Document:

Exhibit
10.11

 

EXECUTION
VERSION

	
   

  	
   

  

 

 

SECURITY
AGREEMENT

 

DATED
AS OF JUNE 29, 2010

 

AMONG

 

CROWN
MEDIA HOLDINGS, INC.

 

AS
DEBTOR

 

AND

 

HC
CROWN CORP.

 

AS
SECURED PARTY

 

	
   

  	
   

  

 

 

TABLE
OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Grant of Security Interest

  	
  1

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Authorization to File Financing Statements

  	
  2

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Other Actions

  	
  2

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Relation to Other Security Documents

  	
  5

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Representations and Warranties Concerning
  Grantor’s Legal Status

  	
  5

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Covenants Concerning Grantor’s Legal Status

  	
  5

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Representations and Warranties Concerning
  Collateral, etc.

  	
  6

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Covenants Concerning Collateral, etc.

  	
  6

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Insurance

  	
  7

  
	
   

  	
   

  	
   

  
	
  11.

  	
  Collateral Protection Expenses;
  Preservation of Collateral

  	
  7

  
	
   

  	
   

  	
   

  
	
  12.

  	
  Securities and Deposits

  	
  7

  
	
   

  	
   

  	
   

  
	
  13.

  	
  Notification to Account Debtors and Other
  Persons Obligated on Collateral

  	
  7

  
	
   

  	
   

  	
   

  
	
  14.

  	
  Power of Attorney

  	
  8

  
	
   

  	
   

  	
   

  
	
  15.

  	
  Rights and Remedies

  	
  9

  
	
   

  	
   

  	
   

  
	
  16.

  	
  Standards for Exercising Rights and
  Remedies

  	
  9

  
	
   

  	
   

  	
   

  
	
  17.

  	
  No Waiver by Secured Party, etc.

  	
  10

  
	
   

  	
   

  	
   

  
	
  18.

  	
  Suretyship Waivers by Grantor

  	
  10

  
	
   

  	
   

  	
   

  
	
  19.

  	
  Marshalling

  	
  10

  
	
   

  	
   

  	
   

  
	
  20.

  	
  Proceeds of Dispositions; Expenses

  	
  11

  
	
   

  	
   

  	
   

  
	
  21.

  	
  Overdue Amounts

  	
  11

  
	
   

  	
   

  	
   

  
	
  22.

  	
  Amendments, Etc.

  	
  11

  
	
   

  	
   

  	
   

  
	
  23.

  	
  Notices

  	
  11

  

 

i

 

	
  24.

  	
  Governing Law; Consent to Jurisdiction

  	
  12

  
	
   

  	
   

  	
   

  
	
  25.

  	
  Waiver of Jury Trial

  	
  13

  
	
   

  	
   

  	
   

  
	
  26.

  	
  Miscellaneous

  	
  13

  
	
   

  	
   

  	
   

  
	
  27.

  	
  Intercreditor

  	
  13

  

 

ii

 

THIS SECURITY AGREEMENT,
(this “Agreement”) dated as of June 29, 2010 between Crown Media
Holdings, Inc, a Delaware corporation (the “Debtor”), each of the
Guarantors listed on the signature pages hereto (the “Guarantors”
and together with the Debtor, the “Grantors”) and HC Crown Corp., a
Delaware corporation (the “Secured Party”).

 

WHEREAS, the Debtor and the
Secured Party are each a party to that certain Security and Pledge Agreement,
dated July 27, 2007 (as amended, supplemented or modified from time to
time the “2007 Security Agreement”) by and among the Debtor, the
subsidiaries of the Debtor listed as Guarantors on that certain Credit,
Security, Guarantee and Pledge Agreement dated as of August 31, 2001, as
subsequently amended, among Debtor, the Guarantors named therein, the Lenders
named therein and JPMorgan Chase as Agent and Hallmark Cards, Incorporated
on behalf of itself and as agent for each of the Secured Party and Hallmark
Entertainment Holdings, Inc., and the Debtor and the Secured party wish
to, and hereby do, continue and extend the security interest granted therein;

 

WHEREAS, the Grantors have entered
into a Credit Agreement dated as of June 29, 2010 (as amended and in
effect from time to time, the “Credit Agreement”), with the Secured
Party, pursuant to which the Secured Party, subject to the terms and conditions
contained therein, is deemed to make loans to the Debtor; and

 

WHEREAS, it is a condition
precedent to the Secured Party’s entry into the Credit Agreement that the
Grantors execute and deliver to the Secured Party a security agreement in
substantially the form hereof; and

 

WHEREAS, the each of the
Grantors wishes to grant a security interest in favor of the Secured Party as
herein provided;

 

NOW, THEREFORE, in
consideration of the promises contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:

 

1.           Definitions. All
capitalized terms used herein without definitions shall have the respective
meanings provided therefor in the Credit Agreement. The term “State,” as used
herein, means the State of New York. All terms defined in the Uniform
Commercial Code of the State and used herein shall have the same definitions
herein as specified therein. However, if a term is defined in Article 9 of
the Uniform Commercial Code of the State differently than in another
Article of the Uniform Commercial Code of the State, the term has the
meaning specified in Article 9.

 

2.           Grant of Security Interest. The Grantors
hereby continue and extend the security interest granted pursuant to the 2007
Security Agreement and grants to the Secured Party, to secure the payment and
performance in full of all of the Obligations, a security interest in and so
pledges and assigns to the Secured Party the following properties, assets and
rights of the Grantors, wherever located, whether now owned or hereafter
acquired or arising, and all proceeds and products thereof (all of the same
being hereinafter called the “Collateral”): all personal and fixture
property of every kind and nature including without limitation all goods (including
inventory,

 

1

 

equipment and any accessions thereto), instruments
(including promissory notes), documents, accounts (including
health-care-insurance receivables), chattel paper (whether tangible or
electronic), deposit accounts, letter-of-credit rights (whether or not the
letter of credit is evidenced by a writing), commercial tort claims, securities
and all other investment property, supporting obligations, any other contract
rights or rights to the payment of money, insurance claims and proceeds, and
all general intangibles (including all payment intangibles). The Secured Party
acknowledges that the attachment of its security interest in any additional
commercial tort claim as original collateral is subject to the Grantor’s
compliance with Section 4.7.

 

3.             Authorization to File
Financing Statements. The Grantors hereby irrevocably authorize the
Secured Party at any time and from time to time to file in any filing office in
any Uniform Commercial Code jurisdiction any initial financing statements and
amendments thereto that (a) indicate the Collateral (i) as all assets
of the Grantors or words of similar effect, regardless of whether any
particular asset comprised in the Collateral falls within the scope of
Article 9 of the Uniform Commercial Code of the State or such
jurisdiction, or (ii) as being of an equal or lesser scope or with greater
detail, and (b) provide any other information required by part 5 of
Article 9 of the Uniform Commercial Code of the State, or such other
jurisdiction, for the sufficiency or filing office acceptance of any financing
statement or amendment, including (i) whether the Grantor is an
organization, the type of organization and any organizational identification number
issued to the Grantor and, (ii) in the case of a financing statement filed
as a fixture filing or indicating Collateral as as-extracted collateral or
timber to be cut, a sufficient description of real property to which the
Collateral relates. The Grantors agree to furnish any such information to the
Secured Party promptly upon the Secured Party’s request. The Grantors each also
ratify their authorization for the Secured Party to have filed in any Uniform
Commercial Code jurisdiction any like initial financing statements or
amendments thereto if filed prior to the date hereof.

 

4.             Other Actions. To further
the attachment, perfection and first priority of, and the ability of the
Secured Party to enforce, the Secured Party’s security interest in the
Collateral, and without limitation on the Grantor’s other obligations in this
Agreement, each Grantor agrees, in each case at such Grantor’s expense, to take
the following actions with respect to the following Collateral:

 

4.1           Promissory Notes and
Tangible Chattel Paper. If any Grantor shall at any time hold or
acquire any promissory notes or tangible chattel paper, such Grantor shall
forthwith endorse, assign and deliver the same to the Secured Party, or for so
long as the Credit, Security, Guaranty and Pledge Agreement, dated as of
August 31, 2001, (as amended the “Revolver”), the Borrower, the
Guarantors named therein, the Lenders referred to therein and JPMorgan Chase
Bank, N.A., as Administrative Agent (the “Revolver Agent”) and as
Issuing Bank for the Lenders is outstanding, the Revolver Agent, in accordance
with the Intercreditor Agreement, accompanied by such instruments of transfer
or assignment duly executed in blank as the Secured Party or the Revolver Agent
may from time to time specify.

 

4.2           Deposit Accounts. For each
deposit account that the any Grantor may at any time open or maintain, such
Grantor shall, at the Secured Party’s request and option, pursuant to an
agreement in form and substance satisfactory to the Secured Party, either
(a) cause the depositary bank to comply at any time with instructions from
the Secured Party to such depositary bank directing the disposition of funds
from time to time credited to such deposit account, without

 

2

 

further consent of the Grantor, or (b) arrange
for the Secured Party to become the customer of the depositary bank with
respect to the deposit account, with the Grantor being permitted, only with the
consent of the Secured Party, to exercise rights to withdraw funds from such
deposit account. The provisions of this paragraph shall not apply to
(i) any deposit account for which the Grantor the depositary bank and the
Secured Party have entered into a cash collateral agreement specially
negotiated among the Grantor, the depositary bank and the Secured Party for the
specific purpose set forth therein, (ii) a deposit account for which the
Secured Party is the depositary bank and is in automatic control, and
(iii) deposit accounts specially and exclusively used for payroll, payroll
taxes and other employee wage and benefit payments to or for the benefit of the
Grantor’s salaried employees.

