on account thereof by
using any claim for moneys then due and payable to the Agent, the Issuing Bank
and the Lenders by any Credit Party hereunder as a credit against the purchase
price.  The Agent shall in any such sale
make no representations or warranties with respect to the Collateral or any
part thereof, and the Agent shall not be chargeable with any of the obligations
or liabilities of any Credit Party.  Each
Credit Party hereby agrees (i) that it will indemnify and hold the Agent,
the Issuing Bank and the Lenders harmless from and against any and all claims
with respect to the Collateral asserted before the taking of actual possession
or control of the relevant Collateral by the Agent pursuant to this Article 8,
or arising out of any act of, or omission to act on the part of, any party
other than the Agent prior to such taking of actual possession or control by
the Agent, or arising out of any act on the part of any Credit Party, or its
agents before or after the commencement of such actual possession or control by
the Agent; and (ii) none of the Agent, the Lenders or the Issuing Bank
shall have any liability or obligation to any Credit Party arising out of any
such claim except for acts by the Agent, the Lenders or the Issuing Bank of
willful misconduct or gross negligence or acts not taken in good faith.  Subject only to the lawful rights of third
parties, any laboratory which has possession of any of the Collateral is hereby
constituted and appointed by each Credit Party as pledgeholder for the Agent
and, upon the occurrence and during the continuance of an Event of Default, each
such pledgeholder is hereby authorized to sell all or any portion of the
Collateral upon the order and direction of the Agent, and each Credit Party
hereby waives any and all claims, for damages or otherwise, for any action
taken by such pledgeholder in accordance with the terms of the UCC not
otherwise waived hereunder.  In any
action hereunder, the Agent shall be entitled to the appointment of a receiver,
without notice, to take possession of all or any portion of the Collateral and
to exercise such powers as the court shall confer upon the receiver.  Notwithstanding the foregoing, upon the
occurrence and during the continuance of an Event of Default, the Agent shall
be entitled to apply, without prior notice to any Credit Party, any cash or
cash items constituting Collateral in the possession of the Agent to payment of
the Obligations.

 

SECTION 8.7.  Application
of Proceeds on Default.  Upon the
occurrence and during the continuance of an Event of Default, the balances in
the Clearing Account, the Collection Account(s), the Cash Collateral Account(s) or
in any account of the Credit Party with a Lender, all other income earned on
the Collateral, and all proceeds from any sale of the Collateral pursuant
hereto shall be applied first toward payment of the reasonable out-of-pocket
costs and expenses paid or incurred by the Agent in enforcing this Credit
Agreement, in realizing on or protecting any Collateral and in enforcing or
collecting any Obligations or any Guaranty thereof, including, without limitation,
court costs and the reasonable attorney’s fees and expenses incurred by the
Agent, then to satisfy or provide cash Collateral for all Obligations relating
to the Letters of Credit, and then to the payment in full of the Obligations in
accordance with Section 12.2(b) hereof.  Any amounts remaining after such payment in
full shall be remitted to the appropriate Credit Party or as a court of
competent jurisdiction may otherwise direct.

 

 

SECTION 8.8.  Power of
Attorney.  Upon the occurrence and
during the continuance of an Event of Default which is not waived in writing by
the Required Lenders (a) each of the Credit Parties does hereby
irrevocably make, constitute and appoint the Agent or any of its officers or
designees its true and lawful attorney-in-fact with full power in the name of
the Agent or such other Person to receive, open and dispose of all mail
addressed to any Credit Party, and to endorse any notes, checks, drafts, money
orders or other evidences of payment relating to the Collateral that may come
into the possession of the Agent, with full power and right to cause the mail
of such Persons to be transferred to the Agent’s own offices or otherwise, and
to do any and all other acts necessary or proper to carry out the intent of
this Agreement and the grant of the security interests hereunder and under the
other Fundamental Documents, and each of the Credit Parties hereby ratifies and
confirms all that the Agent or its substitutes shall properly do by virtue
hereof; (b) each of the Credit Parties does hereby further irrevocably
make, constitute and appoint the Agent or any of its officers or designees its
true and lawful attorney-in-fact in the name of the Agent or any Credit Party (i) to
enforce all of such Credit Party’s rights under and pursuant to all agreements
with respect to the Collateral, all for the sole benefit of the Agent, for the
benefit of itself, the Issuing Bank and the Lenders, and to enter into such
other agreements as may be necessary or appropriate in the judgment of the
Agent to complete the distribution or exploitation of any item of Product which
is included in the Collateral, (ii) to enter into and perform such
agreements as may be necessary in order to carry out the terms, covenants and
conditions of the Fundamental Documents that are required to be observed or
performed by such Credit Party, (iii) to execute such other and further
mortgages, pledges and assignments of the Collateral, and related instruments
or agreements, as the Agent may reasonably require for the purpose of
perfecting, protecting, maintaining or enforcing the security interests granted
to the Agent, for the benefit of itself, the Issuing Bank and the Lenders,
hereunder and under the other Fundamental Documents, and (iv) to do any
and all other things necessary or proper to carry out the intention of this
Agreement and the grant of the security interests hereunder.  In the event the Agent exercises the power of
attorney granted herein, the Agent shall use reasonable efforts to provide
subsequent written notice promptly to the Borrower in accordance with Section 13.1.  Each of the Credit Parties hereby ratifies
and confirms in advance all that the Agent as such attorney-in-fact or its
substitutes shall properly do by virtue of this power of attorney.

 

SECTION 8.9.  Financing
Statements, Direct Payments, Confirmation of Receivables and Audit Rights.  Each Credit Party hereby authorizes the Agent
to file Uniform Commercial Code financing statements (covering all of the
property of such Credit Party) and any amendments thereto or continuations
thereof, any Copyright Security Agreement, any Copyright Security Agreement
Supplement and any Trademark Agreement Supplement and any other appropriate
security documents or instruments and to give any notices necessary or desirable
to perfect the Lien of the Agent (for the benefit of itself, the Issuing Bank
and the Lenders) on the Collateral, in all cases without the signatures of the
relevant Credit Party or to execute such items as attorney-in-fact for the
Credit Party.  Each Credit Party further
authorizes the Agent (i) upon the occurrence and during the continuance of
an Event of Default, to notify any account debtor that all sums payable to such
Credit Party relating to the Collateral shall be paid directly to the Agent; (ii) to
confirm directly with account debtors the amounts payable by them to such
Credit Party with regard to the Collateral and the terms of all accounts
receivable; and (iii) to participate with such Credit Party in the audits
of its account debtors or to request that such Credit Party’s auditors confirm
with account debtors the amounts and terms of all accounts receivable.  The 

 

 

Agent
hereby agrees to provide the Borrower with copies of any notification or
written requests sent by the Agent to such account debtors at the same time as
the mailing of such documents.

 

SECTION 8.10.  Further
Assurances.  Upon the request of the
Agent, each Credit Party hereby agrees to duly and promptly execute and
deliver, or cause to be duly executed and delivered, at the cost and expense of
the Credit Party, such further instruments as may be necessary or proper, in
the judgment of the Agent, to carry out the provisions and purposes of this Article 8,
and to do all things necessary, in the judgment of the Agent, to perfect and
preserve the Liens of the Agent for the benefit of itself, the Issuing Bank and
the Lenders hereunder and under the other Fundamental Documents in the
Collateral or any portion thereof.

 

SECTION 8.11.  Termination
and Release.  The security interests
granted under this Article shall terminate when all the Obligations have
been indefeasibly fully paid and performed and the Commitments shall have
terminated and all Letters of Credit shall have expired or been terminated or
cancelled.  Upon request by the Borrower
(and at the sole expense of the Borrower) after such termination, the Agent
will take all reasonable action and do all things reasonably necessary,
including executing Uniform Commercial Code terminations, Pledgeholder
Agreement terminations, termination letters to account debtors and copyright
reassignments, to release the security interest granted to it hereunder.

 

SECTION 8.12.  Remedies
Not Exclusive.  The remedies
conferred upon or reserved to the Agent in this Article 8 are intended to
be in addition to, and not in limitation of, any other remedy or remedies
available to the Agent.  Without limiting
the generality of the foregoing, the Agent and the Lenders shall have all
rights and remedies of a secured creditor under Article 9 of the UCC and
under any other Applicable Law.

 

SECTION 8.13.  Continuation
and Reinstatement.  Each Credit Party
further agrees that the security interest granted hereunder shall continue to
be effective or be reinstated, as the case may be, if at any time payment or
any part thereof of any Obligation is rescinded or must otherwise be restored
by the Agent, the Issuing Bank or the Lenders upon the bankruptcy or
reorganization of any Credit Party or otherwise.

 

9.             CASH COLLATERAL

 

SECTION 9.1.  Cash
Collateral Account.  (a)  On or
prior to the Closing Date, there shall be established with the Agent a
collateral account in the name of the Agent (the “Cash Collateral Account”),
into which the Borrower shall from time to time deposit Dollars pursuant to the
express provisions of this Agreement requiring or permitting such deposit.  Except to the extent otherwise provided in
this Section 9.1, the Cash Collateral Account shall be under the sole
dominion and control of the Agent.

 

(b)           The Agent is hereby
authorized and directed to invest and reinvest the funds from time to time
deposited in the Cash Collateral Account so long as no Event of Default has
occurred and is continuing on the instructions of the Borrower (provided that
such notice may be given verbally to be confirmed promptly in writing) or, if
the Borrower shall fail to give such instruction upon delivery of any such
funds, in the sole discretion of the Agent, provided that in no event
may the Borrower give instructions to the Agent to, or may the Agent in its 

 

 

discretion,
invest or reinvest funds in the Cash Collateral Account in other than Cash
Equivalents described in clause (i) of the definition of Cash Equivalents
or described in clauses (ii) and (iii) of the definition of Cash
Equivalents to the extent issued by The Chase Manhattan Bank.

 

(c)           Any net income or
gain on the investment of funds from time to time held in the Cash Collateral
Account shall be promptly reinvested by the Agent as a part of the Cash
Collateral Account, and any net loss on any such investment shall be charged
against the Cash Collateral Account.

 

(d)           Neither the Agent
nor the Lenders shall be a trustee for the Borrower, or shall have any
obligations or responsibilities, or shall be liable for anything done or not
done, in connection with the Cash Collateral Account, except as expressly
provided herein and except that the Agent shall have the obligations of a
secured party under the UCC.  The Agent
and the Lenders shall not have any obligation or responsibilities and shall not
be liable in any way for any investment decision made pursuant to this Section 9.1
or for any decrease in the value of the investments held in the Cash Collateral
Account.

 

SECTION 9.2.  Grant of
Security Interest.  For value
received and to induce the Lenders to make Loans from time to time to the
Borrower and to acquire participations in Letters of Credit from time to time
as provided for in this Credit Agreement, as security for the payment of all of
the Obligations, (including interest accruing on and after the filing of any
petition in bankruptcy or of reorganization of the Borrower whether or not
post-filing interest is allowed in such proceeding), the Borrower hereby
assigns to the Agent (for the benefit of itself, the Issuing Bank and the
Lenders), and grants to the Agent (for the benefit of itself, the Issuing Bank
and the Lenders), a first and prior Lien upon, all the Borrower’s rights in and
to the Cash Collateral Account, all cash, documents, instruments and securities
from time to time held therein, and all rights pertaining to investments of
funds in the Cash Collateral Account and all products and proceeds of any of
the foregoing.  All cash, documents,
instruments and securities from time to time on deposit in the Cash Collateral
Account, and all rights pertaining to investments of funds in the Cash
Collateral Account, shall immediately and without any need for any further
action on the part of any of the Credit Parties, any Lender or the Agent,
become subject to the Lien set forth in this Section 9.2, be deemed
Collateral for all purposes hereof and be subject to the provisions of this
Agreement.

 

SECTION 9.3.  Remedies.  At any time during the continuation of an
Event of Default, the Agent may sell any documents, instruments and securities
held in the Cash Collateral Account and may immediately apply the proceeds
thereof and any other cash held in the Cash Collateral Account in accordance
with Section 8.7.

 

10.           GUARANTY

 

SECTION 10.1.  Guaranty.  (a)  Each of the Guarantors, jointly and
severally, unconditionally and irrevocably guarantees to the Agent, the Issuing
Bank and the Lenders the due and punctual payment and performance of the
Obligations (including interest accruing on and after the filing of any
petition in bankruptcy or of reorganization of the obligor whether or not post
filing interest is allowed in such proceeding). 
Each of the Guarantors further agrees that the Obligations may be
increased, extended or renewed, in whole or in part, without notice or 

 

 

further
assent from it (except as may be otherwise required herein), and it will remain
bound under this Article 10 notwithstanding any extension or renewal of
any Obligation.

