Document:

EXHIBIT 10.98

 

DEFERRED
COMPENSATION PLAN

SUMMARY

 

 

2005

 

 

MAJOR
TOPICS

 

	
  The
  Crown Media Holdings, Inc. Deferred Compensation Plan

  	
   

  
	
   

  	
   

  
	
  Enrollment

  	
   

  
	
   

  	
   

  
	
  When You Can Enroll

  	
   

  
	
   

  	
   

  
	
  What is Eligible for
  Deferral?

  	
   

  
	
   

  	
   

  
	
  When
  Your Deferrals Are Credited to Your Account

  	
   

  
	
   

  	
   

  
	
  Interest Paid on
  Account Balance (all non-RSU Compensation)

  	
   

  
	
   

  	
   

  
	
  Investment of RSU
  Compensation

  	
   

  
	
   

  	
   

  
	
  Distribution Alternatives

  	
   

  
	
   

  	
   

  
	
  Other Issues
  Related to Distributions

  	
   

  
	
   

  	
   

  
	
  Taxes
  on Deferrals, Investment Returns and Distributions

  	
   

  
	
   

  	
   

  
	
  Risks of a
  Deferred Compensation Plan

  	
   

  
	
   

  	
   

  
	
  Plan Administration

  	
   

  

 

 

	
   

  	
   

  	
  As part of a select
  group, you are being presented with a unique opportunity — to take advantage
  of the Crown Media Holdings, Inc. Deferred Compensation Plan (Plan). The Plan
  provides an avenue to save pre-tax dollars in a tax-deferred investment
  program for your personal financial goals. The Plan permits you to defer
  portions of your Crown salary, bonus and RSU compensation. You have access to
  your account to make changes in your deferral elections or withdrawals while
  still employed. You may request a copy of the full Plan document from Gene
  Hawkins at (818) 755-2690 or Crown Media Holdings, Inc., 12700 Ventura
  Boulevard, Studio City, CA 91604. 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PLEASE NOTE: AS A RESULT OF RECENT LEGISLATION, SIGNIFICANT
  CHANGES MUST BE MADE TO THE PLAN FOR DEFERRALS RELATING THE TO 2005 AND
  SUBSEQUENT PLAN YEAR. SOME OF THESE CHANGES ARE HIGHLIGHTED BELOW. THE IRS
  INTENDS TO ENACT REGULATIONS, PRIOR TO THE END OF 2004, WHICH WILL FURTHER
  CLARIFY THE REQUIREMENTS OF THE NEW LAW AND ITS EFFECT ON DEFERRAL ELECTIONS
  AND WITHDRAWALS, PARTICULARLY AS THEY RELATE TO INCENTIVE AWARDS SUCH AS
  RSUS. WHEN THIS GUIDANCE IS PROVIDED, YOU MAY BE REQUIRED TO MAKE NEW
  ELECTIONS FOR THE 2005 DEFERRALS AND IT IS POSSIBLE, ALTHOUGH UNLIKELY, THAT
  THE IRS MAY NOT HONOR ANY 2005 PLAN YEAR DEFERRAL ELECTIONS FOR COMPENSATION
  RELATING TO THE RSUS AWARDED IN 2003 AND 2004

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Crown Media Holdings, Inc.
  Deferred Compensation Plan

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Plan Year:.

  	
  January 1 through December
  31, 2005

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Open enrollment:

  	
  December 10 through
  December 30, 2004

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Plan is an unfunded
  arrangement that is intended to benefit a select group of management or
  highly compensated employees and outside directors. It is intended to be a “top
  hat” plan that is exempt from the Employee Retirement Income Security Act of
  1974, as amended (ERISA), with the exception of limited reporting obligations
  and certain administrative and enforcement requirements, including claims
  procedures.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Enrollment

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  To enroll in the Plan,
  you may make the following elections by submitting the enrollment forms
  included in this kit:

  

 

1

 

	
  Send all completed forms to Gene Hawkins by the deadline
  specified.

   

   

  If you do not elect to enroll in the Plan at this time, all
  of your compensation will be paid in cash. You may enroll during any
  future annual open enrollment period.

  	
   

  	
  •   Deferral Election – indicate the
  percentages of your salary (up to a maximum of 50%), bonus and Restricted
  Stock Unit (RSU) compensation that you wish to defer during the January 1 –
  December 31, 2005 Plan Year. Your deferral election is irrevocable and cannot
  be changed during the Plan Year. Your deferral election is for this Plan Year
  only; to defer compensation in subsequent years, you must make a new deferral
  election during the future annual open enrollment period for those years.

  

  •   Investment of RSU Compensation Deferrals –
  indicate in which fund RSU compensation deferrals settled in cash are to be
  invested - the interest bearing account or the stock tracking fund (see
  discussion on pages 3 and 4)

  

  •    Selection of Form of Distribution –
  indicate whether you wish the amounts deferred to be distributed in a lump
  sum or in installments over 5 years (see discussion on pages 5 and 6 – note
  that the only one distribution alternative may be available, depending on the
  amounts involved).