 

4.3           Investment Property. If any
Grantor shall at any time hold or acquire any certificated securities, the
Grantor shall forthwith endorse, assign and deliver the same to the Secured
Party, or provided the Revolver is still in effect, accompanied by such
instruments of transfer or assignment duly executed in blank as the Secured
Party may from time to time specify. If any securities now or hereafter
acquired by the Grantor are uncertificated and are issued to the Grantor or its
nominee directly by the issuer thereof, the Grantor shall immediately notify
the Secured Party thereof and, at the Secured Party’s request and option,
pursuant to an agreement in form and substance satisfactory to the Secured
Party, either (a) cause the issuer to agree to comply with instructions
from the Secured Party as to such securities, without further consent of the
Grantor or such nominee, or (b) arrange for the Secured Party to become
the registered owner of the securities. If any securities, whether certificated
or uncertificated, or other investment property now or hereafter acquired by
any Grantor are held by the Grantor or its nominee through a securities intermediary
or commodity intermediary, the Grantor shall immediately notify the Secured
Party thereof and, at the Secured Party’s request and option, pursuant to an
agreement in form and substance satisfactory to the Secured Party, either
(i) cause such securities intermediary or (as the case may be) commodity
intermediary to agree to comply with entitlement orders or other instructions
from the Secured Party to such securities intermediary as to such securities or
other investment property, or (as the case may be) to apply any value
distributed on account of any commodity contract as directed by the Secured
Party to such commodity intermediary, in each case without further consent of
the Grantor or such nominee, or (ii) in the case of financial assets or
other investment property held through a securities intermediary, arrange for
the Secured Party to become the entitlement holder with respect to such
investment property, with the Grantor being permitted, only with the consent of
the Secured Party, to exercise rights to withdraw or otherwise deal with such
investment property. The provisions of this paragraph shall not apply to any
financial assets credited to a securities account for which the Secured Party
is the securities intermediary.

 

4.4           Collateral in the Possession
of a Bailee. If any Collateral is at any time in the possession
of a bailee, the Grantor shall promptly notify the Secured Party thereof and,
at the Secured Party’s request and option, shall promptly obtain an
acknowledgement from the bailee, in form and substance satisfactory to the
Secured Party, that the bailee holds such Collateral for the benefit of the
Secured Party, and that such bailee agrees to comply, without further consent
of the Grantor, with instructions from the Secured Party as to such Collateral.

 

4.5           Electronic Chattel Paper and
Transferable Records. If the Grantor at any time holds or acquires an
interest in any electronic chattel paper or any “transferable record,” as 

 

3

 

that term is defined in Section 201 of the
federal Electronic Signatures in Global and National Commerce Act, or in
Section 16 of the Uniform Electronic Transactions Act as in effect in any
relevant jurisdiction, the Grantor shall promptly notify the Secured Party
thereof and, at the request and option of the Secured Party, shall take such
action as the Secured Party may reasonably request to vest in the Secured Party
control, under Section 9-105 of the Uniform Commercial Code, of such
electronic chattel paper or control under Section 201 of the federal
Electronic Signatures in Global and National Commerce Act or, as the case may
be, Section 16 of the Uniform Electronic Transactions Act, as so in effect
in such jurisdiction, of such transferable record.

 

4.6           Letter-of-Credit Rights. If any
Grantor is at any time a beneficiary under a letter of credit, the Grantor
shall promptly notify the Secured Party thereof and, at the request and option
of the Secured Party, the Grantor shall, pursuant to an agreement in form and
substance satisfactory to the Secured Party, either (i) arrange for the
issuer and any confirmer or other nominated person of such letter of credit to
consent to an assignment to the Secured Party of the proceeds of the letter of
credit, or (ii) arrange for the Secured Party to become the transferee
beneficiary of the letter of credit.

 

4.7           Commercial Tort Claims. If any
Grantor shall at any time hold or acquire a commercial tort claim, the Grantor
shall immediately notify the Secured Party in a writing signed by the Grantor
of the particulars thereof and grant to the Secured Party in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance satisfactory to
the Secured Party.

 

4.8           Other Actions as to Any and
All Collateral. Each Grantor further agrees, at the request and
option of the Secured Party, to take any and all other actions the Secured
Party may determine to be necessary or useful for the attachment, perfection
and first priority of, and the ability of the Secured Party to enforce, the
Secured Party’s security interest in any and all of the Collateral, including,
without limitation, (a) executing, delivering and, where appropriate,
filing financing statements and amendments relating thereto under the Uniform
Commercial Code, to the extent, if any, that the Grantor’s signature thereon is
required therefor, (b) causing the Secured Party’s name to be noted as
secured party on any certificate of title for a titled good if such notation is
a condition to attachment, perfection or priority of, or ability of the Secured
Party to enforce, the Secured Party’s security interest in such Collateral,
(c) complying with any provision of any statute, regulation or treaty of
the United States as to any Collateral if compliance with such provision is a
condition to attachment, perfection or priority of, or ability of the Secured
Party to enforce, the Secured Party’s security interest in such Collateral,
(d) obtaining governmental and other third party waivers, consents and
approvals in form and substance satisfactory to Secured Party, including,
without limitation, any consent of any licensor, lessor or other person
obligated on Collateral, (e) obtaining waivers from mortgagees and
landlords in form and substance satisfactory to the Secured Party and
(f) taking all actions under any earlier versions of the Uniform
Commercial Code or under any other law, as reasonably determined by the Secured
Party to be applicable in any relevant Uniform Commercial Code or other
jurisdiction, including any foreign jurisdiction.

 

4

 

5.             Relation to Other Security
Documents.

 

5.1           Pledge Agreement. Concurrently
herewith each Grantor is executing and delivering to the Secured Party, pledge
agreement(s) pursuant to which the Grantor is pledging to the Secured
Party all the Equity Interests of the Borrower’s subsidiaries. Such pledges
shall be governed by the terms of such pledge agreements and not by the terms
of this Agreement.

 

5.2           Trademark and Copyright
Security Agreements. Concurrently herewith each Grantor is also
executing and delivering to the Secured Party the Trademark and Copyright
Security Agreements in the form attached hereto as Exhibit A, pursuant
to which the Grantor is granting to the Secured Party security interests in
certain Collateral consisting of trademarks, service marks and trademark and
service mark rights, together with the goodwill appurtenant thereto,
copyrights, and copyright registrations. The provisions of the Trademark and
Copyright Security Agreements are supplemental to the provisions of this
Agreement, and nothing contained in the Trademark and Copyright Security
Agreements shall derogate from any of the rights or remedies of the Secured
Party hereunder. Neither the delivery of, nor anything contained in, the
Trademark and Copyright Security Agreements shall be deemed to prevent or
postpone the time of attachment or perfection of any security interest in such
Collateral created hereby.

 

5.3           Copyright Memorandum. Concurrently
herewith each Grantor is executing and delivering to the Secured Party for
recording in the United States Copyright Office (the “Copyright Office”)
a Memorandum of Grant of Security Interest in Copyrights. Each Grantor
represents and warrants to the Secured Party that such Memorandum identifies
all now existing material copyrights and other rights in and to all material
copyrightable works of the Grantor, identified, where applicable, by title,
author and/or Copyright Office registration number and date. Each Grantor
covenants, promptly following the Grantor’s acquisition thereof, to provide to
the Secured Party like identifications of all material copyrights and other
rights in and to all material copyrightable works hereafter acquired by the
Grantor, to register such copyrights with the Copyright Office, and to execute
and deliver to the Secured Party a supplemental Memorandum of Grant of Security
Interest in Copyrights, in form and substance satisfactory to the Secured
Party, modified to reflect such subsequent acquisitions and registrations.

 

6.             Representations and
Warranties Concerning Grantor’s Legal Status. The Grantors have
previously delivered to the Secured Party a certificate signed by the Grantors
and entitled “Perfection Certificate”, substantially in the form of Schedule 1
to this Agreement (the “Perfection Certificate”). Each Grantor
represents and warrants to the Secured Party as follows: (a) the Grantor’s
exact legal name is that indicated on the Perfection Certificate and on the
signature page hereof, (b) the Grantor is an organization of the
type, and is organized in the jurisdiction set forth in the Perfection
Certificate, (c) the Perfection Certificate accurately sets forth the
Grantor’s organizational identification number or accurately states that the
Grantor has none, (d) the Perfection Certificate accurately sets forth the
Grantor’s place of business or, if more than one, its chief executive office,
as well as the Grantor’s mailing address, if different, (e) all other
information set forth on the Perfection Certificate pertaining to the Grantor
is accurate and complete, and (f) that there has been no change in any
information provided in the Perfection Certificate since the date on which it
was executed by the Grantor.

 

7.             Covenants Concerning
Grantor’s Legal Status. Each Grantor covenants with the Secured
Party as follows: (a) without providing at least thirty (30) days prior
written notice to the Secured Party, the Grantor will not change its name, its
place of business or, if more than one, chief

 

5

 

executive office, or its mailing address or
organizational identification number if it has one, (b) if the Grantor
does not have an organizational identification number and later obtains one,
the Grantor shall forthwith notify the Secured Party of such organizational
identification number, and (c) the Grantor will not change its type of
organization, jurisdiction of organization or other legal structure.

 

8.             Representations and
Warranties Concerning Collateral, etc. Each Grantor further
represents and warrants to the Secured Party as follows: (a) the Grantor
is the owner of the Collateral, free from any right or claim or any person or
any adverse lien, security interest or other encumbrance, except for the
security interest created by this Agreement and other liens permitted by the
Credit Agreement, (b) none of the Collateral constitutes, or is the
proceeds of, “farm products” as defined in Section 9-102(a)(34) of the
Uniform Commercial Code of the State, (c) none of the account debtors or
other persons obligated on any of the Collateral is a governmental authority
covered by the Federal Assignment of Claims Act or like federal, state or local
statute or rule in respect of such Collateral, (d) the Grantor holds
no commercial tort claim except as indicated on the Perfection Certificate, and
(e) the Grantor has at all times operated its business in compliance with
all applicable provisions of the federal Fair Labor Standards Act, as amended,
and with all applicable provisions of federal, state and local statutes and
ordinances dealing with the control, shipment, storage or disposal of hazardous
materials or substances, (f) all other information set forth on the
Perfection Certificate pertaining to the Collateral is accurate and complete,
and (g) that there has been no change in any information provided in the
Perfection Certificate since the date on which it was executed by the Grantor.

 

9.             Covenants Concerning
Collateral, etc. Each Grantor further covenants with the Secured
Party as follows: (a) the Collateral, to the extent not delivered to the
Secured Party pursuant to Section 4, will be kept at those locations
listed on the Perfection Certificate and the Grantor will not remove the
Collateral from such locations, without providing at least thirty days prior
written notice to the Secured Party, (b) except for the security interest
herein granted and liens permitted by the Credit Agreement, the Grantor shall
be the owner of the Collateral free from any right or claim of any other
person, lien, security interest or other encumbrance, and the Grantor shall
defend the same against all claims and demands of all persons at any time
claiming the same or any interests therein adverse to the Secured Party,
(c) the Grantor shall not pledge, mortgage or create, or suffer to exist
any right of any person in or claim by any person to the Collateral, or any
security interest, lien or encumbrance in the Collateral in favor of any
person, other than the Secured Party except for liens permitted by the Credit
Agreement, (d) the Grantor will keep the Collateral in good order and
repair and will not use the same in violation of law or any policy of insurance
thereon, (e) the Grantor will permit the Secured Party, or its designee,
to inspect the Collateral at any reasonable time, wherever located,
(f) the Grantor will pay promptly when due all taxes, assessments,
governmental charges and levies upon the Collateral or incurred in connection
with the use or operation of such Collateral or incurred in connection with
this Agreement, (g) the Grantor will continue to operate, its business in
compliance with all applicable provisions of the federal Fair Labor Standards
Act, as amended, and with all applicable provisions of federal, state and local
statutes and ordinances dealing with the control, shipment, storage or disposal
of hazardous materials or substances, and (h) the Grantor will not sell or
otherwise dispose, or offer to sell or otherwise dispose, of the Collateral or
any interest therein except for (i) sales of inventory and licenses of
general intangibles in the ordinary course of business and
(ii) dispositions permitted by Section 6.6 of the Credit Agreement.