 

(b)           Each Guarantor
waives presentation to, demand for payment from and protest to, as the case may
be, any Credit Party or any other guarantor of any of the Obligations, and also
waives notice of protest for nonpayment, notice of acceleration and notice of
intent to accelerate.  The obligations of
each Guarantor hereunder shall not be affected by (i) the failure of the
Agent, the Issuing Bank or the Lenders to assert any claim or demand or to
enforce any right or remedy against the Borrower or any Guarantor or any other
guarantor under the provisions of this Credit Agreement or any other agreement
or otherwise; (ii) any extension or renewal of any provision hereof or
thereof; (iii) the failure of the Agent, the Issuing Bank or the Lenders
to obtain the consent of such Guarantor with respect to any rescission, waiver,
compromise, acceleration, amendment or modification of any of the terms or
provisions of this Credit Agreement, the Notes or any other agreement; (iv) the
release, exchange, waiver or foreclosure of any security held by the Agent for
the Obligations or any of them; (v) the failure of the Agent, the Issuing
Bank or the Lenders to exercise any right or remedy against any other Guarantor
or any other guarantor of the Obligations; (vi) any bankruptcy,
reorganization, liquidation, dissolution or receivership proceeding or case by
or against the Borrower or other Credit Party, any change in the corporate
existence, structure, ownership or control of any such Guarantor or any other
Credit Party (including any of the foregoing arising from any merger,
consolidation, amalgamation, reorganization or similar transaction); or (vii) the
release or substitution of any Guarantor or any other guarantor of the
Obligations.

 

(c)           Each Guarantor
further agrees that this Article 10 is a continuing guaranty, shall secure
the Obligations and any ultimate balance thereof, notwithstanding that the
Borrower or others may from time to time satisfy the Obligations in whole or in
part and thereafter incur further Obligations, and constitutes a guaranty of
performance and of payment when due and not just of collection, and waives any
right to require that any resort be had by the Agent, the Issuing Bank or any
Lender to any security held for payment of the Obligations or to any balance of
any deposit, account or credit on the books of the Agent, the Issuing Bank or
any Lender in favor of the Borrower or any Guarantor or to any other Person.

 

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

 

(e)           Each Guarantor’s
obligations under the Article 10 shall not be affected by the genuineness,
validity, regularity or enforceability of the Obligations, the Notes or any
other instrument evidencing any Obligations, or by the existence, validity,
enforceability, perfection, or extent of any collateral therefor or by any
other circumstance relating to the Obligations which might otherwise constitute
a defense to this Article 10.  The
Agent, the Issuing Bank and the Lenders make no representation or warranty with
respect to any such circumstances and have no duty or responsibility whatsoever
to any Guarantor in respect to the management and maintenance of the
Obligations or any collateral security for the Obligations.

 

 

SECTION 10.2.  No
Impairment of Guaranty, etc. 
The obligations of each Guarantor under this Article 10 shall not
be subject to any reduction, limitation, impairment or termination for any
reason (except payment and performance in full of the Obligations), including,
without limitation, any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to any defense or set-off, counterclaim,
recoupment or termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise.  Without limiting the generality of the
foregoing, the obligations of each Guarantor under this Article 10 shall
not be discharged or impaired or otherwise affected by the failure of the
Agent, the Issuing Bank or any Lender to assert any claim or demand or to
enforce any remedy under this Credit Agreement or any other agreement, by any
waiver or modification of any provision hereof or thereof, by any default,
failure or delay, willful or otherwise, in the performance of the Obligations,
or by any other act or thing or omission or delay to do any other act or thing
which may or might in any manner or to any extent vary the risk of such
Guarantor or would otherwise operate as a discharge of such Guarantor as a
matter of law, unless and until the Obligations are paid in full, the
Commitments have terminated and each outstanding Letter of Credit has expired
or otherwise been terminated.

 

SECTION 10.3.  Continuation
and Reinstatement, etc.  Each
Guarantor further agrees that its guaranty under this Article 10 shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any Obligation is rescinded or must otherwise
be restored by the Agent, the Issuing Bank or the Lenders upon the bankruptcy
or reorganization of the Borrower or a Guarantor, or otherwise.  In furtherance of the provisions of this Article 10,
and not in limitation of any other right which the Agent, the Issuing Bank or
the Lenders may have at law or in equity against the Borrower, a Guarantor or
any other Person by virtue hereof, upon failure of the Borrower to pay any
Obligation when and as the same shall become due, whether at maturity, by
acceleration, after notice or otherwise, each Guarantor hereby promises to and
will, upon receipt of written demand by the Agent on behalf of itself, the
Issuing Bank and/or the Lenders, forthwith pay or cause to be paid to the Agent
for the benefit of itself, the Issuing Bank and/or the Lenders (as applicable)
in cash an amount equal to the unpaid amount of all the Obligations with
interest thereon at a rate of interest equal to the rate specified in Section 2.9(a) hereof,
and thereupon the Agent shall assign such Obligation, together with all
security interests, if any, then held by the Agent in respect of such
Obligation, to the Guarantors making such payment; such assignment to be
subordinate and junior to the rights of the Agent on behalf of itself, the
Issuing Bank and the Lenders with regard to amounts payable by the Borrower in
connection with the remaining unpaid Obligations and to be pro tanto to the
extent to which the Obligation in question was discharged by the Guarantor or
Guarantors making such payments.

 

(a)           All rights of a
Guarantor against the Borrower, arising as a result of the payment by such
Guarantor of any sums to the Agent for the benefit of the Agent, the Issuing
Bank and/or the Lenders or directly to the Issuing Bank or the Lenders
hereunder by way of right of subrogation or otherwise, shall in all respects be
subordinated and junior in right of payment to, and shall not be exercised by
such Guarantor until and unless, the prior final and indefeasible payment in
full of all the Obligations.  If any
amount shall be paid to such Guarantor for the account of the Borrower, such
amount shall be held in trust for the benefit of the Agent segregated from such
Guarantor’s own assets and shall forthwith be paid to the Agent on behalf 

 

 

of
itself, the Issuing Bank and/or the Lenders to be credited and applied to the
Obligations, whether matured or unmatured.

 

SECTION 10.4.  Limitation
on Guaranteed Amount etc.  (a) 
Notwithstanding any other provision of this Article 10, the amount
guaranteed by each Guarantor under this Article 10 shall be limited to the
extent, if any, required so that its obligations under this Article 10
shall not be subject to avoidance under Section 548 of the Bankruptcy Code
or to being set aside or annulled under any Applicable Law relating to fraud on
creditors.  In determining the limitations,
if any, on the amount of any Guarantor’s obligations under this Article 10
pursuant to the preceding sentence, it is the intention of the parties hereto
that any rights of subrogation or contribution which such Guarantor may have
under this Article 10, any other agreement or Applicable Law shall be
taken into account.

 

11.           PLEDGE

 

SECTION 11.1.  Pledge.  Each Pledgor, as security for the due and
punctual payment of the Obligations (including interest accruing on and after
the filing of any petition in bankruptcy or of reorganization of the Borrower
whether or not post filing interest is allowed in such proceeding) in the case
of the Borrower and as security for its obligations under Article 10
hereof in the case of a Pledgor which is a Guarantor, hereby pledges,
hypothecates, assigns, transfers, sets over and delivers unto the Agent for the
benefit of itself, the Issuing Bank and the Lenders, a security interest in all
Pledged Collateral now owned or hereafter acquired by it.  On the Closing Date, the Pledgors shall
deliver to the Agent the definitive instruments (if any) representing all
Pledged Securities, accompanied by undated stock powers, duly endorsed or
executed in blank by the appropriate Pledgor, and such other instruments or
documents as the Agent or its counsel shall reasonably request.

 

SECTION 11.2.  Registration
in Nominee Name; Denominations.  The
Agent shall have the right (in its sole and absolute discretion) to hold the
certificates representing any Pledged Securities (a) in its own name (on
behalf of the Agent, the Issuing Bank and the Lenders) or in the name of its
nominee or (b) in the name of the appropriate Pledgor, endorsed or
assigned in blank or in favor of the Agent. 
Upon the occurrence and continuance of an Event of Default, the Agent
shall have the right to exchange the certificates representing any of the
Pledged Securities for certificates of smaller or larger denominations for any
purpose consistent with this Credit Agreement.

 

SECTION 11.3.  Covenant.  Each Pledgor covenants that as a stockholder
of each of its respective Subsidiaries it will not take any action to allow any
additional shares of common stock, preferred stock or other equity securities
of any of its respective Subsidiaries or any securities convertible or
exchangeable into common or preferred stock of such Subsidiaries to be issued,
or grant any options or warrants, unless such securities are pledged to the
Agent (for the benefit of itself, the Issuing Bank and the Lenders) as security
for the Obligations and such Pledgor’s obligations (if any) under Article 10
hereof.

 

SECTION 11.4.  Voting
Rights; Dividends; etc.  (a)       The appropriate Pledgor shall be entitled
to exercise any and all voting and/or consensual rights and powers accruing to
an owner of the Pledged Securities being pledged by it hereunder or any part
thereof for any purpose not 

 

 

inconsistent
with the terms hereof, at all times, except as expressly provided in paragraph (c) below.

 

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

 

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

 

SECTION 11.5.  Remedies
Upon Default.  If an Event of Default
shall have occurred and be continuing, the Agent, on behalf of itself, the
Issuing Bank and the Lenders, may sell the Pledged Securities, or any part
thereof, at public or private sale or at any broker’s board or on any
securities exchange, for cash, upon credit or for future delivery as the Agent
shall deem appropriate subject to the terms hereof or as otherwise provided in
the UCC.  The Agent shall be authorized
at any such sale (if it deems it advisable to do so) to restrict to the full
extent permitted by Applicable Law the prospective bidders or purchasers to
Persons who will represent and agree that they are purchasing the Pledged
Securities for their own account for investment and not with a view to the
distribution or sale thereof, and upon consummation of any such sale, the Agent
shall have the right to assign, transfer, and deliver to the purchaser or
purchasers thereof the Pledged Securities so sold.  Each such purchaser at any such sale shall
hold the property sold absolutely, free from any claim or right on the part of
any Pledgor.  The Agent shall give the
Pledgors ten (10) days’ written notice of any such public or private sale,
or sale at any broker’s board or on any such securities exchange, or of any other
disposition of the Pledged Securities. 
Such notice, in the case of public sale, shall state the time and place
for such sale and, in the case of sale at a broker’s board or on a securities
exchange, shall state the board or exchange at which such sale is to be made
and the day on which the Pledged Securities, or portion thereof, will first be
offered for sale at such board or exchange. 
Any such public sale shall be held at such time or times within ordinary
business hours and at such place or places as the Agent may fix and shall state
in the notice of such sale.  At any such
sale, the Pledged Securities, or portion thereof, to be sold may be sold in one
lot as an entirety or in separate parcels, as the Agent may (in its sole and
absolute discretion) determine.  The
Agent shall not be obligated to make any sale of the Pledged Securities if it
shall determine not to do so, regardless of the fact that notice of sale of the
Pledged Securities may have been given. 
The Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be 

 

 

adjourned
from time to time by announcement at the time and place fixed for sale, and
such sale may, without further notice, be made at the time and place to which
the same was so adjourned.  In case the
sale of all or any part of the Pledged Securities is made on credit or for
future delivery, the Pledged Securities so sold shall be retained by the Agent
until the sale price is paid by the purchaser or purchasers thereof, but the
Agent shall not incur any liability in case any such purchaser or purchasers
shall fail to take up and pay for the Pledged Securities so sold and, in case
of any such failure, such Pledged Securities may be sold again upon like
notice.  At any sale or sales made pursuant
to this Section 11.5, the Agent (on behalf of itself, the Issuing Bank
and/or the Lenders) may bid for or purchase, free from any claim or right of
whatever kind, including any equity of redemption, of the Pledgors, any such
demand, notice, claim, right or equity being hereby expressly waived and
released, any or all of the Pledged Securities offered for sale, and may make
any payment on the account thereof by using any claim for moneys then due and
payable to the Agent, the Issuing Bank (to the extent it consents) or any
consenting Lender by any Credit Party as a credit against the purchase price;
and the Agent, upon compliance with the terms of sale, may hold, retain and
dispose of the Pledged Securities without further accountability therefor to any
Pledgor or any third party (other than the Issuing Bank and/or the
Lenders).  The Agent shall in any such
sale make no representations or warranties with respect to the Pledged
Securities or any part thereof and shall not be chargeable with any of the obligations
or liabilities of the Pledgors with respect thereto.  Each Pledgor hereby agrees that (i) it
will indemnify and hold the Agent, the Issuing Bank and the Lenders harmless
from and against any and all claims with respect to the Pledged Securities asserted
before the taking of actual possession or control of the Pledged Securities by
the Agent pursuant to this Credit Agreement, or arising out of any act of, or
omission to act on the part of, any Person prior to such taking of actual
possession or control by the Agent (whether asserted before or after such
taking of possession or control), or arising out of any act on the part of any
Pledgor, its agents or Affiliates before or after the commencement of such
actual possession or control by the Agent and (ii) the Agent, the Issuing
Bank and the Lenders shall have no liability or obligation arising out of any
such claim.  As an alternative to
exercising the power of sale herein conferred upon it, the Agent may proceed by
a suit or suits at law or in equity to foreclose upon the Collateral and
Pledged Securities under this Credit Agreement and to sell the Pledged
Securities, or any portion thereof, pursuant to a judgment or decree of a court
or courts having competent jurisdiction.