  

  •    Scheduled In-Service Withdrawal
  Election – if you want this Plan Year’s deferral, plus earnings thereon,
  distributed while employed, specify when and how (see page 4).

  

  •    Beneficiary Designation – establish
  who receives your money in the event of your death. If you already have a
  Beneficiary Designation on file, you do not need to complete another unless
  you are changing your designated beneficiary.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  When You Can Enroll

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  For the 2005 Plan Year,
  the enrollment period is from December 10 to December 30, 2004. The
  enrollment periods for future Plan Years are scheduled to run from November 1
  to November 30 in the year preceding each Plan Year.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  What is Eligible for Deferral?

  
	
   

  	
   

  	
   

  
	
  Your deferrals and
  their earnings are always 100% vested.

   

   

  The minimum annual
  deferral amount is $5,000 (prorated for partial years).

  	
   

  	
  You may defer up
  to:

  

  •   50% of your
  annual salary

  

  •   100% of your
  incentive compensation (bonus)

  

  •    100% of the
  settlement received during the Plan Year of a Restricted Stock Unit

  award granted under the Crown Media Holdings, Inc. 2000 Long Term
  Incentive 

  plan and RSU Agreement, whether the settlement is in cash or stock

   

  •   If you are a
  director, 100% of your Director fees

  
	
   

  	
   

  	
   

  

 

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  When Your Deferrals Are
  Credited to Your Account

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  All deferred salary and
  bonus amounts are automatically placed in an interest-bearing account. They
  cannot be placed in the Stock Tracking Fund described below. Your base salary
  deferrals are credited to your account as soon as practicable after they are
  withheld from your paycheck. Applicable bonus amounts are credited to your
  account as soon as administratively practicable after the date on which the
  bonus is payable to employees in general. RSU deferrals are credited to your
  account as soon as practicable after the date on which the RSUs are settled.
  Director fee deferrals are credited to your account as of the first day of
  the Plan Year in which the deferred amount would have been paid in cash.

  

  You are always 100% vested in your Account.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Interest
  Paid on Account Balance

  
	
   

  	
   

  	
   

  
	
  The Administrator may adjust
  the interest rate (including the benchmark) prospectively.

  	
   

  	
  For salary, bonus, and
  RSU amounts placed in the interest-bearing account, interest will be paid on
  your daily account balance at the daily equivalent rate of Prime + 1% (unless
  you are notified otherwise). The rate is adjusted monthly.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Investment
  of RSU Compensation

  
	
   

  	
   

  	
  You may elect to have RSU Compensation that is settled by the Company
  in cash placed in the interest bearing account described above or in a Stock
  Tracking Fund. RSU cash proceeds placed in the Stock Tracking Fund will be
  converted into “RSU Cash Units”. The number of RSU Cash Units credited to the
  Fund will equal the amount of cash which you have elected to be placed in the
  Fund divided by the Crown stock price on the day of conversion. Any
  withdrawals or distributions of RSU Cash Units from the Stock Tracking Fund
  will be paid in cash in an amount equal to the then-current price of Crown’s
  common stock times the number of RSU Cash Units redeemed. Any election you
  make between placement of RSU proceeds in the interest-bearing account and
  the Stock Tracking Fund must be in 10% increments.

  

  RSU Compensation that is settled by the Company in stock is automatically
  placed in the Stock Tracking Fund as an “RSU Stock Unit”. Each RSU Stock Unit
  is equivalent in value to

  

 

3

 

	
   

  	
   

  	
  one share of Crown common stock but has no dividend or voting rights.
  Any withdrawals or distributions of RSU Stock Units from the Stock Tracking
  Fund will be settled in Crown shares in an amount equal to the number of RSU
  Stock Units redeemed.

  

  The number of RSU Cash Units and RSU Stock Units credited to a participant’s
  account and invested in the Stock Tracking Fund may be adjusted by the Plan
  Administrator in the event of a stock split, change in capitalization or
  extraordinary corporation transaction (merger, spin-off, reorganization,
  etc.). Upon a de-listing of the stock, a going private transaction or any
  other event that eliminates a market for the stock, the Stock Tracking Fund
  will be eliminated and the proceeds from the Fund placed in the interest
  bearing account.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Distribution Alternatives

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Plan’s distribution
  options provide you with flexibility. Your account balance, or a portion of it,
  may be distributed to you while employed, and/or after separating from
  service. The available distribution options are detailed below.

  

  Scheduled In-Service Withdrawal

  

  During each Plan Year’s open enrollment, you may elect to receive payment
  of all or part of that Plan year’s deferral account in a future year that is
  at least two years beyond the end of that Plan year. For example, you may
  elect to receive your deferrals credited in 2005 and investment returns
  therein in 2007 or later.

  

  If your scheduled in-service distribution is more than $25,000, you may
  receive it in annual installments over 5 years, if elected in advance. If
  your scheduled in-service distribution is $25,000 or less, it must be taken
  as a lump sum. All scheduled in-service withdrawals will be paid in January.