 

6

 

10.           Insurance. Each Grantor
shall at all times comply with the insurance covenants set forth in
Section 5.5 of the Credit Agreement.

 

11.           Collateral Protection
Expenses; Preservation of Collateral.

 

11.1         Expenses Incurred by Secured
Party. In the Secured Party’s discretion, if any Grantor fails to do so, the
Secured Party may discharge taxes and other encumbrances at any time levied or
placed on any of the Collateral, maintain any of the Collateral, make repairs
thereto and pay any necessary filing fees or insurance premiums. Each Grantor
agrees to reimburse the Secured Party on demand for all expenditures so made.
The Secured Party shall have no obligation to the Grantor to make any such
expenditures, nor shall the making thereof be construed as the waiver or cure
of any Default or Event of Default.

 

11.2         Secured Party’s Obligations
and Duties. Anything herein to the contrary notwithstanding,
each Grantor shall remain obligated and liable under each contract or agreement
comprised in the Collateral to be observed or performed by the Grantor
thereunder. The Secured Party shall not have any obligation or liability under
any such contract or agreement by reason of or arising out of this Agreement or
the receipt by the Secured Party of any payment relating to any of the
Collateral, nor shall the Secured Party be obligated in any manner to perform
any of the obligations of the Grantor under or pursuant to any such contract or
agreement, to make inquiry as to the nature or sufficiency of any payment
received by the Secured Party in respect of the Collateral or as to the
sufficiency of any performance by any party under any such contract or
agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to the Secured Party or to which the Secured Party may be entitled at
any time or times. The Secured Party’s sole duty with respect to the custody,
safe keeping and physical preservation of the Collateral in its possession,
under Section 9-207 of the Uniform Commercial Code of the State or
otherwise, shall be to deal with such Collateral in the same manner as the
Secured Party deals with similar property for its own account.

 

12.           Securities and Deposits. The Secured
Party may at any time following and during the continuance of an Event of
Default, at its option, transfer to itself or any nominee any securities
constituting Collateral, receive any income thereon and hold such income as additional
Collateral or apply it to the Obligations. Whether or not any Obligations are
due, the Secured Party may following and during the continuance of an Event of
Default demand, sue for, collect, or make any settlement or compromise which it
deems desirable with respect to the Collateral. Regardless of the adequacy of
Collateral or any other security for the Obligations, any deposits or other
sums at any time credited by or due from the Secured Party to any Grantor may
at any time be applied to or set off against any of the Obligations.

 

13.           Notification to Account
Debtors and Other Persons Obligated on Collateral. If an Event
of Default shall have occurred and be continuing, each Grantor shall, at the
request and option of the Secured Party, notify account debtors and other
persons obligated on any of the Collateral of the security interest of the
Secured Party in any account, chattel paper, general intangible, instrument or
other Collateral and that payment thereof is to be made directly to the Secured
Party or to any financial institution designated by the Secured Party as the
Secured Party’s agent therefor, and the Secured Party may itself, if an Event
of Default shall have occurred and be

 

7

 

continuing, without notice to or demand upon the Grantor, so notify
account debtors and other persons obligated on Collateral. After the making of
such a request or the giving of any such notification, the Grantor shall hold
any proceeds of collection of accounts, chattel paper, general intangibles,
instruments and other Collateral received by the Grantor as trustee for the
Secured Party without commingling the same with other funds of the Grantor and
shall turn the same over to the Secured Party in the identical form received,
together with any necessary endorsements or assignments. The Secured Party
shall apply the proceeds of collection of accounts, chattel paper, general
intangibles, instruments and other Collateral received by the Secured Party to
the Obligations, such proceeds to be immediately credited after final payment
in cash or other immediately available funds of the items giving rise to them.

 

14.           Power of Attorney.

 

14.1         Appointment and Powers of Secured Party. Each Grantor
hereby irrevocably constitutes and appoints the Secured Party and any officer
or agent thereof, with full power of substitution, as its true and lawful
attorneys-in-fact with full irrevocable power and authority in the place and
stead of the Grantor or in the Secured Party’s own name, for the purpose of
carrying out the terms of this Agreement, to take any and all appropriate
action and to execute any and all documents and instruments that may be
necessary or useful to accomplish the purposes of this Agreement and, without limiting
the generality of the foregoing, hereby gives said attorneys the power and
right, on behalf of the Grantor, without notice to or assent by the Grantor, to
do the following:

 

(a)           upon the occurrence and during the continuance of an
Event of Default, generally to sell, transfer, pledge, make any agreement with
respect to or otherwise dispose of or deal with any of the Collateral in such
manner as is consistent with the Uniform Commercial Code of the State and as
fully and completely as though the Secured Party were the absolute owner
thereof for all purposes, and to do, at the Grantor’s expense, at any time, or
from time to time, all acts and things which the Secured Party deems necessary
or useful to protect, preserve or realize upon the Collateral and the Secured
Party’s security interest therein, in order to effect the intent of this
Agreement, all at least as fully and effectively as the Grantor might do,
including, without limitation, (i) the filing and prosecuting of
registration and transfer applications with the appropriate federal, state,
local or other agencies or authorities with respect to trademarks, copyrights
and patentable inventions and processes, (ii) upon written notice to the
Grantor, the exercise of voting rights with respect to voting securities, which
rights may be exercised, if the Secured Party so elects, with a view to causing
the liquidation of assets of the issuer of any such securities, and
(iii) the execution, delivery and recording, in connection with any sale
or other disposition of any Collateral, of the endorsements, assignments or
other instruments of conveyance or transfer with respect to such Collateral;
and

 

(b)           to the extent that the Grantor’s authorization given
in Section 3 is not sufficient, to file such financing statements with
respect hereto, with or without the Grantor’s signature, or a photocopy of this
Agreement in substitution for a financing statement, as the Secured Party may
deem appropriate and to execute in the Grantor’s name such financing statements
and amendments thereto and continuation statements which may require the
Grantor’s signature.

 

8

 

14.2         Ratification Grantors. To the extent permitted by
law, each Grantor hereby ratifies all that said attorneys shall lawfully do or
cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and is irrevocable.

 

14.3         No Duty on Secured Party. The powers
conferred on the Secured Party hereunder are solely to protect its interests in
the Collateral and shall not impose any duty upon it to exercise any such
powers. The Secured Party shall be accountable only for the amounts that it
actually receives as a result of the exercise of such powers, and neither it
nor any of its officers, directors, employees or agents shall be responsible to
the Grantor for any act or failure to act, except for the Secured Party’s own
gross negligence or willful misconduct.

 

15.           Rights and Remedies. If an Event of Default
shall have occurred and be continuing, the Secured Party, without any other
notice to or demand upon any Grantor have in any jurisdiction in which
enforcement hereof is sought, in addition to all other rights and remedies, the
rights and remedies of a secured party under the Uniform Commercial Code of the
State and any additional rights and remedies which may be provided to a secured
party in any jurisdiction in which Collateral is located, including, without
limitation, the right to take possession of the Collateral, and for that purpose
the Secured Party may, so far as the Grantor can give authority therefor, enter
upon any premises on which the Collateral may be situated and remove the same
therefrom. The Secured Party may in its discretion require the Grantor to
assemble all or any part of the Collateral at such location or locations within
the jurisdiction(s) of the Grantor’s principal office(s) or at such
other locations as the Secured Party may reasonably designate. Unless the
Collateral is perishable or threatens to decline speedily in value or is of a
type customarily sold on a recognized market, the Secured Party shall give to
the Grantor at least five (5) Business Days prior written notice of the
time and place of any public sale of Collateral or of the time after which any
private sale or any other intended disposition is to be made. The Grantor
hereby acknowledges that five (5) Business Days prior written notice of
such sale or sales shall be reasonable notice. In addition, the Grantor waives
any and all rights that it may have to a judicial hearing in advance of the
enforcement of any of the Secured Party’s rights and remedies hereunder,
including, without limitation, its right following an Event of Default to take
immediate possession of the Collateral and to exercise its rights and remedies
with respect thereto.

 

16.           Standards for Exercising Rights and Remedies. To the extent
that applicable law imposes duties on the Secured Party to exercise remedies in
a commercially reasonable manner, the Grantor acknowledges and agrees that it
is not commercially unreasonable for the Secured Party (a) to fail to
incur expenses reasonably deemed significant by the Secured Party to prepare
Collateral for disposition or otherwise to fail to complete raw material or
work in process into finished goods or other finished products for disposition,
(b) to fail to obtain third party consents for access to Collateral to be
disposed of, or to obtain or, if not required by other law, to fail to obtain
governmental or third party consents for the collection or disposition of
Collateral to be collected or disposed of, (c) to fail to exercise
collection remedies against account debtors or other persons obligated on
Collateral or to fail to remove liens or encumbrances on or any adverse claims
against Collateral, (d) to exercise collection remedies against account
debtors and other persons obligated on Collateral directly or through the use
of collection agencies and other collection specialists, (e) to advertise
dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature,
(f) to contact other persons, whether or not in the same business as the
Grantor, for expressions of interest in acquiring all or any portion of the

 

9

 

Collateral, (g) to hire one or more professional auctioneers to
assist in the disposition of Collateral, whether or not the collateral is of a
specialized nature, (h) to dispose of Collateral by utilizing Internet
sites that provide for the auction of assets of the types included in the
Collateral or that have the reasonable capability of doing so, or that match
buyers and sellers of assets, (i) to dispose of assets in wholesale rather
than retail markets, (j) to disclaim disposition warranties, (k) to
purchase insurance or credit enhancements to insure the Secured Party against
risks of loss, collection or disposition of Collateral or to provide to the
Secured Party a guaranteed return from the collection or disposition of
Collateral, or (l) to the extent deemed appropriate by the Secured Party,
to obtain the services of other brokers, investment bankers, consultants and
other professionals to assist the Secured Party in the collection or
disposition of any of the Collateral. The Grantor acknowledges that the purpose
of this Section 16 is to provide non-exhaustive indications of what
actions or omissions by the Secured Party would fulfill the Secured Party’s
duties under the Uniform Commercial Code or other law of the State or any other
relevant jurisdiction in the Secured Party’s exercise of remedies against the
Collateral and that other actions or omissions by the Secured Party shall not
be deemed to fail to fulfill such duties solely on account of not being
indicated in this Section 16. Without limitation upon the foregoing,
nothing contained in this Section 16 shall be construed to grant any
rights to the Grantor or to impose any duties on the Secured Party that would
not have been granted or imposed by this Agreement or by applicable law in the
absence of this Section 16.