 

SECTION 11.6.  Application
of Proceeds of Sale and Cash.  The
proceeds of sale of the Pledged Securities sold pursuant to Section 11.5
hereof shall be applied by the Agent on behalf of itself, the Issuing Bank and
the Lenders as follows:

 

(i)            to the payment of
all reasonable out-of-pocket costs and expenses paid or incurred by the Agent
in connection with such sale, including, but not limited to, all court costs
and the reasonable fees and expenses of counsel for the Agent in connection
therewith, and the payment of all reasonable out-of-pocket costs and expenses
paid or incurred by the Agent in enforcing this Credit Agreement, in realizing
or protecting any Collateral and in enforcing or collecting any Obligations or
any Guaranty thereof, including, without limitation, court costs and the
reasonable attorney’s fees and expenses incurred by the Agent in connection
therewith;

 

(ii)           to satisfy or
provide cash collateral for all Obligations relating to the Letters of Credit;
and

 

 

(iii)          to the indefeasible
payment in full of the Obligations in accordance with Section 12.2(b) hereof.

 

Any
amounts remaining after such indefeasible payment in full shall be remitted to
the appropriate Pledgor, or as a court of competent jurisdiction may otherwise
direct.

 

SECTION 11.7.  Securities
Act, etc.  In view of the
position of each Pledgor in relation to the Pledged Securities pledged by it,
or because of other present or future circumstances, a question may arise under
the Securities Act of 1933, as amended, as now or hereafter in effect, or any
similar statute hereafter enacted analogous in purpose or effect (such Act and
any such similar statute as from time to time in effect being hereinafter
called the “Federal Securities Laws”), with respect to any disposition
of the Pledged Securities permitted hereunder. 
Each Pledgor understands that compliance with the Federal Securities
Laws may very strictly limit the course of conduct of the Agent if the Agent
were to attempt to dispose of all or any part of the Pledged Securities, and
may also limit the extent to which or the manner in which any subsequent
transferee of any Pledged Securities may dispose of the same.  Similarly, there may be other legal
restrictions or limitations affecting the Agent in any attempt to dispose of
all or any part of the Pledged Securities under applicable Blue Sky or other
state securities laws, or similar laws analogous in purpose or effect.  Under Applicable Law, in the absence of an
agreement to the contrary, the Agent may perhaps be held to have certain
general duties and obligations to a Pledgor to make some effort towards
obtaining a fair price even though the Obligations may be discharged or reduced
by the proceeds of a sale at a lesser price. 
Each Pledgor waives to the fullest extent permitted by Applicable Law
any such general duty or obligation to it, and the Pledgors and/or the Credit
Parties will not attempt to hold the Agent responsible for selling all or any
part of the Pledged Securities at an inadequate price, even if the Agent shall
accept the first offer received or shall not approach more than one possible
purchaser.  Without limiting the
generality of the foregoing, the provisions of this Section 11.7 would
apply if, for example, the Agent were to place all or any part of the Pledged
Securities for private placement by an investment banking firm, or if such
investment banking firm purchased all or any part of the Pledged Securities for
its own account, or if the Agent placed all or any part of the Pledged
Securities privately with a purchaser or purchasers.

 

SECTION 11.8.  Continuation
and Reinstatement.  Each Pledgor
further agrees that its pledge hereunder shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any Obligation is rescinded or must otherwise be restored by the Agent, the
Issuing Bank or the Lenders upon the bankruptcy or reorganization of any
Pledgor or otherwise.

 

SECTION 11.9.  Termination.  The pledge referenced herein shall terminate
when all Obligations shall have been indefeasibly fully paid and performed and
the Commitments shall have terminated, and all Letters of Credit shall have
expired or been terminated or canceled, at which time the Agent shall assign
and deliver to the appropriate Pledgor, or to such Person or Persons as such
Pledgor shall designate, against receipt, such of the Pledged Securities (if
any) as shall not have been sold or otherwise applied by the Agent pursuant to
the terms hereof and shall still be held by it hereunder, together with
appropriate instruments of reassignment and release.  Any such reassignment shall be free and clear
of all Liens, arising by, under or through the 

 

 

Agent
but shall otherwise be without recourse upon or warranty by the Agent and at
the expense of the Pledgors.

 

12.           THE AGENT AND THE ISSUING BANK

 

SECTION 12.1.  Administration
by Agent.  (a)  The general
administration of the Fundamental Documents and any other documents
contemplated by this Agreement shall be by the Agent or its designees.  Each of the Lenders hereby irrevocably
authorizes the Agent, at its discretion, to take or refrain from taking such
actions as agent on its behalf and to exercise or refrain from exercising such
powers under the Fundamental Documents, the Notes and any other documents
contemplated by this Credit Agreement as are delegated by the terms hereof or
thereof, as appropriate, together with all powers reasonably incidental
thereto.  The Agent shall have no duties
or responsibilities except as set forth in the Fundamental Documents.

 

(b)           The Lenders hereby
authorize the Agent (in its sole discretion):

 

(i)            in connection with
the sale or other disposition of any asset included in the Collateral or the
capital stock of any Guarantor, in accordance with the terms of this Agreement,
to release a Lien granted to it (for the benefit of itself, the Issuing Bank
and the Lenders) on such asset or capital stock and/or release such Guarantor
from its obligations hereunder;

 

(ii)           to determine that
the cost to a Credit Party is disproportionate to the benefit to be realized by
the Lenders by perfecting a Lien in a given asset or group of assets included
in the Collateral and that such Credit Party should not be required to perfect
such Lien in favor of the Agent (for the benefit itself, the Issuing Bank and
of the Lenders);

 

(iii)          to appoint
subagents or Lenders to be the holder(s) of record of a Lien to be granted
to the Agent (for the benefit of itself, the Issuing Bank and the Lenders) or
to hold on behalf of the Agent such collateral or instruments relating thereto;

 

(iv)          to grant a right of
quiet enjoyment to licensees of Product other than pursuant to Platform
Agreements and to confirm such grant in writing;

 

(v)           to enter into
intercreditor and/or subordination agreements on terms acceptable to the Agent
with (A) the unions and/or the guilds with respect to the security
interests in favor of such unions and/or guilds required pursuant to the terms
of any collective bargaining agreement or (B) any licensee or licensor
having any rights to any item of Product or (C) Persons providing any
services in connection with any item of Product;

 

(vi)          to enter into and
perform its obligations under the other Fundamental Documents;

 

(vii)         to accept
commitments from one or more Persons for the remaining $15,000,000 of the facility
not committed to as of the date hereof by (A) obtaining an executed
counterpart of this Agreement from each such Person, (B) amending Schedule
1 hereto to add each such Person’s name, Term Loan Commitment and Revolving
Credit Commitment and circulating the amended Schedule 1 to the Lenders and the
Borrower and (C) recording in 

 

 

the
Register the name and address of each such Person, its Term Loan Commitment and
Revolving Loan Commitment, and the principal amount of the Loans owing to it,
whereupon (x) the Borrower shall execute and deliver to the Agent (i) a
Term Note in the amount of such Person’s Term Loan Commitment and (ii) a
Revolving Credit Note in the amount of such Person’s Revolving Credit
Commitment and (y) each such Person shall be a party hereto, have the
rights and obligations of a Lender hereunder and under the other Fundamental
Documents and shall be bound by the provisions hereof and thereof;

 

(viii)        upon the acceptance
of additional commitments pursuant to Section 12.1(b)(vii), to allocate
equitably among the Lenders, the Term Loans and the Revolving Credit Loans so
as to achieve pro rata status;

 

(ix)           to execute and
deliver reduction certificates from time to time under the Hallmark Cards
Letter of Credit in connection with (and in the amount of) (x) any
reduction in the commitments under the Hallmark Subordination and Support
Agreement permitted pursuant to Section 6.5 hereof or (y) advances
made under the Hallmark Subordination and Support Agreement (other than with
the proceeds of drawings made under the Hallmark Cards Letter of Credit);

 

(x)            [Intentionally
omitted]

 

(xi)           [Intentionally
omitted],

 

(xii)          to approve the
final terms of the Foreign Asset Sale and the related documentation, and to
execute the related collateral release documents in connection with the Foreign
Asset Sale,

 

(xiii)         to accept a
replacement Hallmark L/C in substantially the form of Exhibit R-1 in
replacement for the existing Hallmark L/C in the form of Exhibit R, and to
surrender the existing Hallmark L/C in connection therewith,

 

(xiv)        to accept a revised
Hallmark L/C in the face amount of $90,000,000 in connection with the
effectiveness of Amendment No. 14 dated as of March 10, 2008 to the
Credit Agreement,

 

(xv)         to enter into an
amendment and restatement of Hallmark Cards Subordination and Support Agreement
in connection with Amendment No. 13 in the form attached as an exhibit to
Amendment No. 13,

 

(xvi)        to, in connection
with the effectiveness of Amendment No. 15, (A) accept the
cancellation of the Hallmark L/C and (B) and accept the Hallmark Cards
Facility Guarantee and enforce its rights under the Hallmark Cards Facility Guarantee,
and

 

 

(xvii)       to negotiate, enter
into and exercise its rights under the Recapitalized Debt Intercreditor
Agreement in the form attached hereto as Exhibit T.

 

SECTION 12.2.  Advances
and Payments.  (a)  On the date
of each Loan, (x) the Agent shall be authorized (but not obligated) to
advance, for the account of each of the Lenders, the amount of the Loan to be
made by it in accordance with its Percentage hereunder.  Each of the Lenders hereby authorizes and
requests the Agent to advance for its account, pursuant to the terms hereof,
the amount of the Loan to be made by it, and each of the Lenders agrees
forthwith to reimburse the Agent, in immediately available funds for the amount
so advanced on its behalf by the Agent. 
If any such reimbursement is not made in immediately available funds on
the same day on which the Agent shall have made any such amount available on
behalf of any Lender, such Lender shall pay interest to the Agent, at a rate
per annum equal to the Agent’s cost of obtaining overnight funds in the New
York Federal Funds Market for the first three days following the time when the
Lender fails to make the required reimbursement, and thereafter at a rate per
annum equal to the Alternate Base Rate plus the Applicable Margin for Alternate
Base Rate Loans plus the default rate applicable to Alternate Base Rate Loans
as set forth in Section 2.9 hereof. 
If and to the extent that any such reimbursement shall not have been
made to the Agent, the Borrower agrees to repay to the Agent forthwith on
demand a corresponding amount with interest thereon for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Agent, in the case of an Alternate Base Rate Loan, at the
Alternate Base Rate plus the Applicable Margin for Alternate Base Rate Loans
plus the default rate applicable to Alternate Base Rate Loans as set forth in Section 2.9
hereof and in the case of a Eurodollar Loan, at the LIBO Rate plus the
Applicable Margin for Eurodollar Loans plus the default rate applicable to
Eurodollar Loans as set forth in Section 2.9 hereof.

 

(b)           As between the Agent
and the Lenders, any amounts received by the Agent in connection with the
Fundamental Documents, the application of which is not otherwise provided for,
shall be applied, first, to pay the accrued but unpaid Commitment Fees
in accordance with each Lender’s Percentage, second, to pay accrued but
unpaid interest on the Loans in accordance with the amount of outstanding Loans
owed to each Lender, third, to pay the principal balance outstanding on
the Loans (with amounts payable on the principal balance outstanding on the
Loans in accordance with the amount of outstanding Loans owed to each Lender),
and amounts then due in respect of unreimbursed draws under the Letter of
Credit, fourth, to pay amounts outstanding under Currency Agreements and
Interest Rate Protection Agreements, and fifth, to pay any other amounts
then due under this Credit Agreement. 
All amounts to be paid to any Lender by the Agent shall be credited to
that Lender, after collection by the Agent, in immediately available funds either
by wire transfer or deposit in such Lender’s correspondent account with the
Agent or as such Lender and the Agent shall from time to time agree.