  

  If your employment with Crown ends prior to or while receiving scheduled-in
  service withdrawals, your scheduled in-service withdrawal will be distributed
  to you according to the Termination rule below.

  

  You may postpone or change the distribution method of any scheduled
  in-service withdrawal by filing a Distribution
  Election Change Form at least one year in advance of your
  previously-elected distribution date. This form can be obtained from Gene
  Hawkins.

  

  EFFECTIVE FOR AMOUNTS DEFERRED FROM
  THE 2005 AND SUBSEQUENT PLAN YEARS,
  each scheduled in-service withdrawal may be postponed a maximum of two
  times, and the new date for distribution must be at least FIVE YEARS

  

 

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  beyond the previously-scheduled
  date.

  
	
   

  	
   

  	
   

  
	
  You may elect to
  receive a distribution from the Plan while you are still employed. Scheduled
  in-service withdrawals are available as a manner of accumulating capital for
  shorter term needs such as the payment of a child’s education.

  	
   

  	
  After Employment Ends
  or Following a Change in Control – Termination Distribution 

  

  If you terminate employment for any reason (including retirement, long-term
  disability or death) or the Company experiences a Change in Control (as
  defined in the Crown Media Holdings, Inc. 2000 Long Term Incentive Plan) your
  payment options are as follows:

  
	
   

  	
   

  	
  Balance
  at November 30 of

  applicable Plan Year

  	
   

  	
  Distribution Method

  	
   

  
	
   

  	
   

  	
  $100,000 or less

  	
   

  	
  Lump sum payment

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $100,001 - $250,000

  	
   

  	
  You elect to receive a lump sum payment or 5 Annual
  Installments

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  more than $250,000

  	
   

  	
  5 Annual Installments

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  You should complete the
  Distribution Election section of the enrollment form at the time you make
  your election to defer. Any change to a Distribution Election form must be
  filed at least 6 months prior to your termination or the Change in Control to
  be effective. If no election is made within the required time period, payment
  is made in a single lump sum, if the amount is $250,000 or less, or in installments,
  if the amount exceeds $250,000.

  

  FOR AMOUNTS DEFERRED FROM THE 2005
  AND SUBSEQUENT PLAN YEARS, PENDING IRS REGULATIONS MAY REQUIRE A CHANGE TO A
  DISTRIBUTION ELECTION FORM TO BE FILED AT LEAST 12 MONTHS IN ADVANCE AND EVEN
  THEN MAY NOT GIVE EFFECT TO THE CHANGE WITHOUT A DELAY OF 12 MONTHS.

  

  Payments will be made or, if in installment form, will begin in
  the January following the date of termination or Change in Control. FOR AMOUNTS DEFERRED FROM THE 2005 AND
  SUBSEQUENT PLAN YEARS, PAYMENTS WILL BE MADE OR WILL BEGIN THE LATER OF THE
  JANUARY FOLLOWING THE DATE OF TERMINATION OR CHANGE IN CONTROL OR THE DATE
  THAT IS SIX MONTHS AFTER THE DATE OF TERMINATION OR CHANGE IN CONTROL.

  

  Payments will be made in the form of cash unless the amount distributed is
  from the portion of your account that contains RSU Stock Units (see
  “Investment of RSU Compensation”); in such event, RSU Stock Units will be
  distributed in the form of stock.

  

 

5

 

	
   

  	
   

  	
  If the Administrator
  determines that a total distribution upon a Change in Control will subject
  you to an excise tax as an “excess parachute payment,” then your distribution
  will be limited to the amount that does not trigger the excise tax and the
  remaining amount will be paid as soon as practicable following the one-year
  anniversary of the Change in Control or, if later, the date the Administrator
  determines that the excise tax will no longer be applied.

  

  The Administrator may make a distribution to a legal guardian in the event of
  incompetence or minor status, and may make payments directed by court order.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Explanation
  of Installment Calculation  

  

  The amount of each installment is equal to the value of your account balance
  on November 30 preceding the date of payment divided by the number of
  remaining installments (including the installment being paid).

  

  For example, if you choose a 5-year
  installment period beginning in January 2007, the first payment is equal to
  your November 30, 2006 account balance divided by 5; the second payment
  (January 2008) is equal to your November 30, 2007 account balance
  divided by 4; and so on until the fifth payment, which is equal to your
  remaining account balance. The method will result in a larger installment
  every year.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Other Issues Related to
  Distributions

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Nonscheduled
  Early Withdrawals

  

  At any time, you may request an unplanned distribution of
  up to 100% of your funded account balance. This nonscheduled, immediate
  distribution is subject to a 10% penalty (i.e. 90% of your selected
  withdrawal amount, less taxes, will be distributed to you; and you will
  forfeit the remaining 10%). Income taxes do not apply to the 10% forfeited
  amount. In addition, you will become ineligible to defer base salary to the
  Plan for the remainder of that Plan Year and the following Plan Year. The
  minimum nonscheduled withdrawal is the lesser of $25,000 or your entire
  account balance. 