 

17.           No Waiver by Secured Party, etc. The Secured
Party shall not be deemed to have waived any of its rights or remedies in
respect of the Obligations or the Collateral unless such waiver shall be in writing
and signed by the Secured Party. No delay or omission on the part of the
Secured Party in exercising any right or remedy shall operate as a waiver of
such right or remedy or any other right or remedy. A waiver on any one occasion
shall not be construed as a bar to or waiver of any right or remedy on any
future occasion. All rights and remedies of the Secured Party with respect to
the Obligations or the Collateral, whether evidenced hereby or by any other
instrument or papers, shall be cumulative and may be exercised singularly,
alternatively, successively or concurrently at such time or at such times as
the Secured Party deems expedient.

 

18.           Suretyship Waivers by Grantor. The Grantor
waives demand, notice, protest, notice of acceptance of this Agreement, notice
of loans made, credit extended, Collateral received or delivered or other
action taken in reliance hereon and all other demands and notices of any
description. With respect to both the Obligations and the Collateral, the
Grantor assents to any extension or postponement of the time of payment or any
other indulgence, to any substitution, exchange or release of or failure to
perfect any security interest in any Collateral, to the addition or release of
any party or person primarily or secondarily liable, to the acceptance of
partial payment thereon and the settlement, compromising or adjusting of any
thereof, all in such manner and at such time or times as the Secured Party may
deem advisable. The Secured Party shall have no duty as to the collection or
protection of the Collateral or any income therefrom, the preservation of
rights against prior parties, or the preservation of any rights pertaining
thereto beyond the safe custody thereof as set forth in Section 11.2. The
Grantor further waives any and all other suretyship defenses.

 

19.           Marshalling. The Secured Party shall
not be required to marshal any present or future collateral security (including
but not limited to the Collateral) for, or other assurances of payment of, the
Obligations or any of them or to resort to such collateral security or other

 

10

 

assurances of payment in any particular order, and all of its rights
and remedies hereunder and in respect of such collateral security and other assurances
of payment shall be cumulative and in addition to all other rights and
remedies, however existing or arising. To the extent that it lawfully may, the
Grantor hereby agrees that it will not invoke any law relating to the
marshalling of collateral which might cause delay in or impede the enforcement
of the Secured Party’s rights and remedies under this Agreement or under any
other instrument creating or evidencing any of the Obligations or under which
any of the Obligations is outstanding or by which any of the Obligations is
secured or payment thereof is otherwise assured, and, to the extent that it
lawfully may, the Grantor hereby irrevocably waives the benefits of all such
laws.

 

20.           Proceeds of Dispositions; Expenses. The Grantor
shall pay to the Secured Party on demand any and all expenses, including
reasonable attorneys’ fees and disbursements, incurred or paid by the Secured
Party in protecting, preserving or enforcing the Secured Party’s rights and
remedies under or in respect of any of the Obligations or any of the
Collateral. After deducting all of said expenses, the residue of any proceeds
of collection or sale or other disposition of the Collateral shall, to the
extent actually received in cash, be applied to the payment of the Obligations in
such order or preference as the Secured Party may determine. Upon the final
payment and satisfaction in full of all of the Obligations and after making any
payments required by Sections 9-608(a)(1)(C) or 9-615(a)(3) of the Uniform
Commercial Code of the State, any excess shall be returned to the Grantor. In
the absence of final payment and satisfaction in full of all of the
Obligations, the Grantor shall remain liable for any deficiency.

 

21.         Overdue Amounts. Until paid, all amounts
due and payable by the Grantor hereunder shall be a debt secured by the
Collateral and shall bear, whether before or after judgment, interest at the
rate of interest for overdue principal set forth in the Credit Agreement.

 

22.         Amendments, Etc. No amendment or waiver of
any provision of this Agreement nor consent to any departure by any Grantor
herefrom shall in any event be effective unless the same shall be in writing
and signed by the Debtor and the Secured Party, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given. No failure on the part of Secured Party to exercise, and no
delay in exercising any right under this Agreement, any other Fundamental
Document, or otherwise with respect to any of the Secured Obligations, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right under this Agreement, any other Fundamental Document, or otherwise with
respect to any of the Secured Obligations preclude any other or further exercise
thereof or the exercise of any other right. The remedies provided for in this
Agreement or otherwise with respect to any of the Secured Obligations are
cumulative and not exclusive of any remedies provided by law.

 

23.         Notices.

 

Unless otherwise specifically provided herein, all
notices shall be in writing addressed to the respective party as set forth
below: and may be personally served, faxed, telecopied or sent by overnight
courier service or United States mail:

 

If to any Grantor:

 

Crown Media Holdings, Inc.

 

11

 

12700 Ventura Blvd.

 

Studio City, California 91604 

 

Attention: William J. Abbott

 

If to Secured Party:

 

Hallmark Cards, Inc.

 

2501 McGee, Mail Drop 342 

 

Kansas City, MO 64108 

 

Attention: Tim Griffith

 

with a copy to:

 

Willkie Farr & Gallagher LL 

 

787 Seventh Avenue

 

New York, New York 10019 

 

Attention: Maurice M. Lefkort

 

Any notice given pursuant to this section shall be
deemed to have been given: (a) if delivered in person, when delivered; (b) if
delivered by fax, on the date of transmission if transmitted on a Business Day
before 4:00 p.m. at the place of receipt or, if not, on the next succeeding
Business Day; (c) if delivered by overnight courier, two (2) days
after delivery to such courier properly addressed; or (d) if by United
States mail, four (4) Business Days after depositing in the United States
mail, with postage prepaid and properly addressed. Any party hereto may change
the address or fax number at which it is to receive notices hereunder by notice
to the other party in writing in the foregoing manner.

 

24.         Governing Law; Consent to Jurisdiction. THIS
AGREEMENT IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK. The Grantor agrees that any action or claim arising out of, or any
dispute in connection with, this Agreement, any rights, remedies, obligations,
or duties hereunder, or the performance or enforcement hereof or thereof, may
be brought in the courts of the State or any federal court sitting therein, or
in the courts of the State of Delaware sitting in New Castle county Delaware or
of the United States District Court of the District of Delaware and consents to
the non-exclusive jurisdiction of such court and to service of process in any
such suit being made upon the Grantor by mail at the address specified in
Section 9.1 of the Credit Agreement. The Grantor hereby waives

 

12

 

any objection that it may now or hereafter have to the venue of any
such suit or any such court or that such suit is brought in an inconvenient
court.

 

25.           Waiver of Jury Trial. THE GRANTOR WAIVES ITS
RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY
DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS, REMEDIES, OBLIGATIONS,
OR DUTIES HEREUNDER, OR THE PERFORMANCE OR ENFORCEMENT HEREOF OR THEREOF.
Except as prohibited by law, the Grantor waives any right which it may have to
claim or recover in any litigation referred to in the preceding sentence any
special, exemplary, punitive or consequential damages or any damages other
than, or in addition to, actual damages. The Grantor (i) certifies that neither
the Secured Party nor any representative, agent or attorney of the Secured
Party has represented, expressly or otherwise, that the Secured Party would
not, in the event of litigation, seek to enforce the foregoing waivers or other
waivers contained in this Agreement, and (ii) acknowledges that, in entering
into the Credit Agreement and the other Fundamental Documents to which the
Secured Party is a party, the Secured Party is relying upon, among other
things, the waivers and certifications contained in this Section 23.

 

26.           Miscellaneous. The headings of each
section of this Agreement are for convenience only and shall not define or
limit the provisions thereof. This Agreement and all rights and obligations
hereunder shall be binding upon the Grantor and its respective successors and
assigns, and shall inure to the benefit of the Secured Party and its successors
and assigns. If any term of this Agreement shall be held to be invalid, illegal
or unenforceable, the validity of all other terms hereof shall in no way be
affected thereby, and this Agreement shall be construed and be enforceable as
if such invalid, illegal or unenforceable term had not been included herein.
The Grantor acknowledges receipt of a copy of this Agreement.

 

27.           Intercreditor. The terms and conditions
of this Agreement are subject to the terms and conditions of the Intercreditor
Agreement. In the event of any conflict between the terms and conditions of
this Agreement and the terms, conditions and provisions of the Intercreditor
Agreement, the terms, conditions and provisions of the Intercreditor Agreement
shall control. The rights and remedies of the Secured Party under this
Agreement will be subject to the terms, conditions and provisions of the
Intercreditor Agreement. Notwithstanding anything to the contrary in this
Agreement, prior to the discharge of the First Priority Obligations (as defined
in the Intercreditor Agreement), any obligation of the Grantors in this
Agreement that requires delivery of Collateral to, possession or control of
Collateral with, the pledge, assignment, endorsement or transfer of Collateral
to or the registration of Collateral in the name of, the Secured Party shall be
deemed complied with and satisfied if such delivery of collateral is made to,
such possession or control of Collateral is with, or such Collateral be
assigned, endorsed or transferred to or registered in the name of, the
Revolving Lender; provided that, notwithstanding the foregoing, nothing
contained in this Section shall limit or otherwise adversely effect the
grant of a lien on or a security interest in any Collateral under
Section 2 of this Agreement. To the extent that any Covenants,
representations or warranties set forth in this Agreement are untrue or
incorrect solely as a result of the delivery to, or grant of possession or
control to, the Revolving Lender in accordance with this Section, such
representation or warranty shall not be deemed to be untrue or incorrect for
purposes of this Agreement.

 

13

 

IN WITNESS WHEREOF, intending to be legally bound,
the Grantor has caused this Agreement to be duly executed as of the date first
above written.