 

SECTION 12.3.  Sharing of
Setoffs, Cash Collateral and Sharing Events.  Each of the Lenders agrees that if it shall,
through the exercise of a right of banker’s lien, setoff or counterclaim
against any Credit Party (including, but not limited to, a secured claim under Section 506
of Title 11 of the United States Code or other security or interest arising
from, or in lieu of, such secured claim and received by such Lender under any
applicable bankruptcy, insolvency or other similar law) or otherwise, obtain
payment in respect of its Obligations as a result of which the unpaid portion
of its Obligations is proportionately less than the unpaid 

 

 

portion
of Obligations of any of the other Lenders (a) it shall promptly purchase
at par (and shall be deemed to have thereupon purchased) from such other
Lenders a participation in the Obligations of such other Lenders, so that the
aggregate unpaid principal amount of each of the Lender’s Obligations and its
participation in Obligations of the other Lenders shall be in the same
proportion to the aggregate unpaid amount of all remaining Obligations as the
amount of its Obligations prior to the obtaining of such payment was to the
amount of all Obligations prior to the obtaining of such payment and (b) such
other adjustments shall be made from time to time as shall be equitable to
ensure that the Lenders share such payment pro rata.  If all or any portion of such excess payment
is thereafter recovered from the Lender which originally received such excess
payment, such purchase (or portion thereof) shall be canceled and the purchase
price restored to the extent of such recovery. 
Each Credit Party expressly consents to the foregoing arrangements and
agrees that any Lender or Lenders (and any Person holding (or deemed to be
holding) a participation in) a Loan, Note, or Letter of Credit may exercise any
and all rights of banker’s lien, setoff or counterclaim with respect to any and
all moneys owing by such Credit Party to such Person(s) as fully as if
such Person(s) held a Note and was the original obligee thereon or was the
issuer of the Letter of Credit in the amount of such participation.

 

SECTION 12.4.  Notice to the
Lenders.  Upon receipt by the Agent
or the Issuing Bank from any of the Credit Parties of any communication calling
for an action on the part of the Lenders, or upon notice to the Agent of any
Event of Default, the Agent or the Issuing Bank will in turn immediately inform
the other Lenders in writing (which shall include facsimile communications) of
the nature of such communication or of the Event of Default, as the case may
be.

 

SECTION 12.5.  Liability
of the Agent.  (a)  The Agent or
the Issuing Bank, when acting on behalf of the Lenders, may execute any of its
duties under this Credit Agreement or the other Fundamental Documents by or
through its officers, agents, or employees and neither the Agent, the Issuing
Bank nor their respective officers, agents or employees shall be liable to the
Lenders or any of them for any action taken or omitted to be taken in good
faith, nor be responsible to the Lenders or to any of them for the consequences
of any oversight or error of judgment, or for any loss, unless the same shall
happen through its gross negligence or willful misconduct.  The Agent, the Issuing Bank and their
respective directors, officers, agents, and employees shall in no event be
liable to the Lenders or to any of them for any action taken or omitted to be
taken by it pursuant to instructions received by it from the Required Lenders
(or such other number of Lenders as is expressly required by any Fundamental
Document) or in reliance upon the advice of counsel selected by it with
reasonable care.  Without limiting the
foregoing, neither the Agent, the Issuing Bank, nor any of their respective
directors, officers, employees, or agents shall be responsible to any of the
Lenders for the due execution, validity, genuineness, effectiveness,
sufficiency, or enforceability of, or for any statement, warranty, or
representation in, or for the perfection of any security interest contemplated
by, this Credit Agreement, any other Fundamental Document or any related
agreement, document or order, or for freedom of any of the Collateral or any of
the Pledged Securities from prior Liens or security interests, or shall be
required to ascertain or to make any inquiry concerning the performance or
observance by the Borrower or any other Credit Party of any of the terms,
conditions, covenants, or agreements of this Credit Agreement, any other
Fundamental Document, or any related agreement or document.

 

 

(b)           None of the Agent
(as agent for the Lenders), the Issuing Bank or any of their respective
directors, officers, employees, or agents shall have any responsibility to the
Borrower or any other Credit Party on account of the failure or delay in
performance or breach by any of the Lenders of any of such Lender’s obligations
under this Credit Agreement, the other Fundamental Documents or any related
agreement or document or in connection herewith or therewith.  No Lender nor any of its directors, officers,
employees or agents shall have any responsibility to the Borrower or any other
Credit Party on account of the failure or delay in performance or breach by any
other Lender of such other Lender’s obligations under this Credit Agreement,
the other Fundamental Documents or any related agreement or document or in
connection herewith or therewith.

 

(c)           The Agent as agent
for the Lenders hereunder and the Issuing Bank in such capacity, shall be
entitled to rely on any communication, instrument, or document believed by it
to be genuine or correct and to have been signed or sent by a Person or Persons
believed by it to be the proper Person or Persons, and it shall be entitled to
rely on advice of legal counsel, independent public accountants, and other
professional advisers and experts selected by it.

 

SECTION 12.6.  Reimbursement
and Indemnification.  Each of the
Lenders agrees (i) to reimburse the Agent for such Lender’s Pro Rata Share
of any expenses and fees incurred for the benefit of the Lenders under the
Fundamental Documents, including, without limitation, counsel fees and
compensation of agents and employees paid for services rendered on behalf of
the Lenders, and any other expense incurred in connection with the operations
or enforcement thereof not reimbursed by or on behalf of the Borrower, (ii) to
indemnify and hold harmless the Agent and any of its directors, officers, employees,
or agents, on demand, in accordance with such Lender’s Pro Rata Share, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses, or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against, it
or any of them in any way relating to or arising out of the Fundamental
Documents or any related agreement or document, or any action taken or omitted
by it or any of them under the Fundamental Documents or any related agreement
or document, to the extent not reimbursed by or on behalf of the Borrower or
any other Credit Party (except such as shall result from its or their gross
negligence or willful misconduct), and (iii) to indemnify and hold
harmless the Issuing Bank and any of its directors, officers, employees, or
agents, on demand, in the amount of its Pro Rata Share, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against it or any
of them in any way relating to or arising out of the issuance of any Letters of
Credit or the failure to issue Letters of Credit if such failure or issuance
was at the direction of the Required Lenders (except as shall result from the
gross negligence or willful misconduct of the Person to be reimbursed,
indemnified or held harmless, as applicable). 
To the extent indemnification payments made by the Lenders pursuant to
this Section 12.6 are subsequently recovered by the Agent from a Credit
Party, the Agent will promptly refund such previously paid indemnity payments
to the Lenders.

 

SECTION 12.7.  Rights of
Agent and Issuing Bank.  It is understood
and agreed that each of the Agent and the Issuing Bank shall have the same
duties, rights and powers as a Lender hereunder (including the right to give
such instructions) as any of the other Lenders and may exercise such rights and
powers, as well as its rights and powers under other agreements and 

 

 

instruments
to which it is or may be party, and engage in other transactions with any
Credit Party or Affiliate thereof, as though it were not the Agent of the
Lenders under this Credit Agreement and the other Fundamental Documents or the
Issuing Bank.

 

SECTION 12.8.  Independent
Investigation by Lenders.  Each of
the Lenders acknowledges that it has decided to enter into this Credit
Agreement and the other Fundamental Documents and to make the Loans and
participate in the Letters of Credit hereunder based on its own analysis of the
transactions contemplated hereby and of the creditworthiness of the Credit
Parties and agrees that neither the Agent nor the Issuing Bank shall bear any
responsibility therefor.

 

SECTION 12.9.  Agreement
of Required Lenders.  Upon any
occasion requiring or permitting an approval, consent, waiver, election or
other action on the part of the Required Lenders, action shall be taken by the
Agent for and on behalf of, or for the benefit of, all Lenders upon the
direction of the Required Lenders and any such action shall be binding on all
Lenders.  No amendment, modification,
consent or waiver shall be effective except in accordance with the provisions
of Section 13.11 hereof.

 

SECTION 12.10.  Notice of
Transfer.  The Agent and the Issuing
Bank may deem and treat any Lender which is a party to this Credit Agreement as
the owner of such Lender’s respective portions of the Loans and participations
in Letters of Credit for all purposes, unless and until a written notice of the
assignment or transfer thereof executed by any such Lender shall have been
received by the Agent and become effective in accordance with Section 13.3
hereof.

 

SECTION 12.11.  Successor
Agent.  The Agent may resign at any
time by giving written notice thereof to the Lenders and the Borrower, but such
resignation shall not become effective until acceptance by a successor agent of
its appointment pursuant hereto.  Upon
any such resignation, the retiring Agent shall promptly appoint a successor
agent from among the Lenders which successor shall be experienced and
sophisticated in entertainment industry lending, provided that such
replacement is reasonably acceptable (as evidenced in writing) to the Required
Lenders and the Borrower; provided, however, that such approval
by the Borrower shall not be required at any time when a Default or Event of
Default is continuing.  If no successor
agent shall have been so appointed by the retiring Agent and shall have accepted
such appointment, within 30 days after the retiring agent’s giving of notice of
resignation, the Borrower may appoint a successor agent (which successor may be
replaced by the Required Lenders; provided that such successor is experienced
and sophisticated in entertainment industry lending or media lending and
reasonably acceptable to the Borrower), which shall be either a Lender or a
commercial bank organized, licensed, carrying on business under the laws of the
United States of America or of any State thereof and shall have a combined
capital and surplus of at least US$500,000,000 and shall be experienced and
sophisticated in entertainment industry lending.  Upon the acceptance of any appointment as
Agent hereunder by a successor agent, such successor agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations under this Credit Agreement, the other Fundamental
Documents and any other credit documentation. 
After any retiring Agent’s resignation hereunder as Agent, the
provisions of this Article 12 and Article 13 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Credit Agreement.

 

 

SECTION 12.12.  Successor
Issuing Bank.  The Issuing Bank may
resign at any time by giving prior written notice thereof to the Lenders and
the Borrower, but such resignation shall not become effective until acceptance
by a successor Issuing Bank of its appointment pursuant hereto.  Upon any such resignation, the retiring
Issuing Bank shall promptly appoint a successor Issuing Bank from among the
Lenders, provided that such replacement is reasonably acceptable (as
evidenced in writing) to the Required Lenders and the Borrower and has a credit
rating at least as high as that of the Issuing Bank; provided, however,
that such approval by the Borrower shall not be required at any time when a
Default or Event of Default is continuing. If no successor Issuing Bank shall
have been so appointed by the retiring Issuing Bank and shall have accepted
such appointment, within 30 days after the retiring Issuing Bank’s giving of
notice of resignation, the Borrower may appoint a successor Issuing Bank (which
successor may be replaced by the Required Lenders; provided that such
successor is reasonably acceptable to the Borrower), which shall be either a
Lender or a commercial bank organized, licensed, carrying on business under the
laws of the United States of America or of any State thereof and shall have a
combined capital and surplus of at least US$500,000,000.  Upon the acceptance of any appointment as
Issuing Bank hereunder by a successor Issuing Bank, such successor Issuing Bank
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Issuing Bank, and the retiring Issuing
Bank shall be discharged from its duties and obligations under this Credit
Agreement, the other Fundamental Documents and any other credit documentation,
except with respect to Letters of Credit which are outstanding at the time of
the resignation unless the successor Issuing Bank replaces the retiring Issuing
Bank as the issuing bank on such Letters of Credit.  The Borrower and each Lender hereby agree
that each will use its commercially reasonable efforts to replace any such
outstanding Letters of Credit issued by the retiring Issuing Bank.  After any retiring Issuing Bank’s resignation
hereunder as Issuing Bank, the provisions of this Article 12 and Article 13
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Issuing Bank under this Credit Agreement.