  

  NONSCHEDULED
  EARLY WITHDRAWALS ARE NOT AVAILABLE FOR AMOUNTS DEFERRED FROM THE 2005 AND
  SUBSEQUENT PLAN YEARS.

  
	
   

  	
   

  	
   

  
	
  You will need to
  complete a written request for a Nonscheduled Early or Hardship Withdrawal.

  	
   

  	
  Hardship
  Withdrawals

  

  In some circumstances, hardship withdrawals of your funded
  account balances are allowed without penalty. Hardship withdrawals are limited
  to “unforeseeable emergencies” such as illness or casualty losses. You must
  apply for a hardship withdrawal and your application must be approved by the
  Administrator.

  

 

6

 

	
  When you enroll in the
  Plan you will complete a Beneficiary Designation. You should determine
  whether or not you need to change your beneficiary any time your personal
  circumstances change.

  	
   

  	
  Death

  

  If you die while receiving post-employment installment
  distributions, the remaining installments will be paid over the installment
  period to your beneficiary(ies) of record. 

   

  When
  Distributions Are Paid

  

  Nonscheduled Early Withdrawals (available only for the 2004
  and preceding Plan Years) and hardship withdrawals are paid as soon as
  feasible after being requested and, where applicable, approved.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Taxes on Deferrals, Investment
  Returns and Distributions

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Deferrals

  

  The compensation deferred will be subject to current Social
  Security, Medicare and other statutory employment taxes in the year of
  deferral.

  

  Distributions

  

  All distributions from the Crown Media Holdings, Inc. Deferred
  Compensation Plan are treated as “ordinary income” subject to federal, state,
  and local (if applicable) income taxation at the time of distribution and the
  Company will withhold on these amounts. Account distributions including
  investment income will not be included in your Social Security wages or
  Medicare wages for the year in which the distributions are made.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Risks of a Deferred
  Compensation Plan

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  In the
  event of the Company’s bankruptcy or insolvency, Deferred Compensation Plan
  assets are treated like all other corporate assets and are subject to the
  claims of the general creditors of the Company.

  

  The “unsecured” nature of the Deferred Compensation Plan should be considered
  prior to your election to participate in the Plan.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Plan Administration

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  This Plan is
  administered by the Administrator, which has discretionary authority to
  interpret and apply the Plan, and

  

 

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  make the rules
  necessary for the day-to-day operation of the Plan. 

  The Administrator can
  be either an individual or Committee appointed by the Compensation Committee
  of the Board of Directors of the Company. If no Administrator is named, the
  Compensation Committee serves as the Administrator.

  The Company has the
  right to amend or terminate the Plan, in whole or in part, at any time. No
  amendment or termination of the Plan will retroactively reduce any amounts
  allocated to a participant’s account.

  If there is a dispute
  over benefits under the Plan, the Plan requires binding arbitration through
  the American Arbitration Association

  

 

8Exhibit
10.99

 

TECHNICAL
SERVICES AGREEMENT

 

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

 

WHEREAS, Buyer is engaged in the provision of
television post-production, origination, compression, authorization and
transmission services at its Network Operations Center facility (as defined
below);

 

WHEREAS, CMUS operates a television programming service
delivering CMUS’ program channels or program content, including, but not
limited to an East and West Coast regional feed of the Hallmark Channel and
Hallmark Movie Channel as such channels are more particularly described in
Exhibit A(1) hereto (the “Channel” or the “Channels”), and CMUS desires to
engage Buyer for the non-exclusive provision of the services specified in
Paragraph 1; and

 

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

 

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

 

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

 

EXHIBIT A - ORIGINATION
SERVICES

EXHIBIT B - TRANSMISSION
AND COMPRESSION SERVICES

EXHIBIT C -
POST-PRODUCTION SERVICES PRICES

EXHIBIT D - SATELLITE
RECEPTION AUTHORIZATION SERVICES

EXHIBIT E - REPORTING
SERVICE PROBLEMS

EXHIBIT F - SERVICES

 

1

 

The Services shall be
rendered by Buyer at the Network and Production Operations Center (the “NOC”),
6430 S. Fiddlers Green Circle, Suite 225, Greenwood Village, Colorado
80111.  Uplink and satellite transponder
services shall be provided by a third party contracted by CMUS.  Notwithstanding the above, CMUS may elect to
cancel the Services provided hereunder in respect of one (1) of the Channels
upon six (6) months prior written notice to Buyer, such cancellation to take
effect at the earliest upon expiry of the third year of the Service Term (the “Cancellation
Option”).  CMUS may also elect, upon six
(6) months prior written notice to Buyer, to extend any part of the Services
for up to two additional channels (the “Additional Channels” and each an “Additional
Channel”) for the remainder of the Service Term upon the terms set out herein
(the “Additional Channel Option(s)”).