 

	
   

  	
  DEBTOR:

  
	
   

  	
   

  
	
   

  	
  CROWN MEDIA HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian Stewart

  
	
   

  	
   

  	
  Name:

  	
  Brian Stewart

  
	
   

  	
   

  	
  Title:

  	
  EVP/CFO

  
	
   

  	
   

  
	
   

  	
  GUARANTORS:

  
	
   

  	
   

  
	
   

  	
  CROWN MEDIA UNITED STATES, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian Stewart

  
	
   

  	
   

  	
  Name:

  	
  Brian Stewart

  
	
   

  	
   

  	
  Title:

  	
  EVP/CFO

  
	
   

  	
   

  
	
   

  	
  CM INTERMEDIARY, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian Stewart

  
	
   

  	
   

  	
  Name:

  	
  Brian Stewart

  
	
   

  	
   

  	
  Title:

  	
  EVP/CFO

  
	
   

  	
   

  
	
   

  	
  CITI TEEVEE, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian Stewart

  
	
   

  	
   

  	
  Name:

  	
  Brian Stewart

  
	
   

  	
   

  	
  Title:

  	
  EVP/CFO

  
	
   

  	
   

  
	
   

  	
  DOONE CITY PICTURES, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian Stewart

  
	
   

  	
   

  	
  Name:

  	
  Brian Stewart

  
	
   

  	
   

  	
  Title:

  	
  EVP/CFO

  

 

[Signature
Page to the Security Agreement]

 

 

	
   

  	
  ACCEPTED AND AGREED BY

  
	
   

  	
   

  
	
   

  	
  SECURED PARTY:

  
	
   

  	
   

  
	
   

  	
  HC CROWN CORP.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy Griffith

  
	
   

  	
   

  	
  Name:

  	
  Timothy Griffith

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  

 

[Signature
Page to the Security Agreement]Exhibit
10.12

 

EXECUTION COPY

	
   

  	
   

  

 

 

PLEDGE AGREEMENT

 

DATED AS OF JUNE 29, 2010

 

AMONG

 

CROWN MEDIA
HOLDINGS, INC.

 

AS PLEDGOR

 

AND

 

HC CROWN CORP.

 

AS SECURED PARTY

 

	
   

  	
   

  

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Definitions and Construction

  	
  1

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Pledge

  	
  4

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Delivery and Registration of Collateral

  	
  4

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Voting Rights and Dividends

  	
  5

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Representations and Warranties

  	
  5

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Further Assurances

  	
  6

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Covenants of Pledgor

  	
  7

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Secured Party as Pledgor’s Attorney-in-Fact

  	
  7

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Remedies upon Default

  	
  8

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Application of Proceeds

  	
  10

  
	
   

  	
   

  	
   

  
	
  11.

  	
  Indemnity and Expenses

  	
  10

  
	
   

  	
   

  	
   

  
	
  12.

  	
  Duties of Secured Party

  	
  11

  
	
   

  	
   

  	
   

  
	
  13.

  	
  Choice of Law and Venue; Submission to Jurisdiction; Service of
  Process

  	
  11

  
	
   

  	
   

  	
   

  
	
  14.

  	
  Amendments; etc.

  	
  12

  
	
   

  	
   

  	
   

  
	
  15.

  	
  Notices

  	
  12

  
	
   

  	
   

  	
   

  
	
  16.

  	
  Continuing Security Interest

  	
  13

  
	
   

  	
   

  	
   

  
	
  17.

  	
  Security Interest Absolute

  	
  13

  
	
   

  	
   

  	
   

  
	
  18.

  	
  Headings

  	
  14

  
	
   

  	
   

  	
   

  
	
  19.

  	
  Severability

  	
  14

  
	
   

  	
   

  	
   

  
	
  20.

  	
  Counterparts; Telefacsimile Execution

  	
  14

  
	
   

  	
   

  	
   

  
	
  21.

  	
  Waiver of Marshaling

  	
  14

  
	
   

  	
   

  	
   

  
	
  22.

  	
  Waiver of Jury Trial

  	
  14

  

 

i

 

	
  23.

  	
  Intercreditor

  	
  14

  

 

ii

 

Pledge Agreement

 

THIS PLEDGE AGREEMENT (this “Agreement”), dated
as of June 29, 2010 is entered into between Crown Media
Holdings, Inc. a Delaware corporation (“Debtor”) each of the
Guarantors listed on the signature pages hereto (the “Guarantors” and
together with the Debtor each individually a “Pledgor” and collectively
the “Pledgors”) and HC Crown Corp., a Delaware Corporation (“Secured
Party”),  with reference to the following:

 

WHEREAS, the Pledgors and the Secured Party are each
a party that certain Security and Pledge Agreement, dated July 27, 2007
(as amended, supplemented or modified from time to time the “2007 Pledge and
Security Agreement”) by and among the Debtor, the subsidiaries of the
Debtor listed as Guarantors on that certain Credit, Security, Guarantee and
Pledge Agreement dated as of August 31, 2001, as subsequently amended,
among Crown Holdings, the Guarantors named therein, the Lenders named therein
and JPMorgan Chase as Agent and Hallmark Cards, Incorporated on behalf of
itself and as agent for each of the Secured Party and Hallmark Entertainment
Holdings, Inc., and the Debtor and the Secured party wish to, and hereby
do, continue and extend the pledge made therein;

 

WHEREAS, Pledgors and Secured Party are parties to
that certain Credit Agreement (as amended, restated, or otherwise modified from
time to time, the “Credit Agreement”), of even date herewith, pursuant
to which Secured Party has agreed to make certain financial accommodations to
Pledgor;

 

WHEREAS, the Pledgors beneficially own the Equity
Interests (as hereinafter defined) in the Issuers (as hereinafter defined);

 

WHEREAS, to induce Secured Party to make the financial
accommodations provided to Pledgors pursuant to the Credit Agreement, Pledgors
desire to pledge, grant, transfer, and assign to Secured Party a security
interest in the Collateral (as hereinafter defined) to secure the Secured
Obligations (as hereinafter defined), as provided herein.

 

NOW, THEREFORE, in consideration of the mutual
promises, covenants, representations, and warranties set forth herein and for
other good and valuable consideration, the parties hereto agree as follows:

 

1.             Definitions and
Construction.

 

(a)           Definitions.

 

All initially capitalized terms used herein and not
otherwise defined herein shall have the meaning ascribed thereto in the Credit
Agreement. As used in this Agreement:

 

“Bankruptcy Code” means United States
Bankruptcy Code (11 U.S.C. Section 101 et seq.), as in effect from time to
time, and any successor statute thereto.

 

 

“Business Day” means any day that is not a
Saturday, Sunday, or other day on which national banks are authorized or
required to close.

 

“Code” means the Uniform Commercial Code as
in effect in the State of New York from time to time.

 

“Collateral” shall mean the Pledged
Interests, the Future Rights, and the Proceeds, collectively.

 

“Credit Agreement” shall have the meaning
ascribed thereto in the recitals to this Agreement.

 

“Equity Interests” means all securities,
shares, units, options, warrants, interests, participations, or other
equivalents (regardless of how designated) of or in a corporation, partnership,
limited liability company, or similar entity, whether voting or nonvoting,
certificated or uncertificated, including general partner partnership
interests, limited partner partnership interests, common stock, preferred
stock, or any other “equity security” (as such term is defined in
Rule 3a11-1 of the General Rules and Regulations promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934).

 

“Event of Default” shall have the meaning
ascribed thereto in the Credit Agreement. 

 

“Fundamental Documents” shall have the
meaning ascribed to it in the Credit Agreement.

 

“Future Rights” shall mean: (a) all
Equity Interests (other than Pledged Interests) of the Issuers, and all
securities convertible or exchangeable into, and all warrants, options, or
other rights to purchase, Equity Interests of the Issuers; and (b) the
certificates or instruments representing such Equity Interests, convertible or
exchangeable securities, warrants, and other rights and all dividends, cash,
options, warrants, rights, instruments, and other property or proceeds from
time to time received, receivable, or otherwise distributed in respect of or in
exchange for any or all of such Equity Interests.

 

“Holder” and “Holders” shall have the
meanings ascribed thereto in Section 3 of this Agreement.

 

“Issuers” shall mean each of the Persons
identified as an Issuer on Schedule 1 attached hereto (or any addendum
thereto), and any successors thereto, whether by merger or otherwise.

 

“Lien” shall mean any lien, mortgage, pledge,
assignment (including any assignment of rights to receive payments of money),
security interest, charge, or encumbrance of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, or any agreement to give any security interest).

 

“Pledged Interests” shall mean (a) all
Equity Interests of the Issuers identified on Schedule 1; and (b) the
certificates or instruments representing such Equity Interests.

 

“Pledgor” shall have the meaning ascribed
thereto in the recitals to this Agreement.

 

2

 

“Proceeds” shall mean all proceeds (including
proceeds of proceeds) of the Pledged Interests and Future Rights including all:
(a) rights, benefits, distributions, premiums, profits, dividends,
interest, cash, instruments, documents of title, accounts, contract rights,
inventory, equipment, general intangibles, payment intangibles, deposit
accounts, chattel paper, and other property from time to time received,
receivable, or otherwise distributed in respect of or in exchange for, or as a
replacement of or a substitution for, any of the Pledged Interests, Future
Rights, or proceeds thereof (including any cash, Equity Interests, or other
securities or instruments issued after any recapitalization, readjustment,
reclassification, merger or consolidation with respect to the Issuers and any
security entitlements, as defined in Section 8-102(a)(17) of the Code,
with respect thereto); (b) “proceeds,” as such term is defined in
Section 9-102(a)(64) of the Code; (c) proceeds of any insurance,
indemnity, warranty, or guaranty (including guaranties of delivery) payable
from time to time with respect to any of the Pledged Interests, Future Rights,
or proceeds thereof; (d) payments (in any form whatsoever) made or due and
payable to any Pledgor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Pledged Interests, Future Rights, or proceeds thereof; and (e) other
amounts from time to time paid or payable under or in connection with any of
the Pledged Interests, Future Rights, or proceeds thereof.

 

“Registered Organization” shall have the
meaning ascribed thereto in Section 9-102(a)(7) of the Code.

 

“Secured Obligations” shall mean all
liabilities, obligations, or undertakings owing by any Pledgor to Secured Party
of any kind or description arising out of or outstanding under, advanced or
issued pursuant to, or evidenced by the Credit Agreement, this Agreement, or
any other Fundamental Document, irrespective of whether for the payment of
money, whether direct or indirect, absolute or contingent, due or to become
due, voluntary or involuntary, whether now existing or hereafter arising, and
including all interest (including interest that accrues after the filing of a
case under the Bankruptcy Code) and any and all costs, fees (including
attorneys fees), and expenses which any Pledgor is required to pay pursuant to
any of the foregoing, by law, or otherwise.