 

13.           MISCELLANEOUS

 

SECTION 13.1.  Notices.  Notices and other communications provided for
herein shall be in writing and shall be delivered or mailed (or in the case of
telegraphic communication, if by telegram, delivered to the telegraph company
and, if by telex, graphic scanning or other telegraphic or facsimile
communications equipment of the sending party hereto, delivered by such
equipment) addressed, if to the Agent, the Issuing Bank or JPMorgan Chase Bank,
N.A., to  JPMorgan Chase Bank, N.A., 1166
Avenue of the Americas, Floor 17, New York, New York 10036, Attention: Garrett
J. Verdone, Senior Vice President, facsimile no.: (212) 899-2893, with a copy
to J.P. Morgan Securities, 1800 Century Park East, Suite 400, Los Angeles,
California 90067, Attn: P. Clark Hallren, facsimile no.: (310) 788-5628, or if
to any Credit Party, to it at Crown Media Holdings, 12700 Ventura Blvd, Studio
City, California 91604, Attn.:  Charles
Stanford, Esq., facsimile no.: 
(303) 221-3779, with a courtesy copy to Hallmark Cards Incorporated,
2501 McGee, P.O. 419580, Mail Drop #339, Kansas City, Missouri 64108,
Attn: Deanne Stedem, facsimile no.: (816) 274-7171, or if to a Lender, to it at
its address set forth on the signature page, or such other address as such
party may from time to time designate by giving written notice to the other
parties hereunder.  Any failure of the
Agent, the Issuing Bank or a Lender giving notice pursuant to this Section 13.1,
to provide a courtesy copy to a party as provided 

 

 

herein,
shall not affect the validity of such notice. 
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
fifth Business Day after the date when sent by registered or certified mail,
postage prepaid, return receipt requested, if by mail, or when delivered to the
telegraph company, charges prepaid, if by telegram, or when receipt is
acknowledged, if by any telegraphic or facsimile communications equipment of
the sender, in each case addressed to such party as provided in this Section 13.1
or in accordance with the latest unrevoked written direction from such party.

 

SECTION 13.2.  Survival
of Agreement, Representations and Warranties, etc.  All warranties, representations and covenants
made by any of the Credit Parties herein or in any other Fundamental Document
or in any certificate or other instrument delivered in connection with this
Credit Agreement or any other Fundamental Document shall be considered to have
been relied upon by the Agent, the Issuing Bank and the Lenders except for any
terminations, amendments, modifications or waivers thereof in accordance with
the terms hereof, and shall survive the making of the Loans and the issuance of
the Letters of Credit herein contemplated and the issuance and delivery to the
Agent of the Notes regardless of any investigation made by the Agent, the
Issuing Bank or the Lenders or on their behalf and shall continue in full force
and effect so long as any Obligation is outstanding and unpaid and so long as
any Letter of Credit remains outstanding and the Commitments have not been
terminated.  All statements in any such
certificate or other instrument shall constitute representations and warranties
by the Credit Party hereunder.

 

SECTION 13.3.  Successors
and Assigns; Syndications; Loan Sales; Participations.  (a)  Whenever in this Credit Agreement
any of the parties hereto is referred to, such reference shall be deemed to
include the successors and assigns of such party (provided, however, that no
Credit Party may assign its rights or obligations hereunder without the prior
written consent of the Agent, the Issuing Bank and all the Lenders), and all
covenants, promises and agreements by or on behalf of any Credit Party which
are contained in this Agreement shall inure to the benefit of the successors
and assigns of the Administrative Agent, the Issuing Bank and the Lenders.

 

(b)           Each of the Lenders
may (but only with the prior written consent of the Agent and the Issuing Bank,
which consent shall not be unreasonably withheld or delayed and with the prior
written consent of the Borrower, which consent shall not be unreasonably
withheld or delayed and which consent of the Borrower shall not be required for
an assignment by a Lender to any Affiliate thereof or when an Event of Default
has occurred and is continuing) assign all or a portion of its interests,
rights and obligations under this Credit Agreement (including, without
limitation, all or a portion of its Commitment and the same portion of all
Loans at the time owing to it and the Notes held by it and its obligations and
rights with regard to Letters of Credit); provided, however, that
(i) each assignment shall be of a constant, and not a varying, percentage
of the assigning Lender’s interests, rights and obligations under this Credit
Agreement, (ii) each assignment shall be in a minimum Commitment amount
(or, at any time after the Commitment Termination Date, minimum Loan amount) of
at least $5,000,000 (except that any assignment of the entire remaining portion
of a Lender’s Commitment or Loan amount shall not be subject to this
limitation), (iii) the parties to each such assignment shall execute and
deliver to the Agent, for its acceptance and recording in the Register (as
defined below), an Assignment and Acceptance, together with the assigning
Lender’s original Note and a processing 

 

 

and
recordation fee of US$3,500 to be paid to the Administrative Agent by the
assigning Lender or the assignee.  Upon
such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, which effective
date shall not (unless otherwise agreed to by the Agent) be earlier than five
Business Days after the date of acceptance and recording by the Agent, (x) the
assignee thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender
hereunder and under the other Fundamental Documents and shall be bound by the
provisions hereof and (y) the assigning Lender thereunder shall, to the
extent provided in such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Credit Agreement except that,
notwithstanding such assignment, any rights and remedies available to the
Borrower for any breaches by such assigning Lender of its obligations hereunder
while a Lender shall be preserved after such assignment and such Lender shall
not be relieved of any liability to the Borrower due to any such breach.  In the case of an Assignment and Acceptance
covering all or the remaining portion of the assigning Lender’s rights and
obligations under this Credit Agreement, such assigning Lender shall cease to
be a party hereto.

 

(c)           Each Lender may at
any time make an assignment of its interests, rights and obligations under this
Credit Agreement, without the consent of the Agent or the Issuing Bank, to (i) any
Affiliate of such Lender or (ii) any other Lender hereunder; provided
that after giving effect to such assignment, the assignee’s Percentage shall
not exceed 20% of the aggregate amount of all Commitments then outstanding
hereunder.  Any such assignment to any
Affiliate of the assigning Lender or any other Lender hereunder shall not be
subject to the requirements of Section 13.3(b) that (x) that the
amount of the Commitment (or Loans if applicable) of the assigning Lender
subject to each assignment be in a minimum principal amount of $5,000,000 and (y) the
payment of a processing and recordation fee and any such assignment to any
Affiliate of the assigning Lender shall not release the assigning Lender of its
remaining obligations hereunder, if any.

 

(d)           By executing and
delivering an Assignment and Acceptance, the assigning Lender thereunder and
the assignee thereunder confirm to and agree with each other and the other
parties hereto as follows:  (i) other
than the representation and warranty that it is the legal and beneficial owner
of the interest being assigned thereby and that such interest is free and clear
of any adverse claim, the assigning Lender makes no representation or warranty
and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Credit Agreement or any
other Fundamental Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Fundamental Documents
or any other instrument or document furnished pursuant hereto or thereto; (ii) such
assignor Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any of the Credit
Parties or the performance or observance by any of the Credit Parties of any of
their obligations under the Fundamental Documents or any other instrument or
document furnished pursuant thereto; (iii) such assignee confirms that it
has received a copy of this Credit Agreement, together with copies of the most
recent financial statements delivered pursuant to Sections 5.1(a) and 5.1(b) (or
if none of such financial statements shall have then been delivered, then
copies of the financial statements referred to in Section 3.4 hereof) and
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such
assignee agrees that it will, independently and without reliance upon the assigning
Lender, 

 

 

the
Agent, the Issuing Bank or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Credit Agreement or
any other Fundamental Document; (v) such assignee appoints and authorizes
the Agent, and the Issuing Bank to take such action as the agent on its behalf
and to exercise such powers under this Credit Agreement as are delegated to the
Agent or the Issuing Bank by the terms hereof, together with such powers as are
reasonably incidental thereto; and (vi) such assignee agrees that it will
be bound by the provisions of this Credit Agreement and will perform in
accordance with their terms all of the obligations which by the terms of this
Credit Agreement are required to be performed by it as a Lender.

 

(e)           The Agent shall
maintain at its address at which notices are to be given to it pursuant to Section 13.1
a copy of each Assignment and Acceptance and a register for the recordation of
the names and addresses of the Lenders and the Commitments of, and principal
amount of the Loans owing to, each Lender from time to time (the “Register”).  The entries in the Register shall be
conclusive, in the absence of manifest error, and the Credit Parties, the
Agent, the Issuing Bank and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of the
Fundamental Documents.  The Register
shall be available for inspection by any Credit Party or any Lender at any
reasonable time and from time to time upon reasonable prior notice.

 

(f)            Subject to the
foregoing, upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee together with the assigning Lender’s original
Notes and the processing and recordation fee, the Agent shall, if such
Assignment and Acceptance has been completed and is substantially in the form
of Exhibit H hereto, (i) accept such Assignment and Acceptance, (ii) record
the information contained therein in the Register and (iii) give prompt
written notice thereof to the Borrower. 
Within five (5) Business Days after receipt of the notice, the
Borrower, at its own expense, shall execute and deliver to the Agent, in
exchange for each surrendered Note, a new Note to the order of such assignee in
an amount equal to the Revolving Credit Commitment and/or Term Loan, as the
case may be, assumed by it pursuant to such Assignment and Acceptance and if
the assigning Lender has retained a Revolving Credit Commitment and/or Term
Loan hereunder, new Notes to the order of the assigning Lender in an amount
equal to the Revolving Credit Commitment or Term Loan, as the case may be,
retained by it hereunder.  Such new Notes
shall be in an aggregate principal amount equal to the aggregate principal
amount of the surrendered Note and shall otherwise be in substantially the form
of Exhibit A-1 or Exhibit A-2, as applicable.  In addition the Credit Parties will promptly,
at their own expense, execute such amendments to the Fundamental Documents to
which each is a party and such additional documents, and take such other
actions as the Agent or the assignee Lender may reasonably request in order to
give such assignee Lender the full benefit of the Liens contemplated by the
Fundamental Documents.

 

(g)           Each of the Lenders
may, without the consent of any of the Credit Parties, the Issuing Bank or the
Agent or the other Lenders, sell participations to one or more banks or other
entities in all or a portion of its rights and obligations under this Credit
Agreement (including, without limitation, all or a portion of its Commitment
and the Loans owing to it and the Note or Notes held by it and its
participation in Letters of Credit); provided, however, that (i) any
such Lender’s obligations under this Credit Agreement shall remain unchanged, (ii) such
participant shall not be granted any voting rights or any right to control the
vote of such Lender 

 

 

under
this Credit Agreement, except with respect to proposed changes to interest
rates, amount of Commitments, final maturity of any Loan, releases of all or
substantially all the Collateral and fees (as applicable to such participant), (iii) any
such Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iv) the participating banks or other
entities shall be entitled to the cost protection provisions contained in
Sections 2.11, 2.12, 2.13 and 12.3 hereof but a participant shall not be
entitled to receive pursuant to such provisions an amount larger than its share
of the amount to which the Lender granting such participation would have been
entitled to receive and (v) the Credit Parties, the Agent, the Issuing
Bank and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender’s and its participants’ rights and
obligations under this Credit Agreement.

 

(h)           A Lender may, in
connection with any assignment or participation or proposed assignment or
participation pursuant to this Section 13.3, disclose to the assignee or
participant or proposed assignee or participant, any information relating to
any of the Credit Parties furnished to the Agent or such Lender by or on behalf
of the Borrower; provided that prior to any such disclosure, each such
assignee or participant or proposed assignee or participant shall agree, by
executing a confidentiality letter, substantially in the form of the
confidentiality letter executed by the Lenders in connection with information
received by the Lenders relating to this transaction, to preserve the
confidentiality of any confidential information relating to any of the Credit
Parties received from such Lender.

 

(i)            Any assignment
pursuant to paragraph (b) or (c) of this Section 13.3 shall constitute
an amendment of the Schedule of Commitments as of the effective date of such
assignment.

 

(j)            The Credit Parties
consent that any Lender may at any time and from time to time pledge or
otherwise grant a security interest in any Loan or in any Note evidencing the
Loans (or any part thereof) to any Federal Reserve Bank.

 

(k)           Notwithstanding anything to the
contrary contained herein, any Lender (a “Granting Lender”) may grant to
a special purpose funding vehicle (an “SPC”) identified as such in
writing from time to time by the Granting Lender to the Agent and the Borrower,
the option to provide to the Borrower all or any part of any Loan that such
Granting Lender would otherwise be obligated to make to the Borrower pursuant
to this Agreement; provided that (i) nothing herein shall
constitute a commitment by any SPC to make any Loan and (ii) if an SPC
elects not to exercise such option or otherwise fails to provide all or any
part of a Loan, the Granting Lender shall be obligated to make such Loan
pursuant to the terms hereof.  The making
of a Loan by an SPC hereunder shall utilize the relevant portion of the
Commitment of the Granting Lender to the same extent, and as if, such Loan were
made by such Granting Lender.  Each party
hereto hereby agrees that no SPC shall be liable for any indemnity or similar
obligation under the Fundamental Documents (all liability for which shall
remain with the Granting Lender).  In
addition, notwithstanding anything to the contrary contained in this Section 13.3(k),
any SPC may (i) with notice to, but without prior written consent of, the
Borrower and the Agent and without paying any processing fee therefor, assign
all or a portion of its interests in any Loans to the Granting Lender or to any
financial institutions (consented to by the Agent) providing liquidity and/or
credit support to or for the account of such SPC to support the funding or
maintenance of Loans and (ii) disclose on a confidential basis any
non-public information 

 

 

relating
to its Loans to any rating agency, commercial paper dealer or provider of any
surety, guarantee or credit or liquidity enhancement to such SPC.  This Section 13.3(k) may not be
amended without the prior written consent of each Granting Lender, all or any
of whose Loans are being funded by an SPC at the time of such amendment.  For the avoidance of doubt, the Granting
Lender shall for all purposes (including, without limitation, the approval of
any amendment or waiver of any provision of any of the Fundamental Documents)
continue to be the Lender of record hereunder.