 

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

 

3.                                      EQUIPMENT AND INSURANCE.

 

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

 

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

 

3.2.1        Statutory Workers’ Compensation coverage
for all of its employees rendering services or who are responsible for
interfacing with those rendering services under this Agreement, including
occupational disease coverage, as required by applicable law, and employer’s
liability with limits of at least $1,000,000 bodily injury each accident,
$1,000,000 bodily injury by disease each employee and $1,000,000 bodily injury
by disease in the aggregate.  The policy
must be endorsed to include “all states” coverage;

 

3.2.2        Comprehensive General Liability
Insurance, including media liability, written on an “occurrence” basis with a
combined single limit of at least $2,000,000 per occurrence, and $5,000,000 in
the aggregate for bodily injury and property damage in a form providing
coverage not less than a standard commercial general liability policy including
hazards

 

2

 

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

 

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

 

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

 

4.                                      SERVICE PROBLEMS AND INTERRUPTIONS.

 

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

 

4.2           Service Interruption Credits.  So long as this Agreement has not been
terminated and CMUS is not in material breach of any of the material provisions
of this Agreement, CMUS shall, subject to the terms of this Agreement, be
entitled to Service Interruption Credits for Service Interruptions, calculated
in accordance with Exhibit F.

 

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

 

3

 

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

 

In the event of a Force Majeure Condition, the parties
shall:

 

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

 

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

 

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

 

4.4           Replacement
Service Providers.  During any
Initial Period or Suspension Period, subject to CMUS continuing to fully
co-operate with Buyer, pursuant to Paragraph 4.3 above, CMUS will have the
right to seek an alternative service provider for the provision of

 

4

 

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

 

4.5           Where
a Force Majeure Condition of the nature set out in Paragraph 4.3(ii) occurs,
Buyer shall use reasonable efforts to promptly repair or correct such
problem.  CMUS hereby represents and
warrants that no material occurrences of interference of the sort envisaged in
Paragraph 4.3(ii) affecting the Services have occurred prior to the Service
Term.

 

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

 

5.                                      SERVICE FEES.

 

5.1           Service Fees.  In consideration of the Services provided
hereunder, CMUS shall pay to Buyer a service fee per Channel (“Service Fee”).  In year one (1) of the Service Term, the per
annum Service Fee shall be one million, one hundred thousand US dollars (US$
1,100,0000) so that subject to the exercise by CMUS of its option to require
Buyer to provide Services in respect of any Additional Channel in accordance
with Paragraph 1 above, Service Fees in year one of the Service Term shall be
payable in respect of not less than three (3) Channels with aggregate Service
Fees of three million, three hundred thousand US dollars (US$ 3,300,000).  The Service Fee for any Additional Channel
shall be equal to seventy per cent (70%) of the Service Fee for a Channel, provided
that the service and equipment required for such Additional Channel do not
substantially exceed that required for one of the Channels of the Hallmark
Channel.  By way of example, but without
limiting the generality of the foregoing, the service and equipment required
for any high definition channel shall substantially exceed that required for
the current Hallmark Channel.  Any
additional costs will be negotiated in good faith at the time service
requirements are defined.  The annual
Service Fee for all Channels shall increase each year of the Service Term by
the actual percentage increase in the cost of living over the preceding year
measured by reference to the United States Retail Price Index.  If CMUS exercises the Cancellation Option and
either of the Additional Channel Options in accordance with Paragraph 1 above,
then the Service Fee payable in respect of the first Additional Channel shall
be the same as the Service Fee payable for the Channel cancelled in exercise of
the Cancellation Option.  If CMUS
exercises the Cancellation Option, then no further Service Fees will be payable
for such Channel and Buyer shall apply the balance of the amount of License Fee

 

5

 

paid on execution of this
Agreement in respect of that Channel against further Monthly Service Fees (as
defined in section 5.2 below) payable in respect of the remaining Channels.

 

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

 

6.                                      COMPLIANCE WITH APPLICABLE LAWS.

 

6.1           Buyer’s
Obligations.  Buyer shall prepare,
apply for and maintain all governmental permits, licenses and authorizations
necessary or commercially appropriate to perform the Services.

 

6.2           Applicable
Laws.  This Agreement is subject to
all applicable federal, state and local laws and regulations and orders of
governmental agencies, as in effect from time to time in the United States,
including but not limited to, the Communications Act of 1934 and the rules and
regulations of the FCC or any other applicable governing body.  Either party may terminate this Agreement
without further liability if ordered to do so by the final order of a court or
other governmental agency or if such order or ruling would make it impossible
for either such party to carry out its obligations under this Agreement.

 

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

 

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

 

6

 

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

 