 

“Secured Party” shall have the meaning ascribed
thereto in the recitals to this Agreement, together with its successors or
assigns.

 

“Securities Act”
shall have the meaning ascribed thereto in Section 9(c) of this
Agreement. 

 

(b)           Construction.

 

(i)            Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular and to the singular
include the plural, the part includes the whole, the term “including” is not
limiting, and the term “or” has, except where otherwise indicated, the
inclusive meaning represented by the phrase “and/or.” The words “hereof,”
“herein,” “hereby,” “hereunder,” and other similar terms in this Agreement
refer to this Agreement as a whole and not exclusively to any particular
provision of this Agreement. Article, section, subsection, exhibit, and
schedule references are to this Agreement unless otherwise specified. All of
the exhibits or schedules attached to this Agreement shall be deemed
incorporated herein by reference. Any reference to any of the following
documents includes any and all alterations, amendments,

 

3

 

restatements, extensions, modifications, renewals, or supplements
thereto or thereof, as applicable: this Agreement, the Credit Agreement, or any
of the other Fundamental Documents.

 

(ii)           Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Secured Party or any
Pledgor, whether under any rule of construction or otherwise. On the
contrary, this Agreement has been reviewed by both of the parties and their
respective counsel and shall be construed and interpreted according to the
ordinary meaning of the words used so as to fairly accomplish the purposes and
intentions of the parties hereto.

 

(iii)          In the event of any direct conflict between the
express terms and provisions of this Agreement and of the Credit Agreement, the
terms and provisions of the Credit Agreement shall control.

 

2.             Pledge.

 

As security for the prompt payment and performance
of the Secured Obligations in full by Pledgors when due, whether at stated
maturity, by acceleration or otherwise (including amounts that would become due
but for the operation of the provisions of the Bankruptcy Code), each Pledgor
hereby pledges, grants, transfers, and assigns to Secured Party a security
interest in all of such Pledgor’s right, title, and interest in and to the
Collateral.

 

3.             Delivery and
Registration of Collateral.

 

(a)           All certificates or instruments representing or
evidencing the Collateral shall be promptly delivered by each Pledgor to
Secured Party or Secured Party’s designee pursuant hereto at a location
designated by Secured Party and shall be held by or on behalf of Secured Party
pursuant hereto, and shall be in suitable form for transfer by delivery, or
shall be accompanied by duly executed indorsement certificate in the form
attached hereto as Exhibit A or other instrument of transfer or assignment
in blank, in form and substance satisfactory to Secured Party.

 

(b)           Upon the occurrence and during the continuance of an
Event of Default, Secured Party shall have the right, at any time in its
discretion and without notice to any Pledgor, to transfer to or to register on
the books of the Issuers (or of any other Person maintaining records with
respect to the Collateral) in the name of Secured Party or any of its nominees
any or all of the Collateral. In addition, Secured Party shall have the right
at any time to exchange certificates or instruments representing or evidencing
Collateral for certificates or instruments of smaller or larger denominations.

 

(c)           If, at any time and from time to time, any
Collateral (including any certificate or instrument representing or evidencing
any Collateral) is in the possession of a Person other than Secured Party or
Pledgor (a “Holder”), then Pledgor shall immediately, at Secured Party’s
option, either cause such Collateral to be delivered into Secured Party’s
possession, or cause such Holder to enter into a control agreement, in form and
substance satisfactory to Secured Party, and take all other steps deemed
necessary by Secured Party to perfect the security interest of Secured Party in
such Collateral, all pursuant to Sections 9-106 & 9-313 of the Code or
other applicable law governing the perfection of Secured Party’s security interest
in the Collateral in the possession of such Holder.

 

4

 

(d)           Any and all Collateral (including dividends,
interest, and other cash distributions) at any time received or held by any
Pledgor shall be so received or held in trust for Secured Party, shall be
segregated from other funds and property of Pledgor and shall be forthwith
delivered to Secured Party in the same form as so received or held, with any
necessary indorsements; provided that cash dividends or distributions received
by Pledgor, may be retained by Pledgor in accordance with Section 4 and
used in the ordinary course of Pledgor’s business.

 

(e)           If at any time, and from time to time, any
Collateral consists of an uncertificated security or a security in book entry
form, then Pledgor shall immediately cause such Collateral to be registered or
entered, as the case may be, in the name of Secured Party, or otherwise cause
Secured Party’s security interest thereon to be perfected in accordance with
applicable law.

 

4.             Voting Rights
and Dividends.

 

(a)           So long as no Event of Default shall have occurred
and be continuing, each Pledgor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Collateral or any part
thereof for any purpose not inconsistent with the terms of the Fundamental
Documents and shall be entitled to receive and retain any cash dividends or
distributions paid or distributed in respect of the Collateral.

 

(b)           Upon the occurrence and during the continuance of an
Event of Default, all rights of each Pledgor to exercise the voting and other
consensual rights or receive and retain cash dividends or distributions that it
would otherwise be entitled to exercise or receive and retain, as applicable
pursuant to Section 4(a), shall cease, and all such rights shall thereupon
become vested in Secured Party, who shall thereupon have the sole right to
exercise such voting or other consensual rights and to receive and retain such
cash dividends and distributions. Pledgors shall execute and deliver (or cause
to be executed and delivered) to Secured Party all such proxies and other
instruments as Secured Party may reasonably request for the purpose of enabling
Secured Party to exercise the voting and other rights which it is entitled to
exercise and to receive the dividends and distributions that it is entitled to
receive and retain pursuant to the preceding sentence.

 

5.             Representations
and Warranties.

 

Each Pledgor represents, warrants, and covenants as
follows:

 

(a)           Pledgor has taken all steps it deems necessary or
appropriate to be informed on a continuing basis of changes or potential
changes affecting the Collateral (including rights of conversion and exchange,
rights to subscribe, payment of dividends, reorganizations or recapitalization,
tender offers and voting and registration rights), and Pledgor agrees that
Secured Party shall have no responsibility or liability for informing Pledgor
of any such changes or potential changes or for taking any action or omitting
to take any action with respect thereto.

 

(b)           Pledgor is a Registered Organization, organized
under the laws of the state set forth on Schedule 2. Pledgor’s type of
organization is set forth on Schedule 2.

 

(c)           All information herein or hereafter supplied to Secured
Party by or on behalf of Pledgor in writing with respect to the Collateral is,
or in the case of information hereafter supplied will be, accurate and complete
in all material respects.

 

5

 

(d)           Pledgor is and will be the sole legal and beneficial
owner of the Collateral of such Pledgor (including the Pledged Interests and
all other Collateral acquired by Pledgor after the date hereof) free and clear
of any adverse claim, Lien, or other right, title, or interest of any party,
other than the Liens in favor of Secured Party.

 

(e)           This Agreement, and the delivery to Secured Party of
the Pledged Interests representing Collateral (or the control agreements
referred to in Section 3 of this Agreement), creates a valid, perfected,
and first priority security interest in one hundred percent (100%) of the
Pledged Interests in favor of Secured Party securing payment of the Secured
Obligations, and all actions necessary to achieve such perfection have been
duly taken.

 

(f)            Schedule 1 to this Agreement is true and correct and
complete in all material respects. Without limiting the generality of the
foregoing: (i) except as set forth on Schedule 1, all the Pledged
Interests are in certificated form, and, except to the extent registered in the
name of Secured Party or its nominee pursuant to the provisions of this
Agreement, are registered in the name of the Pledgor who owns such Pledged
Interests; and (ii) the Pledged Interests as to each of the Issuers
constitute at least the percentage of all the fully diluted issued and
outstanding Equity Interests of such Issuer as set forth in Schedule 1 to this
Agreement.

 

(g)           There are no presently existing Future Rights or
Proceeds owned by Pledgor.

 

(h)           The Pledged Interests have been duly authorized and
validly issued and are fully paid and nonassessable.

 

(i)            Neither the pledge of the Collateral pursuant to
this Agreement nor the extensions of credit represented by the Secured
Obligations violates Regulation T, U or X of the Board of Governors of the
Federal Reserve System.

 

6.             Further
Assurances.

 

(a)           Each Pledgor agrees that from time to time, at the
expense of Pledgor, Pledgor will promptly execute and deliver all further
instruments and documents, and take all further action that may be necessary or
reasonably desirable, or that Secured Party may request, in order to perfect
and protect any security interest granted or purported to be granted hereby or
to enable Secured Party to exercise and enforce its rights and remedies hereunder
with respect to any Collateral. Without limiting the generality of the
foregoing, Pledgor will: (i) at the request of Secured Party, mark
conspicuously each of its records pertaining to the Collateral with a legend,
in form and substance reasonably satisfactory to Secured Party, indicating that
such Collateral is subject to the security interest granted hereby;
(ii) execute any such instruments or notices, as may be necessary or
reasonably desirable, or as Secured Party may request, in order to perfect and
preserve the first priority security interests granted or purported to be
granted hereby; (iii) allow inspection of the Collateral by Secured Party
or Persons designated by Secured Party; and (iv) appear in and defend any
action or proceeding that may affect Pledgor’s title to or Secured Party’s
security interest in the Collateral.

 

(b)           Each Pledgor hereby authorizes Secured Party to file
one or more financing or continuation statements, and amendments thereto,
relative to all or any part of the Collateral. A carbon, photographic, or other
reproduction of this Agreement or any financing statement covering

 

6

 

the Collateral or any part thereof shall be sufficient as a financing
statement where permitted by law.

 

(c)           Each Pledgor will furnish to Secured Party, upon the
request of Secured Party: (i) a certificate executed by an authorized
officer of Pledgor, and dated as of the date of delivery to Secured Party,
itemizing in such detail as Secured Party may request, the Collateral which, as
of the date of such certificate, has been delivered to Secured Party by Pledgor
pursuant to the provisions of this Agreement; and (ii) such statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Secured Party may request.