 

(l)            Notwithstanding anything to the
contrary in this Section 13.3, upon five (5) Business Days written
notice to the Agent, Hallmark Cards (or its designee) shall have the right to
purchase from each of the Lenders its entire interest in the Total Commitments
and the Loans and to assume each of the Lender’s obligations under the Credit
Agreement (the “Hallmark Purchase”) for an amount equal to the total
outstanding principal plus the total accrued, unpaid interest plus
all other outstanding Obligations to the Lenders plus all Obligations
owing to the Agent and the Issuing Bank plus cash collateral for any
outstanding L/C Exposure (the “Purchase Price”).  The Hallmark Purchase Price is only
exercisable with regard to all of the Lenders at the same time.  Such Purchase Price shall be paid directly to
the Agent for the benefit of the Agent, the Issuing Bank and each Lender in
accordance with such Lender’s Commitment on the date of the Hallmark
Purchase.  Provided the Hallmark Guarantee
remains in full force and effect and has not been disavowed by Hallmark Cards,
during the five (5) day written notice period, the Agent will take no
action to foreclose on the Collateral or to demand payment from the Borrower
without the consent of Hallmark Cards. 
The Hallmark Purchase will be treated as if each of the Lenders and
Hallmark Cards (or its designee) had signed an Assignment and Acceptance
Agreement and neither party shall have any obligation to the other beyond that
provided for in the form of Assignment and Acceptance attached hereto as Exhibit H
and as soon as practicable thereafter, each of the assigning Lenders will
surrender to the Agent the Note or Notes held by it and the Agent will, at the
request of Hallmark Cards (or its designee), issue a replacement Note or Notes
to Hallmark Cards (or its designee).  As
soon as practicable subsequent to the payment of the Purchase Price, the Agent
shall surrender the Hallmark L/C to Hallmark Cards and Hallmark Cards will
designate a successor agent to the Agent as contemplated by Section 12.11
of the Credit Agreement and a successor to the Issuing Bank as contemplated by Section 12.12
of the Credit Agreement.  Until such
successor Issuing Bank is appointed and assumes the obligations of JPMorgan
Chase Bank, N.A., as the existing Issuing Bank, the Borrower shall not be
entitled to request that any additional letters of credit be issued on its
behalf pursuant to Section 2.4 of the Credit Agreement.  Subsequent to the payment of the Purchase
Price, each of the assigning Lenders shall have the same rights against the
Borrower for continuing indemnification and expense reimbursement as it would
have had had it signed an Assignment and Assumption Agreement; and subsequent
to its replacement as the Agent and as the Issuing Bank, JPMorgan Chase Bank,
N.A. shall have the same continuing claims against the Borrower as it would
have had had it resigned and been replaced as the Agent and the Issuing Bank in
accordance with the procedures contemplated by Sections 12.11 and 12.12 of the
Credit Agreement.  Notwithstanding any of
the preceding provisions of this Section 13.3(l), at any time prior to the
payment of the Purchase Price, the Agent may make a claim under, or otherwise
seek to enforce any remedies available to it under the Hallmark Cards Facility
Guarantee in accordance with the terms thereof.

 

 

SECTION 13.4.  Expenses;
Documentary Taxes.  Whether or not
the transactions hereby contemplated shall be consummated, the Borrower agrees
to pay (a) all reasonable out-of-pocket expenses incurred by the Agent or
J.P. Morgan Securities Inc. in connection with, or growing out of, the
performance of due diligence, the syndication of the credit facility
contemplated hereby, the negotiation, preparation, execution, delivery, waiver
or modification and administration of this Credit Agreement and any other
documentation contemplated hereby, the making of the Loans and the issuance of
the Letters of Credit, the Collateral, the Pledged Securities or any
Fundamental Document, including, but not limited to, the reasonable
out-of-pocket costs and internally allocated charges of audit or field
examinations of the Agent in connection with the administration of this Credit
Agreement, the verification of financial data and the transactions contemplated
hereby, and the reasonable fees and disbursements of Morgan, Lewis &
Bockius LLP, counsel for the Agent and the Issuing Bank, and any other counsel
that the Agent or the Issuing Bank shall retain, and (b) all reasonable
out-of-pocket expenses incurred by the Agent, the Issuing Bank or the Lenders
in the enforcement or protection of the rights and remedies of the Agent, the
Issuing Bank or the Lenders in connection with this Credit Agreement, the other
Fundamental Documents, the Letters of Credit or the Notes, or as a result of
any transaction, action or non-action arising from any of the foregoing,
including, but not limited to, the reasonable fees and disbursements of any
counsel for the Agent, the Issuing Bank or the Lenders.  Such payments shall be made on the date this
Credit Agreement is executed by the Borrower and thereafter on demand.  The Borrower agrees that it shall indemnify
the Agent, the Issuing Bank and the Lenders from and hold them harmless against
any documentary taxes, assessments or charges made by any Governmental
Authority by reason of the execution and delivery of this Credit Agreement or
the Notes or the other Fundamental Documents or the issuance of the Letters of
Credit.  The obligations of the Borrower
under this Section shall survive the termination of this Credit Agreement,
the payment of the Loans and the expiration of all Letters of Credit.

 

SECTION 13.5.  Indemnification
of the Agent, the Issuing Bank and the Lenders.  The Borrower agrees (a) to indemnify and
hold harmless the Agent, the Issuing Bank and the Lenders and their respective
directors, officers, employees, trustees, agents and affiliates (each, an “Indemnified
Party”) (to the full extent permitted by Applicable Law) from and against
any and all claims, demands, losses, judgments and liabilities (including
liabilities for penalties) of whatsoever nature, and (b) to pay to the
Indemnified Parties an amount equal to the amount of all costs and expenses,
including reasonable legal fees and disbursements, and with regard to both (a) and
(b) growing out of or resulting from any litigation, investigation or
other proceedings relating to the Collateral, this Credit Agreement, the other
Fundamental Documents and the Letters of Credit, the making of the Loans, any
attempt to audit, inspect, protect or sell the Collateral, or the
administration and enforcement or exercise of any right or remedy granted to
the Agent, the Issuing Bank or Lenders hereunder or thereunder but excluding
therefrom all claims, demands, losses, judgments, liabilities, costs and
expenses arising out of or resulting from (i) in the case of any
Indemnified Party, the gross negligence or willful misconduct of such
Indemnified Party and (ii) claims asserted or litigation commenced against
such Indemnified Party by a Credit Party in which the Credit Party is the
prevailing party.  The foregoing
indemnity agreement includes any reasonable costs incurred by any Indemnified
Party in connection with any action or proceeding which may be instituted in
respect of the foregoing by any Indemnified Party, or by any other Person
either against any Indemnified Party or in connection with which any officer,
director, agent or employee of any Indemnified Party is 

 

 

called
as a witness or deponent, including, but not limited to, the reasonable fees
and disbursements of Morgan, Lewis & Bockius LLP, counsel to the Agent
and the Issuing Bank, and any out-of-pocket costs incurred by any Indemnified
Party in appearing as a witness or in otherwise complying with legal process
served upon them.  Except as otherwise
required by Applicable Law which may not be waived, the Agent, the Issuing Bank
and the Lenders shall not be liable to any Credit Party for any matter or thing
in connection with this Credit Agreement other than their express obligations
hereunder, including obligations to make Loans and account for moneys actually
received by them in accordance with the terms hereof.

 

Whenever
the provisions of this Credit Agreement or any other Fundamental Document provide
that, if any Credit Party shall fail to do any act or thing which it has
covenanted to do hereunder, the Agent may (but shall not be obligated to) do
the same or cause it to be done or remedy any such breach and if the Agent does
the same or causes it to be done, there shall be added to the Obligations
hereunder the cost or expense incurred by the Agent in so doing, and any and
all amounts expended by the Agent in taking any such action shall be repayable
to it upon its demand therefor and shall for advances made by the Agent, bear
interest at 2% in excess of the sum of the Alternate Base Rate plus the
Applicable Margin, from time to time in effect from the date advanced to the
date of repayment.

 

All
indemnities contained in this Section 13.5 shall survive the expiration or
earlier termination of this Credit Agreement and shall inure to the benefit of
any Person who was a Lender notwithstanding such Person’s assignment of all its
Loans and Commitments as to any actions taken or omitted to be taken by it
while it was a Lender.

 

SECTION 13.6.  CHOICE OF
LAW.  THIS CREDIT AGREEMENT AND THE
NOTES SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY,
THE LAWS OF THE STATE OF NEW YORK WHICH ARE APPLICABLE TO CONTRACTS MADE AND TO
BE PERFORMED WHOLLY WITHIN SUCH STATE AND, IN THE CASE OF PROVISIONS
RELATING TO INTEREST RATES, ANY APPLICABLE LAW OF THE UNITED STATES OF
AMERICA.  EACH LETTER OF CREDIT SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OR
RULES DESIGNATED IN SUCH LETTER OF CREDIT OR IF NO SUCH LAWS OR RULES ARE
DESIGNATED, THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS, INTERNATIONAL
CHAMBER OF COMMERCE PUBLICATION NO. 500 
AS ADOPTED OR AMENDED FROM TIME TO TIME (THE “UNIFORM CUSTOMS”)
AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE
STATE OF NEW YORK.

 

SECTION 13.7.  WAIVER OF
JURY TRIAL.  TO THE EXTENT NOT
PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH CREDIT PARTY HEREBY
WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT
OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
CREDIT AGREEMENT, THE SUBJECT MATTER HEREOF, ANY OTHER FUNDAMENTAL DOCUMENT OR
THE SUBJECT MATTER THEREOF, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER

 

 

ARISING
AND WHETHER IN CONTRACT OR TORT OR OTHERWISE. 
EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER
PARTIES HERETO THAT THE PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL
INDUCEMENT UPON WHICH SUCH OTHER PARTIES HAVE RELIED, ARE RELYING AND WILL RELY
IN ENTERING INTO THIS CREDIT AGREEMENT AND ANY OTHER FUNDAMENTAL DOCUMENT.  ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION 13.7 WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF ANY OTHER PARTY TO THE WAIVER OF ITS RIGHTS TO TRIAL BY JURY.

 

SECTION 13.8.  WAIVER
WITH RESPECT TO DAMAGES.  EACH CREDIT
PARTY ACKNOWLEDGES THAT NEITHER THE AGENT, THE ISSUING BANK NOR ANY LENDER HAS
ANY FIDUCIARY RELATIONSHIP WITH, OR FIDUCIARY DUTY TO, ANY CREDIT PARTY ARISING
OUT OF OR IN CONNECTION WITH THIS CREDIT AGREEMENT OR ANY OTHER FUNDAMENTAL
DOCUMENT AND THE RELATIONSHIP BETWEEN THE AGENT, THE ISSUING BANK AND THE LENDERS,
ON THE ONE HAND, AND THE CREDIT PARTIES, ON THE OTHER HAND, IN CONNECTION
HEREWITH AND THEREWITH IS SOLELY THAT OF DEBTOR AND CREDITOR.  TO THE EXTENT PERMITTED BY APPLICABLE LAW, NO
CREDIT PARTY SHALL ASSERT, AND EACH CREDIT PARTY HEREBY WAIVES, ANY CLAIMS
AGAINST THE AGENT, THE ISSUING BANK, AND THE LENDERS, ON ANY THEORY OF
LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED
TO DIRECT OR ACTUAL DAMAGES) ARISING OUT OF, IN CONNECTION WITH, OR AS A
RESULT OF, THIS CREDIT AGREEMENT, ANY OTHER FUNDAMENTAL DOCUMENT, ANY AGREEMENT
OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.

 

SECTION 13.9.  No Waiver.  No failure on the part of the Agent, or any
Lender or the Issuing Bank to exercise, and no delay in exercising, any right,
power or remedy hereunder, under the Notes or any other Fundamental Document or
with regard to any Letter of Credit shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, power or remedy
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy.  All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
law.