9.             CONFIDENTIALITY. 
Each party to this Agreement agrees that all terms and conditions of
this Agreement and all confidential information furnished by either party
hereunder shall be used only in performance of this Agreement, treated as
confidential and not disclosed to anyone other than those who have a need to
use such confidential and proprietary information for the purposes of this
Agreement.  The foregoing restrictions
and obligations shall not apply with respect to any information which:  (i) is or become generally available to the
public through any means other than a breach by the receiving party of its
obligations under this Agreement; (ii) was in the possession of the receiving
party without obligation of confidentiality prior to receipt under this
Agreement; (iii) is disclosed to the receiving party without an obligation of
confidentiality by a third party who has the right to make such disclosure;
(iv) is developed independently by or on behalf of the receiving party without
use of or benefit from the confidential or proprietary information; (v) is
required to be disclosed by a court or governmental agency of competent
jurisdiction, provided that the party whose information is to be
disclosed is given prompt notice of such requirement and an opportunity to
contest to the extent permitted by the court or governmental agency; or (vi) is
disclosed subject to the same provisions as regards confidentiality as are
contained herein to agents or institutions associated with financing and to
investors or potential investors or to legal and financial advisors.  Except for any announcement intended solely
for the internal distribution within either Buyer or CMUS as the case may be
(and which is not subsequently distributed externally of the relevant
organization), or any disclosure required by legal, accounting or regulatory
requirements, all media releases that refer to the other party hereto
(including, but not limited to, promotional or marketing material) by Buyer and
CMUS or their related companies shall be subject to the written approval of the
other party prior to the release thereof, such approval not to be unreasonably
withheld or delayed.  Notwithstanding the
foregoing, CMUS and Buyer may state, without prior approval, in their
promotional and advertising material that services of the type comprised in the
Services are provided to CMUS by Buyer.

 

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

 

10.1         Termination
for Cause.  Either party (the “Non-Defaulting
Party”) may terminate this Agreement with immediate effect by prior written
notice to the other party on or at any time after a material and irremediable
breach of this Agreement by the other party (the “Defaulting Party”) or, if
such material breach is remediable, if such material breach is not cured or
remedied by the Defaulting Party within 30 days starting on the day of its
receipt of written

 

7

 

notice regarding such breach from the Non-Defaulting Party stating that
failure to remedy such breach may give rise to termination under this
Paragraph.

 

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

 

(a) For “Major
Signal Outages”:

 

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

 

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

 

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

 

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

 

(b)  For “Significant Service Interruptions”:

 

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

 

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

 

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

 

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

 

8

 

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

 

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

 

10.4         If CMUS legitimately exercises its
rights to terminate this Agreement pursuant to Paragraphs 10.1 or 10.2, no
further Service Fees will be payable and any Service Fees prepaid for the
periods remaining in the Service Term following the effective date of
termination will be refunded by Buyer to CMUS within thirty (30) days of such
effective date of termination.

 

11.          NOTICES.  All
notices, demands, requests, or other communications which may be or are
required to be given or made hereunder or in connection with the matters
contemplated by this Agreement shall be in writing and shall be delivered
personally, or sent by overnight messenger, or sent by facsimile transmission,
or mailed by first-class certified mail with return receipt requested,
addressed as follows:

 

	
  If to CMUS:

  	
   

  	
   

  
	
   

  	
   

  	
  Crown Media United
  States, LLC

  
	
   

  	
   

  	
  12700 Ventura Blvd.
  Suite 200

  
	
   

  	
   

  	
  Studio City,
  CA 91604

  
	
   

  	
   

  	
  Attention: Brian
  Stewart, CFO

  
	
   

  	
   

  	
  Telephone: (818)
  755-2648

  
	
   

  	
   

  	
  Facsimile: (818)
  755-2564

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
   

  
	
   

  	
   

  	
  Legal Department

  
	
   

  	
   

  	
  Crown Media Holdings,
  Inc.

  
	
   

  	
   

  	
  12700 Ventura Blvd.

  
	
   

  	
   

  	
  Studio City, CA 91604

  
	
   

  	
   

  	
  Attn: Charles Stanford,
  General Counsel

  
	
   

  	
   

  	
  Telephone: (818)
  755-2469

  
	
   

  	
   

  	
  Facsimile: (818)
  755-2461

  
	
   

  	
   

  	
   

  
	
  If to Buyer:

  	
   

  	
   

  
	
   

  	
   

  	
  Crown Media
  International, LLC

  
	
   

  	
   

  	
  6430 S. Fiddlers Green Circle, Suite 225

  
	
   

  	
   

  	
  Greenwood Village,
  Colorado 80111

  
	
   

  	
   

  	
  Attn: Richard Buchanan,
  Sr. Vice President

  
	
   

  	
   

  	
  Telephone: (303)
  967-4616

  
	
   

  	
   

  	
  Facsimile: (303)
  220-8679

  

 

9

 

	
  with copies to:

  	
   

  	
   

  
	
   

  	
   

  	
  Crown Media
  International, LLC

  
	
   

  	
   

  	
  6430 S. Fiddlers Green
  Circle, Suite 225

  
	
   

  	
   

  	
  Greenwood Village,
  Colorado 80111

  
	
   

  	
   

  	
  Attn: Charles Zabilski,
  Vice President

  
	
   

  	
   

  	
  Telephone: (303)
  220-7990

  
	
   

  	
   

  	
  Facsimile: (303)
  220-7660

  

 

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

 

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

 

(ii)                                  if
sent by overnight courier, such time as it is delivered to the addressee (with
signed messenger or delivery receipt being deemed conclusive evidence of such
delivery);

 

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

 

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

 

12.                               GENERAL.

 

12.1         Entire Agreement.  This Agreement, together with Exhibits A
through F, constitutes the entire and only understanding of the parties hereto
and supersedes all prior agreements, whether oral or written, relating to the
subject matters specifically expressed herein. 
Neither party has been induced to enter into this Agreement in reliance
upon, nor has any party been given any warranty, representation, statement,
assurance, covenant, agreement, undertaking, indemnity or commitment of any
nature whatsoever other than are set out in this Agreement including the
Exhibits attached hereto and the Purchase and Sale Agreement including any
Exhibits attached thereto.  This Agreement
cannot be modified or changed except as agreed in writing by both parties
hereto.