 

7.             Covenants of
Pledgor.

 

Each Pledgor shall:

 

(a)           Perform each and every covenant in the Fundamental
Documents applicable to such Pledgor;

 

(b)           Neither change its jurisdiction of organization nor
cease to be a Registered Organization, in each case, without giving Secured
Party at least thirty (30) days prior written notice thereof;

 

(c)           To the extent it may lawfully do so, use its best
efforts to prevent the Issuers from issuing Future Rights or Proceeds, except
for cash dividends and other distributions to be paid by any Issuer to Pledgor;
and

 

(d)           Upon receipt by Pledgor of any material notice,
report, or other communication from any of the Issuers or any Holder relating
to all or any part of the Collateral, deliver such notice, report or other
communication to Secured Party as soon as possible, but in no event later than
five (5) days following the receipt thereof by Pledgor.

 

8.             Secured Party
as Pledgor’s Attorney-in-Fact.

 

(a)           Each Pledgor hereby irrevocably appoints Secured
Party as Pledgor’s attorney-in-fact, with full authority in the place and stead
of Pledgor and in the name of Pledgor, Secured Party or otherwise, from time to
time at Secured Party’s discretion, to take any action and to execute any
instrument that Secured Party may reasonably deem necessary or advisable to
accomplish the purposes of this Agreement, including: (i) upon the
occurrence and during the continuance of an Event of Default, to receive, indorse,
and collect all instruments made payable to Pledgor representing any dividend,
interest payment or other distribution in respect of the Collateral or any part
thereof to the extent permitted hereunder and to give full discharge for the
same and to execute and file governmental notifications and reporting forms;
(ii) to enter into any control agreements Secured Party deems necessary
pursuant to Section 3 of this Agreement; or (iii) to arrange for the
transfer of the Collateral on the books of any of the Issuers or any other
Person to the name of Secured Party or to the name of Secured Party’s nominee.

 

(b)           In addition to the designation of Secured Party as
each Pledgor’s attorney-in-fact in subsection (a), each Pledgor hereby
irrevocably appoints Secured Party as Pledgor’s agent and

 

7

 

attorney-in-fact to make, execute and deliver any and all documents and
writings which may be necessary or appropriate for approval of, or be required
by, any regulatory authority located in any city, county, state or country
where Pledgor or any of the Issuers engage in business, in order to transfer or
to more effectively transfer any of the Pledged Interests or otherwise enforce
Secured Party’s rights hereunder.

 

9.             Remedies upon
Default.

 

Upon the occurrence and during the continuance of an
Event of Default:

 

(a)           Secured Party may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the Code (irrespective of whether the Code applies to the
affected items of Collateral), and Secured Party may also without notice
(except as specified below) sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any exchange, broker’s board or at any
of Secured Party’s offices or elsewhere, for cash, on credit or for future
delivery, at such time or times and at such price or prices and upon such other
terms as Secured Party may deem commercially reasonable, irrespective of the
impact of any such sales on the market price of the Collateral. To the maximum
extent permitted by applicable law, Secured Party may be the purchaser of any
or all of the Collateral at any such sale and shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral sold at any such public sale, to use and
apply all or any part of the Secured Obligations as a credit on account of the
purchase price of any Collateral payable at such sale. Each purchaser at any
such sale shall hold the property sold absolutely free from any claim or right
on the part of any Pledgor, and each Pledgor hereby waives (to the extent
permitted by law) all rights of redemption, stay, or appraisal that it now has
or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Each Pledgor agrees that, to the extent notice
of sale shall be required by law, at least ten (10) calendar days notice
to Pledgor of the time and place of any public sale or the time after which a
private sale is to be made shall constitute reasonable notification. Secured
Party shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given. Secured Party may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefore, and such sale may, without further notice, be made at the time and
place to which it was so adjourned. To the maximum extent permitted by law,
each Pledgor hereby waives any claims against Secured Party arising because the
price at which any Collateral may have been sold at such a private sale was
less than the price that might have been obtained at a public sale, even if
Secured Party accepts the first offer received and does not offer such
Collateral to more than one offeree.

 

(b)           Each Pledgor hereby agrees that any sale or other
disposition of the Collateral conducted in conformity with reasonable
commercial practices of banks, insurance companies, or other financial institutions
in the city and state where Secured Party is located in disposing of property
similar to the Collateral shall be deemed to be commercially reasonable.

 

(c)           Each Pledgor hereby acknowledges that the sale by
Secured Party of any Collateral pursuant to the terms hereof in compliance with
the Securities Act of 1933 as now in effect or as hereafter amended, or any
similar statute hereafter adopted with similar purpose or effect (the
“Securities Act”), as well as applicable “Blue Sky” or other state securities
laws, may require strict

 

8

 

limitations as to the manner in which Secured Party or any subsequent
transferee of the Collateral may dispose thereof. Each Pledgor acknowledges and
agrees that in order to protect Secured Party’s interest it may be necessary to
sell the Collateral at a price less than the maximum price attainable if a sale
were delayed or were made in another manner, such as a public offering under
the Securities Act. No Pledgor has any objection to sale in such a manner and
agrees that Secured Party shall have no obligation to obtain the maximum
possible price for the Collateral. Without limiting the generality of the
foregoing, each Pledgor agrees that, upon the occurrence and during the
continuation of an Event of Default, Secured Party may, subject to applicable
law, from time to time attempt to sell all or any part of the Collateral by a
private placement, restricting the bidders and prospective purchasers to those
who will represent and agree that they are purchasing for investment only and
not for distribution. In so doing, Secured Party may solicit offers to buy the
Collateral or any part thereof for cash, from a limited number of investors
reasonably believed by Secured Party to be institutional investors or other
accredited investors who might be interested in purchasing the Collateral. If
Secured Party shall solicit such offers, then the acceptance by Secured Party
of one of the offers shall be deemed to be a commercially reasonable method of
disposition of the Collateral.

 

(d)           If Secured Party shall determine to exercise its
right to sell all or any portion of the Collateral pursuant to this Section,
each Pledgor agrees that, upon request of Secured Party, Pledgor will, at its
own expense:

 

(i)            use its best efforts to execute and deliver, and
cause the Issuers and the directors and officers thereof to execute and
deliver, all such instruments and documents, and to do or cause to be done all
such other acts and things, as may be necessary or, in the opinion of Secured
Party, advisable to register such Collateral under the provisions of the
Securities Act, and to cause the registration statement relating thereto to
become effective and to remain effective for such period as prospectuses are
required by law to be furnished, and to make all amendments and supplements
thereto and to the related prospectuses which, in the opinion of Secured Party,
are necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and
Exchange Commission applicable thereto;

 

(ii)           use its best efforts to qualify the Collateral under
the state securities laws or “Blue Sky” laws and to obtain all necessary
governmental approvals for the sale of the Collateral, as requested by Secured
Party;

 

(iii)          cause the Issuers to make available to their
respective security holders, as soon as practicable, an earnings statement
which will satisfy the provisions of Section 11 (a) of the Securities
Act;

 

(iv)          execute and deliver, or cause the officers and
directors of the Issuers to execute and deliver, to any person, entity or
governmental authority as Secured Party may choose, any and all documents and
writings which, in Secured Party’s reasonable judgment, may be necessary or
appropriate for approval, or be required by, any regulatory authority located
in any city, county, state or country where Pledgor or the Issuers engage in
business, in order to transfer or to more effectively transfer the Pledged
Interests or otherwise enforce Secured Party’s rights hereunder; and

 

9

 

(v)           do or cause to be done all such other acts and
things as may be necessary to make such sale of the Collateral or any part
thereof valid and binding and in compliance with applicable law.

 

Each Pledgor acknowledges that there is no adequate
remedy at law for failure by it to comply with the provisions of this
Section and that such failure would not be adequately compensable in
damages, and therefore agrees that its agreements contained in this
Section may be specifically enforced.

 

(e)           EACH PLEDGOR EXPRESSLY WAIVES TO THE MAXIMUM EXTENT PERMITTED
BY LAW: (i) ANY CONSTITUTIONAL OR OTHER RIGHT TO A JUDICIAL HEARING PRIOR
TO THE TIME SECURED PARTY DISPOSES OF ALL OR ANY PART OF THE COLLATERAL AS
PROVIDED IN THIS SECTION; (ii) ALL RIGHTS OF REDEMPTION, STAY, OR
APPRAISAL THAT IT NOW HAS OR MAY AT ANY TIME IN THE FUTURE HAVE UNDER ANY
RULE OF LAW OR STATUTE NOW EXISTING OR HEREAFTER ENACTED; AND (iii) EXCEPT
AS SET FORTH IN SUBSECTION (a) OF THIS Section 9, ANY
REQUIREMENT OF NOTICE, DEMAND, OR ADVERTISEMENT FOR SALE.

 

10.           Application of
Proceeds.

 

Upon the occurrence and during the continuance of an Event of Default,
any cash held by Secured Party as Collateral and all cash Proceeds received by
Secured Party in respect of any sale of, collection from, or other realization
upon all or any part of the Collateral pursuant to the exercise by Secured
Party of its remedies as a secured creditor as provided in Section 9 shall
be applied from time to time by Secured Party as provided in the Credit
Agreement.

 

11.           Indemnity and
Expenses.

 

Each Pledgor jointly and severally agrees:

 

(a)           To indemnify and hold harmless Secured Party and
each of its directors, officers, employees, agents and affiliates from and
against any and all claims, damages, demands, losses, obligations, judgments
and liabilities (including, without limitation, reasonable attorneys’ fees and
expenses) in any way arising out of or in connection with this Agreement or the
Secured Obligations, except to the extent the same shall arise as a result of
the gross negligence or willful misconduct of the party seeking to be
indemnified; and

 

(b)           To pay and reimburse Secured Party upon demand for
all reasonable costs and expenses (including, without limitation, reasonable
attorneys’ fees and expenses) that Secured Party may incur in connection with
(i) the custody, use or preservation of, or the sale of, collection from
or other realization upon, any of the Collateral, including the reasonable
expenses of re-taking, holding, preparing for sale or lease, selling or
otherwise disposing of or realizing on the Collateral, (ii) the exercise
or enforcement of any rights or remedies granted hereunder, under the Credit
Agreement, or under any of the other Fundamental Documents or otherwise
available to it (whether at law, in equity or otherwise), or (iii) the
failure by any Pledgor to perform or observe any of the provisions hereof. The
provisions of this Section shall survive the execution and delivery of
this Agreement, the repayment of any of the Secured Obligations, the
termination of the commitments

 

10

 

of Secured Party under the Credit Agreement and the termination of this
Agreement or any other Fundamental Document.

 

12.           Duties of
Secured Party.

 

The powers conferred on Secured Party hereunder are
solely to protect its interests in the Collateral and shall not impose on it
any duty to exercise such powers. Except as provided in Section 9-207 of
the Code, Secured Party shall have no duty with respect to the Collateral or
any responsibility for taking any necessary steps to preserve rights against
any Persons with respect to any Collateral.