 

SECTION 13.10.  Extension
of Payment Date.  Except as otherwise
specifically provided in Article 2 hereof, should any payment or
prepayment of principal of or interest on the Notes or any other amount due
hereunder, become due and payable on a day other than a Business Day, the due
date of such payment or prepayment shall be extended to the next succeeding
Business Day and, in the case of a payment or prepayment of principal, interest
shall be payable thereon at the rate herein specified during such extension.

 

SECTION 13.11.  Amendments, etc.  No modification, amendment or waiver of any
provision of this Credit Agreement or any other Fundamental Document, and no
consent to any departure by the Borrower or any other Credit Party herefrom or
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Required Lenders and then such 

 

 

waiver
or consent shall be effective only in the specific instance and for the purpose
for which given; provided, however, that no such modification,
waiver, consent or amendment shall, without the written consent of (a) each
affected Lender, (i) change any Commitment of such Lender, (ii) reduce
the interest payable on such Lender’s Loans, (iii) alter the principal
amount of such Lender’s Loans or any reimbursement obligation in respect of
Letters of Credit; (iv) reduce the rate at which the Commitment Fees are
payable to such Lender or (v) reduce the fees payable to such Lender with
respect to Letters of Credit issued hereunder as set forth in Section 2.4(f) and
(g) and (b) all Lenders, (i) amend or modify any provision of
this Credit Agreement, which expressly provides for the unanimous consent or
approval of the Lenders, (ii) release a substantial portion of the
Collateral or any of the Pledged Securities (except as contemplated herein), (iii) extend
the Maturity Date or (iv) amend the definition of “Required Lenders,” (v) materially
amend the definition of “Collateral” (and defined terms used in the definition
of Collateral), or (vi) amend or modify this Section 13.11.  No such amendment or modification may
adversely affect the rights and obligations of the Agent hereunder without its
prior written consent or the rights and obligations of the Issuing Bank without
its prior written consent.  No notice to
or demand on the Borrower shall entitle the Borrower to any other or further
notice or demand in the same, similar or other circumstances.  Each holder of a Note shall be bound by any
amendment, modification, waiver or consent authorized as provided herein,
whether or not such Note shall have been marked to indicate such amendment,
modification, waiver or consent and any consent by any holder of a Note shall
bind any Person subsequently acquiring such Note, whether or not such Note is
so marked.

 

SECTION 13.12.  Severability.  Any provision of this Credit Agreement or of
the Notes which is invalid, illegal or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such invalidity,
illegality or unenforceability without invalidating the remaining provisions
hereof or thereof, and any such invalidity, illegality or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.

 

SECTION 13.13.  SERVICE OF PROCESS.  EACH CREDIT PARTY PARTY HERETO (EACH A “SUBMITTING
PARTY”) HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE STATE COURTS OF
THE STATE OF NEW YORK IN NEW YORK COUNTY AND TO THE JURISDICTION OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSES OF
ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THIS CREDIT
AGREEMENT (INCLUDING, BUT NOT LIMITED TO, THE LETTERS OF CREDIT), THE SUBJECT
MATTER HEREOF, ANY OTHER FUNDAMENTAL DOCUMENT AND THE SUBJECT MATTER THEREOF.  EACH SUBMITTING PARTY TO THE EXTENT PERMITTED
BY APPLICABLE LAW (A) HEREBY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF
MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR OTHER
PROCEEDING BROUGHT IN THE ABOVE-NAMED COURTS ANY CLAIM THAT IT IS NOT SUBJECT
PERSONALLY TO THE JURISDICTION OF SUCH COURTS, THAT ITS PROPERTY IS EXEMPT OR
IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING IS
BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR
PROCEEDING IS IMPROPER OR THAT THIS CREDIT AGREEMENT, THE 

 

 

SUBJECT MATTER HEREOF, THE OTHER FUNDAMENTAL DOCUMENT OR THE
SUBJECT MATTER THEREOF (AS APPLICABLE) MAY NOT BE ENFORCED IN OR BY SUCH
COURT, (B) HEREBY WAIVES THE RIGHT TO REMOVE ANY SUCH ACTION, SUIT OR
PROCEEDING INSTITUTED BY THE AGENT, THE ISSUING BANK OR A LENDER IN STATE COURT
TO FEDERAL COURT, OR TO REMAND AN ACTION INSTITUTED IN FEDERAL COURT TO STATE
COURT AND (C) HEREBY WAIVES THE RIGHT TO ASSERT IN ANY SUCH ACTION, SUIT
OR PROCEEDING ANY OFFSETS OR COUNTERCLAIMS EXCEPT COUNTERCLAIMS THAT ARE
COMPULSORY OR OTHERWISE ARISE FROM THE SAME SUBJECT MATTER.  EACH SUBMITTING PARTY HEREBY CONSENTS TO
SERVICE OF PROCESS BY MAIL AT THE ADDRESS TO WHICH NOTICES ARE TO BE GIVEN TO IT
PURSUANT TO SECTION 13.1 HEREOF. 
EACH SUBMITTING PARTY AGREES THAT ITS SUBMISSION TO JURISDICTION AND
CONSENT TO SERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF EACH
OF THE OTHER PARTIES HERETO.  FINAL
JUDGMENT AGAINST ANY SUBMITTING PARTY IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL
BE CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHER JURISDICTION (X) BY
SUIT, ACTION OR PROCEEDING ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH
SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND OF THE AMOUNT OF INDEBTEDNESS OR
LIABILITY OF THE SUBMITTING PARTY THEREIN DESCRIBED, OR (Y) IN ANY OTHER
MANNER PROVIDED BY OR PURSUANT TO THE LAWS OF SUCH OTHER JURISDICTION, PROVIDED,
HOWEVER, THAT THE AGENT, THE ISSUING BANK OR A LENDER MAY AT ITS
OPTION BRING SUIT, OR INSTITUTE OTHER JUDICIAL PROCEEDINGS, AGAINST A
SUBMITTING PARTY OR ANY OF ITS ASSETS IN ANY STATE OR FEDERAL COURT OF THE
UNITED STATES OR OF ANY COUNTRY OR PLACE WHERE THE SUBMITTING PARTY OR SUCH
ASSETS MAY BE FOUND.

 

SECTION 13.14.  Headings.  Section headings used herein and the
Table of Contents are for convenience only and are not to affect the
construction of or be taken into consideration in interpreting this Credit
Agreement.

 

SECTION 13.15.  Execution
in Counterparts.  This Credit
Agreement may be executed in any number of counterparts, each of which shall
constitute an original, but all of which taken together shall constitute one
and the same instrument.

 

SECTION 13.16.  Subordination
of Intercompany Indebtedness, Receivables and Advances.  (a)  Each Credit Party hereby agrees
that any intercompany Indebtedness or other intercompany receivables or
intercompany advances of any other Credit Party, directly or indirectly in
favor of such Credit Party of whatever nature at any time outstanding shall be
completely subordinate in right of payment to the prior payment in full of the
Obligations, and that no payment on any such Indebtedness, receivable or
advance shall be made (i) except that intercompany receivables and
intercompany advances permitted pursuant to the terms hereof may be repaid and
intercompany Indebtedness permitted pursuant to the terms hereof may be repaid,
in each case so long as no Default or Event of Default shall have occurred and
be continuing and (ii) except as specifically consented to by all the
Lenders in writing, until the 

 

 

prior
payment in full of all the Obligations, expiration or other termination of all
outstanding Letters of Credit and termination of the Commitments.

 

(b)           In the event that
any payment on any such Indebtedness shall be received by any Credit Party
other than as permitted by Section 13.16(a) before payment in full of
all Obligations, expiration or other termination of all outstanding Letters of
Credit and termination of the Commitments, such Credit Party shall receive such
payments and hold the same in trust for the Agent segregate the same from its
own assets and immediately pay over to the Agent for itself, the Issuing Bank
and the Lenders all such sums to the extent necessary so that the Agent, the
Issuing Bank and the Lenders shall have been paid all Obligations owed or which
may become owing.

 

SECTION 13.17.  Confidentiality.  Each of the Lenders, the Agent and the
Issuing Bank hereby agrees that it will use its best efforts to treat any
information obtained from the Credit Parties and their Affiliates in connection
with this Credit Agreement as confidential, except that each of the Lenders,
the Agent and the Issuing Bank shall be permitted to disclose information (i) to
their Affiliates and to their (and their Affiliates’) respective officers,
directors, trustees, employees, agents, auditors, attorneys and representatives
(who will be informed of the confidential nature of the material); (ii) to
prospective assignees in accordance with Section 13.3(h) hereof, (iii) to
the extent required by Applicable Law or by any subpoena or similar legal
process; (iv) to the extent requested by any bank or other regulatory
authority; (v) to the extent such information (A) becomes publicly
available other than as a result of a breach of this provision or any confidentiality
letter executed by any prospective assignee addressed to the Borrower, its
representatives or agents, (B) becomes available to any of the Lenders,
the Agent or the Issuing Bank on a nonconfidential basis from a source other
than the Credit Parties or any of their respective Affiliates which source is
not known to such Lender, the Agent or the Issuing Bank to be prohibited from
transmitting the information by a contractual, legal or fiduciary obligation or
(C) was available to any of the Lenders, the Agent or the Issuing Bank on
a nonconfidential basis prior to its disclosure to any of the Lenders, the
Agent or the Issuing Bank  by any Credit
Party or any of their respective Affiliates; (vi) to the extent any Credit
Party, prior to such disclosure, shall have consented to such disclosure in
writing; or (vii) in connection with the enforcement by any Lender, the
Agent or the Issuing Bank of its rights under or in respect of this Credit
Agreement.

 

SECTION 13.18.  Entire
Agreement.  This Credit Agreement
(including the Exhibits and Schedules hereto) and the other Fundamental
Documents represent the entire agreement of the parties with regard to the
subject matter hereof and the terms of any letters and other documentation
entered into between any of the parties hereto (other than the Fee Letter)
prior to the execution of this Credit Agreement which relate to Loans to be
made or the Letters of Credit to be issued hereunder shall be replaced by the
terms of this Credit Agreement.

 

SECTION 13.19.  Right of
Set-Off.  Upon the occurrence and
during the continuance of any Event of Default, each of the Agent and the
Lenders is hereby authorized at any time and from time to time, to the fullest
extent permitted by law and without order of or application to any court, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Person to or for the credit or the account of any Credit Party against
any and all of the Obligations, 

 

 

irrespective
of whether or not such Person shall have made any demand under any Fundamental
Document and although the Obligations may not have been accelerated. The rights
of each Lender and the Agent under this Section are in addition to other
rights and remedies which such Lender and the Agent may have upon the
occurrence and during the continuance of any Event of Default.

 

14.           HALLMARK SUBORDINATED PARTICIPATION

 

SECTION 14.1.  Sale and
General Terms of Participation Upon A Payment Under the Hallmark Cards Facility
Guarantee.  (a)  The net
proceeds received by the Agent from any payment made by Hallmark Cards under
the Hallmark Cards Facility Guarantee shall not be applied to repay Obligations
but shall instead be treated as the purchase price for the sale of a
subordinated participation in the Obligations from the Agent and the Lenders to
Hallmark Cards.  Such subordinated
participation in the Obligations shall be purchased at the face amount and
shall be hereinafter referred to as the “Hallmark Subordinated Participation”.  If the amount of the drawing is less than the
amount of the outstanding Obligations, the purchase shall be deemed to be made
in the following order: (i) claims other than principal and interest, (ii) interest,
and (iii) principal.

 

(b)           The purchase and sale of the Hallmark
Subordinated Participation shall be automatic and shall not require any action
on behalf of Hallmark Cards or on behalf of the Lenders.  Such purchase and sale shall be pro rata among
all of the Lenders.  To the extent that
such purchase and sale is of the outstanding principal amount of the Loans, the
Agent shall give notice to each of the Lenders and each Lender shall annex to
its Note the notice from the Agent which memorializes the amount of the
subordinated participation being purchased in that Note.

 

(c)           Such purchase and sale shall be
without any representation, warranty or recourse to the Agent or the Lenders;
provided, however, that each Lender makes a representation and warranty that it
is the legal and beneficial owner of the interest being assigned thereby and
that such interest is free and clear of any adverse claims.  The assigning Lender makes no representation
or warranty and assumes no responsibility with regard to any of the statements,
warranties or representations made in or in connection with any Fundamental
Document or as to the execution, legality, validity, enforceability,
genuineness or sufficiency or value thereof or of any instrument or
documentation furnished pursuant thereto.