 

12.2         Relationship.  It is expressly understood that the parties
to this Agreement intend to establish the relationship of independent
contractors, and nothing in this Agreement and no action taken by the parties
pursuant to this Agreement will constitute, or be deemed to constitute, the
parties in the relationship of principal and agent or to create a joint
venture, partnership, association or other cooperative entity between
themselves or their respective successors in interest, and at no time will
either of the parties have the authority to hold itself out as the agent of the
other or as being empowered to bind the other in any way whether contractually
or otherwise.

 

10

 

12.3         Waiver.  No delay or failure of Buyer or CMUS to
insist on performance of any of the terms or conditions herein or to exercise
any right, power or privilege shall be construed to be a waiver thereof or a
waiver of any other terms, conditions or privileges, whether of the same or
similar type.  No breach of any provision
of this Agreement shall be waived or discharged except with the express written
consent of the parties hereto.

 

12.4         Assignment.

 

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

 

(b)           Any
party may (without the consent of the others) assign to an Affiliate the
benefit of all or any of the parties’ obligations or any benefit it enjoys
under this Agreement provided, however, that such assignment
shall not be absolute but shall be expressed to have effect only for so long as
the assignee remains an Affiliate and that immediately before ceasing to be an
Affiliate the assignee shall assign the benefit to an Affiliate of the party
concerned.

 

(c)           Buyer
may assign and/or charge all or any of its rights under this Agreement by way
of security to any bank(s) and/or holders of debt securities and/or financial
institutions(s) and/or hedge counterparties and/or any other person lending
money or making other banking facilities available to Buyer or any Affiliate of
Buyer in connection with the acquisition of the Purchased Interests described
in the Purchase and Sale Agreement and/or any refinancing of the existing debt
of any Group Member or to any financiers who provide funds on or in connection
with any subsequent refinancing of such funding or to any person from time to
time appointed by any financier to act as security trustee on behalf of such
financier; without limitation to the foregoing, any such person or financier
may assign such rights on any enforcement of the security under such finance
arrangements.

 

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

 

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

 

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

 

11

 

12.7         Arbitration. The parties hereto
irrevocably agree that each and every controversy or claim arising out of, or
in connection with or relating to this Agreement or the interpretation, performance
or breach thereof shall be settled by binding arbitration under the rules then
in effect of the American Arbitration Association or its successor and in
accordance with applicable law but subject to the following agreed provisions.  The arbitration shall be conducted in New
York, New York, and the proceedings shall be kept confidential.  Notice of papers or processes relating to any
arbitration proceeding, or for the confirmation of award and entry of judgment
on an award may be served on each of the parties by registered or certified
mail at the addresses set forth under the signature lines above.  Each dispute shall be promptly adjudicated by
a panel of three neutral arbitrators appointed as follows:  each party shall nominate an arbitrator, and
the two arbitrators so appointed shall appoint a third arbitrator who shall act
as president of the arbitral tribunal; if either party fails to nominate an
arbitrator within 30 days of receiving notice of the nomination of an arbitrator
by the other party, such arbitrator shall at the request of that party be
appointed by the American Arbitration Association; if the two arbitrators to be
nominated by the parties fail to agree upon a third arbitrator within 30 days
of the appointment of the second arbitrator, the third arbitrator shall be
appointed on the nomination of the American Arbitration Association at the
written request of either party; and should a vacancy arise because any
arbitrator dies, resigns, refuses to act, or becomes incapable of performing
his functions, the vacancy shall be filled by the method by which that
arbitrator was originally appointed.  All
arbitrators shall be of good reputation and character and shall be highly
knowledgeable of entertainment industry matters.  CM shall pay one-half of the arbitrators’
expenses and Buyer shall pay one-half. 
The parties shall pay their own legal expenses.  The arbitrators shall provide a reasoned
opinion supporting their conclusion, including detailed findings of fact and
conclusions of law.  Such findings of
fact shall be final and binding on the parties but such conclusions of law
shall be subject to appeal in any court of competent jurisdiction.  For these purposes, the parties agree that
all appeals shall be brought in the state or federal courts of appropriate
subject matter jurisdiction in New York and each party hereby submits itself to
the exclusive in personam
jurisdiction of such courts for purposes of any such appeals. The arbitrators
may award damages and/or permanent injunctive relief, but in no event shall the
arbitrators have the authority to award punitive or exemplary damages.  Notwithstanding anything to the contrary in
this Section 12.7, either party may apply to a court of competent jurisdiction
for relief in the form of a temporary restraining order or preliminary
injunction, or other provisional remedy pending final determination of a claim
through arbitration in accordance with this Section 12.7.  If proper notice of any hearing has been
given, the arbitrators will have full power to proceed to take evidence or to
perform any other acts necessary to arbitrate the matter in the absence of any
party who fails to appear.