 

13.           Choice of Law
and Venue; Submission to Jurisdiction; Service of Process.

 

(a)           THE VALIDITY OF THIS AGREEMENT, ITS
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE
PARTIES HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE
CHOICE OF LAW PRINCIPLES THEREOF). THE PARTIES AGREE THAT ALL ACTIONS OR
PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED
IN ANY OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY, THE
UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, THE COURTS
OF THE STATE OF DELAWARE SITTING IN NEW CASTLE COUNTY DELAWARE OR OF THE UNITED
STATES DISTRICT COURT OF THE DISTRICT OF DELAWARE, AND ANY APPELLATE COURT FROM
ANY THEREOF.

 

(b)           EACH PLEDGOR HEREBY SUBMITS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, TO THE JURISDICTION OF
THE AFORESAID COURTS AND WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW,
ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO
OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
SECTION.

 

(c)           EACH PLEDGOR HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT, OR OTHER PROCESS ISSUED IN ANY ACTION OR PROCEEDING AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT, OR OTHER PROCESS MAY BE
MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO PLEDGOR AT ITS ADDRESS FOR
NOTICES IN ACCORDANCE WITH THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF PLEDGOR’S ACTUAL RECEIPT THEREOF OR THREE DAYS
AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID.

 

(d)           NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE
TO AFFECT THE RIGHT OF SECURED PARTY TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY SECURED PARTY OF ANY
JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING

 

11

 

OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER
APPROPRIATE FORUM OR JURISDICTION.

 

14.           Amendments;
etc.

 

No amendment or waiver of any provision of this
Agreement nor consent to any departure by any Pledgor herefrom shall in any
event be effective unless the same shall be in writing and signed by the Debtor
and the Secured Party, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given. No
failure on the part of Secured Party to exercise, and no delay in exercising
any right under this Agreement, any other Fundamental Document, or otherwise
with respect to any of the Secured Obligations, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right under this
Agreement, any other Fundamental Document, or otherwise with respect to any of
the Secured Obligations preclude any other or further exercise thereof or the
exercise of any other right. The remedies provided for in this Agreement or
otherwise with respect to any of the Secured Obligations are cumulative and not
exclusive of any remedies provided by law.

 

15.           Notices.

 

Unless otherwise specifically provided herein, all
notices shall be in writing addressed to the respective party as set forth
below: and may be personally served, faxed, telecopied or sent by overnight
courier service or United States mail:

 

	
  If to any Pledgor:

  	
   

  
	
   

  	
   

  
	
  Crown Media Holdings, Inc.

  	
   

  
	
   

  	
   

  
	
  12700 Ventura Blvd.

  	
   

  
	
   

  	
   

  
	
  Studio City, California 91604

  	
   

  
	
   

  	
   

  
	
  Attention: William J. Abbott

  	
   

  
	
   

  	
   

  
	
  If to Secured Party:

  	
   

  
	
   

  	
   

  
	
  Hallmark Cards, Inc.

  	
   

  
	
   

  	
   

  
	
  2501 McGee, Mail Drop 342 

  	
   

  
	
   

  	
   

  
	
  Kansas City, MO 64108

  	
   

  
	
   

  	
   

  
	
  Attention: Tim Griffith

  	
   

  
	
   

  	
   

  
	
  with a copy to:

  	
   

  
	
   

  	
   

  
	
  Willkie Farr & Gallagher LL 

  	
   

  
	
   

  	
   

  
	
  787 Seventh Avenue

  	
   

  

 

12

 

	
  New York, New York 10019 

  	
   

  
	
   

  	
   

  
	
  Attention: Maurice M. Lefkort

  	
   

  

 

Any notice given pursuant to this section shall be
deemed to have been given: (a) if delivered in person, when delivered;
(b) if delivered by fax, on the date of transmission if transmitted on a
Business Day before 4:00 p.m. at the place of receipt or, if not, on the next
succeeding Business Day; (c) if delivered by overnight courier, two
(2) days after delivery to such courier properly addressed; or (d) if
by United States mail, four (4) Business Days after depositing in the
United States mail, with postage prepaid and properly addressed. Any party
hereto may change the address or fax number at which it is to receive notices
hereunder by notice to the other party in writing in the foregoing manner.

 

16.           Continuing Security
Interest.

 

This Agreement shall create a continuing security
interest in the Collateral and shall: (a) remain in full force and effect
until the indefeasible payment in full of the Secured Obligations and the full
and final termination of any commitment to extend any financial accommodations
under the Credit Agreement; (b) be binding upon each Pledgor and its
successors and assigns; and (c) inure to the benefit of Secured Party and
its successors, transferees, and assigns. Upon the indefeasible payment in full
of the Secured Obligations and the full and final termination of any commitment
to extend any financial accommodations under the Credit Agreement, the security
interests granted herein shall automatically terminate and all rights to the
Collateral shall revert to Pledgor. Upon any such termination, Secured Party
will, at Pledgor’s expense, execute and deliver to Pledgor such documents as
Pledgor shall reasonably request to evidence such termination. Such documents
shall be prepared by Pledgor and shall be in form and substance reasonably
satisfactory to Secured Party.

 

17.           Security
Interest Absolute.

 

To the maximum extent permitted by law, all rights
of Secured Party, all security interests hereunder, and all obligations of each
Pledgor hereunder, shall be absolute and unconditional irrespective of:

 

(a)           any lack of validity or enforceability of any of the
Secured Obligations or any other agreement or instrument relating thereto,
including any of the Fundamental Documents;

 

(b)           any change in the time, manner, or place of payment
of, or in any other term of, all or any of the Secured Obligations, or any
other amendment or waiver of or any consent to any departure from any of the
Fundamental Documents, or any other agreement or instrument relating thereto;

 

(c)           any exchange, release, or non-perfection of any
other collateral, or any release or amendment or waiver of or consent to
departure from any guaranty for all or any of the Secured Obligations; or

 

(d)           any other circumstances that might otherwise
constitute a defense available to, or a discharge of, any Pledgor.

 

13

 

18.           Headings.

 

Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not constitute
a part of this Agreement or be given any substantive effect.

 

19.           Severability.

 

In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.

 

20.           Counterparts;
Telefacsimile Execution.

 

This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same Agreement. Delivery of an executed counterpart of
this Agreement by telefacsimile shall be equally as effective as delivery of an
original executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, or
binding effect hereof.

 

21.           Waiver of
Marshaling.

 

Each of Pledgor and Secured Party acknowledges and
agrees that in exercising any rights under or with respect to the Collateral:
(a) Secured Party is under no obligation to marshal any Collateral;
(b) may, in its absolute discretion, realize upon the Collateral in any
order and in any manner it so elects; and (c) may, in its absolute
discretion, apply the proceeds of any or all of the Collateral to the Secured
Obligations in any order and in any manner it so elects. Each Pledgor and
Secured Party waive any right to require the marshaling of any of the
Collateral.

 

22.           Waiver of Jury
Trial.

 

EACH OF PLEDGOR AND SECURED PARTY HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND
ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH OF PLEDGOR AND SECURED PARTY
REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE
EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT
TO A TRIAL BY THE COURT.

 

23.           Intercreditor

 

The terms and conditions of this Agreement are
subject to the terms and conditions of the Intercreditor Agreement. In the
event of any conflict between the terms and conditions of this

 

14

 

Agreement and the terms, conditions and provisions of the Intercreditor
Agreement, the terms, conditions and provisions of the Intercreditor Agreement
shall control. The rights and remedies of the Secured Party under this Agreement
will be subject to the terms, conditions and provisions of the Intercreditor
Agreement. Notwithstanding anything to the contrary in this Agreement, prior to
the discharge of the First Priority Obligations (as defined in the
Intercreditor Agreement), any obligation of the Pledgors in this Agreement that
requires delivery of Collateral to, possession or control of Collateral with,
the pledge, assignment, endorsement or transfer of Collateral to or the
registration of Collateral in the name of, the Secured Party shall be deemed
complied with and satisfied if such delivery of collateral is made to, such
possession or control of Collateral is with, or such Collateral be assigned,
endorsed or transferred to or registered in the name of, the Revolving Lender;
provided that, notwithstanding the foregoing, nothing contained in this
Section shall limit or otherwise adversely effect the pledge of any
Collateral under Section 2 of this Agreement. To the extent that any
covenants, representations or warranties set forth in this Agreement are untrue
or incorrect solely as a result of the delivery to, or grant of possession or
control to, the Revolving Lender in accordance with this Section, such
representation or warranty shall not be deemed to be untrue or incorrect for
purposes of this Agreement.

 

[Signature page to
follow.]

 

15

 

IN WITNESS WHEREOF, each of the Pledgors and Secured
Party have caused this Agreement to be duly executed and delivered by their
officers thereunto duly authorized as of the date first written above.

 

	
   

  	
  DEBTOR:

  
	
   

  	
   

  
	
   

  	
  CROWN MEDIA HOLDINGS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian Stewart

  
	
   

  	
   

  	
  Name:

  	
  Brian Stewart

  
	
   

  	
   

  	
  Title:

  	
  EVP / CFO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  GUARANTORS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CROWN MEDIA UNITED STATES, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian Stewart

  
	
   

  	
   

  	
  Name:

  	
  Brian Stewart

  
	
   

  	
   

  	
  Title:

  	
  EVP / CFO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  CM INTERMEDIARY, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian Stewart

  
	
   

  	
   

  	
  Name:

  	
  Brian Stewart

  
	
   

  	
   

  	
  Title:

  	
  EVP / CFO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  CITI TEEVEE, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian Stewart

  
	
   

  	
   

  	
  Name:

  	
  Brian Stewart

  
	
   

  	
   

  	
  Title:

  	
  EVP / CFO

  
	
   

  	
   

  
	
   

  	
  DOONE CITY PICTURES, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian Stewart

  
	
   

  	
   

  	
  Name:

  	
  Brian Stewart

  
	
   

  	
   

  	
  Title:

  	
  EVP / CFO

  

 

[Signature Page to Pledge
Agreement]

 

 

	
   

  	
  SECURED PARTY:

  
	
   

  	
   

  	
   

  
	
   

  	
  HC CROWN CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy Griffith

  
	
   

  	
   

  	
  Name:

  	
  Timothy Griffith

  
	
   

  	
   

  	
  Title: 

  	
  Vice President

  

 

[Signature Page to the
Pledge Agreement]

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