 

(d)           Once all of the Senior Obligations
have been paid in full, each of the Lenders shall, if requested by Hallmark
Cards and at the expense of Hallmark Cards, endorse its Note without
representation, warranty or recourse to Hallmark Cards and deliver such Note to
the Agent for delivery to Hallmark Cards. 
At that point in time, the Credit Parties and Hallmark Cards agree that
the Agent may immediately resign notwithstanding any provisions to the contrary
contained in the Credit Agreement and that the Agent and the Issuing Bank shall
continue to be entitled to all of the indemnities provided in the Credit
Agreement as secured Lenders with regard to all matters relating to periods or
actions taken prior to their resignation. 
To the extent that there are any Letters of Credit outstanding at the
time of a payment by Hallmark Cards under the Hallmark Cards Facility
Guarantee, cash received by the Agent subsequent to such payment shall be used
first to provide cash collateral for such Letters of Credit.

 

 

(e)           Notwithstanding any provisions to the
contrary in the Credit Agreement, the Junior Creditor shall not be entitled to
any right of consent or to vote under the Credit Agreement or to receive any
payments with regard to accrued interest and fees or other amounts applicable
to the Hallmark Subordinated Participation until all of the Senior Obligations
shall have been paid in full.

 

(f)            The Borrower acknowledges that the
Total Commitment shall terminate upon any assertion by the Agent of any claim
under the Hallmark Cards Facility Guarantee and that subsequent thereto neither
the Agent, the Issuing Bank nor the Lenders shall be obligated to provide any
additional credit whatsoever to the Credit Parties.

 

SECTION 14.2.  Agreement
to Subordinate.  The Junior Creditor
agrees that the Junior Obligations are and shall be subordinate and junior in
right of payment, to the extent and in the manner hereinafter set forth, to the
prior payment in full of the Senior Obligations.  Interest on the Hallmark Subordinated Participation
shall accrue in accordance with the provisions of Section 2.6 hereof, but
no payment of principal or interest or any other amounts shall be made with
respect to the Junior Obligations until all of the Senior Obligations have been
paid in full.  Any payment of principal
of, or interest on, the Loans or any other amounts with regard to Obligations
received or collected by the Agent, any Lender or the Junior Creditor shall be
allocated first entirely to the Senior Obligations until the Senior Obligations
are paid in full and only thereafter allocated to the Junior Obligations.  The expressions “prior payment in full”, “payment
in full”, “paid in full” or any other similar term or phrase when used herein
with respect to the Senior Obligations shall mean the payment in full, in cash,
of all of the Senior Obligations.

 

SECTION 14.3.  Restrictions
on Payment of the Junior Obligations. 
The Junior Creditor shall not ask, demand, sue for, take or receive,
directly or indirectly, from any Credit Party, in cash or other property, by
setoff, by realizing upon the Collateral, foreclosing on any lien or otherwise,
by exercise of any remedies or rights under this Credit Agreement or by
executions, garnishments, or in any other manner, payment of, or additional security
for, all or any part of the Junior Obligations unless and until the Senior
Obligations shall have been paid in full. 
The Credit Parties will not make any payment of the Junior Obligations,
or take any other action, in contravention of the provisions of this Article 14.

 

SECTION 14.4.  Additional
Provisions Concerning Subordination. 
The Junior Creditor and the Credit Parties agree as follows:

 

(a)           In the event of (x) any dissolution, winding-up,
liquidation or reorganization of a Credit Party (whether voluntary or
involuntary and whether in bankruptcy, insolvency or receivership proceedings,
or upon an assignment for the benefit of creditors or proceedings for voluntary
or involuntary liquidation, dissolution or other winding-up of the Credit Party,
whether involving insolvency or bankruptcy, or any other marshalling of the
assets and liabilities of the Credit Party or otherwise), or (y) any Event
of Default or an event that with notice or passage of time would constitute an
Event of Default, or any default, demand for payment or acceleration of
maturity regarding the Junior Obligations:

 

 

(i)            all Senior Obligations shall first be paid in full to the
Agent for the benefit of the holders of the Senior Obligations before any
payment or distribution is made upon the principal of, interest on, or any
fees, costs, charges or expenses in connection with, the Junior Obligations;
and

 

(ii)           to the extent necessary to pay in full all Senior
Obligations remaining unpaid after giving effect to any concurrent payment or
distribution to the holders of the Senior Obligations, any payment or
distribution of assets of a Credit Party, whether in cash, property or
securities to which the Junior Creditor would be entitled except for the
provisions hereof, shall be paid or delivered by the Credit Party, or any
receiver, trustee in bankruptcy, liquidating trustee, disbursing agent, agent
or other person making such payment or distribution, directly to the Agent to
be applied to outstanding Senior Obligations before any payment or distribution
is made upon the Junior Obligations.

 

(b)           In any proceeding referred to or resulting from any event
referred to in subsection (a) of this Section 14.4 commenced by or
against the Borrower:

 

(i)            The Agent may, and is hereby irrevocably authorized and
empowered (in its own name or in the name of the Junior Creditor or otherwise),
but shall have no obligation to, (A) demand, sue for, collect and receive
every payment or distribution referred to in subsection (a) of this Section 14.4
and give acquittance therefor, (B) file claims and proofs of claim in
respect of the Junior Obligations and (C) take such other action as the
Agent may deem necessary or advisable for the exercise or enforcement of any of
the rights or interests of the Agent and the Lenders.

 

(ii)           The Junior Creditor will duly and promptly take such
action as the Agent may reasonably request to collect the Junior Obligations
for the account of the holders of the Senior Obligations and to file
appropriate claims or proofs of claim with respect thereto, to execute and
deliver to the Agent such powers of attorney, assignments or other instruments
as the Agent may request in order to enable it to enforce any and all claims
with respect to the Junior Obligations, and to collect and receive any and all
payments or distributions that may be payable or deliverable upon or with
respect to the Junior Obligations.

 

(c)           All payments or distributions upon or with respect to the
Junior Obligations that are received by the Junior Creditor contrary to the
provisions of this Article 14 shall be deemed to be the property of the
holders of the Senior Obligations, shall be received in trust for the benefit
of the holders of the Senior Obligations, shall be segregated from other funds
and property held by the Junior Creditor and shall be forthwith paid over to
the Agent for the benefit of the holders of the Senior Obligations in the same
form as so received (with any necessary endorsement) to be applied to the
payment or prepayment of the Senior Obligation until the Senior Obligations
shall have been paid in full.

 

(d)           The subordination provisions contained herein are for the
benefit of each holder of Senior Obligations and may not be rescinded, modified
or cancelled at any time without the prior written consent of all holders.

 

 

(e)           So long as the Junior Obligations remains outstanding, the
Junior Creditor agrees not to assert any direct right of legal redress against
a Credit Party with respect to the Junior Obligations.  The Junior Creditor hereby authorizes the
Agent to take legal action to enforce or protect their interest with respect to
the Senior Obligations as it may from time to time see fit.

 

(f)            Any holder of Senior Obligations may at any time or from
time to time grant to others assignments or participations in the Loans
pursuant to the terms of Section 13.3 hereof.  Any such assignment or participation shall
continue to be treated as a Senior Obligation of the Credit Parties and any
holder of such an assignment or participation shall be entitled to the benefits
of the subordination set forth in Section 14.2 above.  The Junior Creditor will not sell, assign or
otherwise dispose of the Junior Obligations or any portion thereof, or grant
any sub-participation therein, without the prior written consent of the
Required Lenders.

 

 

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

 

	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  CROWN
  MEDIA HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
  [signature
  block omitted]

  
	
   

  	
   

  
	
   

  	
  CM
  INTERMEDIARY, LLC

  
	
   

  	
  CROWN
  MEDIA UNITED STATES, LLC

  
	
   

  	
  CITI
  TEEVEE, LLC

  
	
   

  	
  DOONE
  CITY PICTURES, LLC

  
	
   

  	
   

  
	
   

  	
  [signature
  block omitted]

  

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
  JPMORGAN CHASE BANK, N.A.,
  individually and as Agent and Issuing Bank

  

 

 

	
   

  	
  [signature
  block omitted]Exhibit
10.10

 

H C CROWN
CORP

103 Foulk Road,
Suite 214

Wilmington, DE 19803

(302) 654-7584

Fax (302) 652-8667

 

March 19, 2010

 

Crown Media Holdings, Inc.

12700 Ventura Boulevard

Studio City, California 91604 

Attention: Chief Executive Officer

 

Crown Media Holdings, Inc. 

12700 Ventura Boulevard

Studio City, California 91604 

Attention: Chief Financial Officer

 

Crown Media Holdings, Inc. 

12700 Ventura Boulevard 

Studio City, California 91604 

Attention: General Counsel

 

Re:                                    Recapitalization
Agreement

 

Gentlemen:

 

Reference is hereby made to that certain Master
Recapitalization Agreement, dated as of February 26, 2010 (the “Recapitalization
Agreement”), by and among by and among Hallmark Cards, Incorporated, a
Missouri corporation (“Hallmark Cards”), H C Crown Corp., a Delaware
corporation (“HCC” and, together with Hallmark Cards, the “Hallmark Lenders”),
Hallmark Entertainment Holdings, Inc., a Delaware corporation (“HEH” and,
collectively with the Hallmark Lenders, the “Hallmark Parties”), Crown Media
Holdings, Inc., a Delaware corporation (the “Company”), Crown Media United
States, LLC, a Delaware limited liability company (“CMUS”), and the
subsidiaries of the Company listed as Guarantors on the Credit Facility (the “Guarantors,”
and, together with the Company and CMUS, the “Debtors”). Capitalized terms used
but not otherwise defined in this letter shall have the respective meanings
ascribed thereto in the Recapitalization Agreement.

 

 

not later than March 20, 2010) the Information Statement in a form
that complies in all material respects with the requirements of the Exchange
Act and the rules and regulations promulgated thereunder (the “Covenant”).
The Hallmark Parties understand that the Company has determined that it would
be advisable to present the Information Statement to the Company’s Board of
Directors at a meeting thereof scheduled to be held on March 25, 2010 and
to file the Information Statement with the SEC following approval thereof by
the Company’s Board of Directors at such meeting. In light of the foregoing,
the Debtors have requested that the Hallmark Parties amend the Covenant.

 

The parties to this letter agreement hereby agree
that Section 5.5 of the Recapitalization Agreement shall be amended to
change the date contained in the third line thereof from March 20, 2010 to
March 31, 2010.

 

Except as otherwise expressly provided herein, the
terms and conditions of the Recapitalization Agreement remain unchanged and the
Hallmark Parties hereby reserve all rights and remedies available to them at
law, in equity and under the Recapitalization Agreement and the Ancillary
Documents.

 

Please acknowledge that the foregoing is acceptable
by executing a counterpart to this letter and returning it to the Hallmark
Parties in accordance with Section 11 (Notices) of the Recapitalization
Agreement.

 

[Remainder of
page intentionally left blank]

 

2

 

In witness whereof, the undersigned has executed
this letter as of the date first above written.

 

 

	
   

  	
  HALLMARK CARDS, INCORPORATED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy Griffith

  
	
   

  	
   

  	
  Name: Timothy Griffith

  
	
   

  	
   

  	
  Title: Executive Vice President – CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  H C CROWN CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy Griffith

  
	
   

  	
   

  	
  Name: Timothy Griffith

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HALLMARK ENTERTAINMENT HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy Griffith

  
	
   

  	
   

  	
  Name: Timothy Griffith

  
	
   

  	
   

  	
  Title: President

  

 

 

Accepted and agreed (with the consent of the Special Committee) this 19th day of March, 2010.

 

 

	
   

  	
  CROWN MEDIA HOLDINGS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ C. Stanford

  
	
   

  	
   

  	
  Name: Charles Stanford

  
	
   

  	
   

  	
  Title: Executive Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CROWN MEDIA UNITED STATES, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ C. Stanford

  
	
   

  	
   

  	
  Name: Charles Stanford

  
	
   

  	
   

  	
  Title: Executive Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CM INTERMEDIARY, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ C. Stanford

  
	
   

  	
   

  	
  Name: Charles Stanford

  
	
   

  	
   

  	
  Title: Executive Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CITI TEEVEE, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ C. Stanford

  
	
   

  	
   

  	
  Name: Charles Stanford

  
	
   

  	
   

  	
  Title: Executive Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DOONE CITY PICTURES, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ C. Stanford

  
	
   

  	
   

  	
  Name: Charles Stanford

  
	
   

  	
   

  	
  Title: Executive Vice President

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00177-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00177-of-00352.parquet"}]]