 

12.8         Counterparts.  This Agreement may be executed in
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.

 

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

 

12

 

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

 

12.10       Access to Facilities.  Buyer shall provide CMUS with reasonable
access during normal business hours to the NOC and other areas of the
facilities hereunder located at the NOC Building required in relation to the
Services subject to such supervision
and restrictions as may be reasonably necessary having regard to Buyer’s
obligations to third parties. 
Buyer agrees that CMUS employees or contractors may occupy the space in
the NOC Building provided for in Section 1(g) of Exhibit F on a full time basis
for the purpose of exercising such access rights and for maintaining the
computer equipment in the Server Room provided for in Section 1(h) of Exhibit
F.  Any other CMUS employees or
representatives will be given supervised and restricted access to the
facilities used to provide the Services upon not less than two (2) business
days prior written notice to Buyer or on such other terms as the parties may
agree hereafter.

 

13.                               INDEMNIFICATION/CONSEQUENTIAL DAMAGES.

 

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

 

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

 

13

 

of a third party’s
rights; (iii) any material breach of any representation or warranty made by
CMUS in this Agreement; (iv) any material breach or default in the performance
by CMUS of any of the covenants to be performed by CMUS under this Agreement;
(v) any acts or omissions of CMUS in violation of applicable federal, state or
local laws; (vi) any actual or alleged infringement or misappropriation of any
patent, copyright, trademark, trade name, trade secret or other proprietary or
intellectual property right by any programming delivered pursuant to this
Agreement or (vii) any other Claim against Buyer based on the content of such
programming or other material supplied by CMUS; provided that in no
event shall CMUS’ aggregate liability hereunder exceed the aggregate of the
Service Fees paid in the immediately preceding period of eighteen (18) months.

 

13.3         Neither
party nor their parent or co-owned companies, nor their officers, directors,
employees, shareholders, partners, representatives, consultants and agents
shall be liable to the other party or their parent or co-owned comanies, or to
any officer, director, employee, shareholder, partner, representative,
consultant or agent of the other party, whether in contract, tort (including
strict liability), or otherwise, for any special, indirect, incidental or
consequential damages whatsoever, which in any way arise out of, relate to, or
are a consequence of either party’s performance or nonperformance hereunder or
the performance of their respective contractors and vendors.

 

14.          CROSS INDEMNIFICATION.  In the event any act or omission of a party
or its employees, servants, agents, or representatives causes or results in
(i) damage to or destruction of tangible property of the other party or
third parties, and/or (ii) death or injury to persons including, but not
limited to, employees or invitees of either party, then such party shall
indemnify, defend, and hold the other party harmless from and against any and
all claims, actions, damages, demands, liabilities, costs, and expenses,
including reasonable attorneys’ fees and expenses, resulting there from.  The indemnifying party shall pay or reimburse
the other party promptly for all such damage, destruction, death, or injury.

 

14

 

IN
WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first
set forth above.

 

 

	
  CROWN MEDIA UNITED STATES, LLC

  	
  CROWN MEDIA INTERNATIONAL, LLC

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  

 

15

 

EXHIBIT A

 

ORIGINATION
SERVICES

 

1.             Buyer shall originate
three full-time (52 x 7 x 24) Hallmark channels, namely Hallmark Channel East,
Hallmark Channel West, and Hallmark Movie Channel with the configuration of
equipment listed below.  Even though not
presently the case, the Hallmark Movie Channel may eventually contain all the
same types of elements that the Hallmark Channel currently contains (such as
commercials).  If CMUS elects to
incorporate such elements, they will be integrated by Buyer into the Hallmark
Movie Channel signal at no additional charge. Each of these channels shall
originate from the NOC.  Each channel
shall originate in digital 525 format from any of the following:

 

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

 

b.              Video Server material previously ingested
from VTRs; or material electronically delivered;

 

c.               Time Delay Video Server from a different
primary channel; or

 

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

 

Each
channel shall utilize a serial digital interface with four channels of embedded
audio and shall conform to SMPTE 259M, Level C.  The three channels shall be configured as
follows:

 

a.               The Hallmark Channel, East Coast;

 

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

 

c.               The Hallmark Movie Channel.

 

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

 

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

 

1

 

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

 

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

 

2

 

EXHIBIT B

 

TRANSMISSION AND COMPRESSION SERVICES

 

1.             Buyer will encode,
compress, encrypt, and transport the CMUS channels to CMUS’ Uplink Provider (as
defined below), on its existing platform, utilizing the CMUS fully protected, non-preemptable
transponder capacity on AMC-11, or its replacement or successor, located at
131° West Longitude (the “CMUS Transponder”). 
AMC-11 is owned and operated by SES Americom. All “Transmission and
Compression” services provided hereunder are subject to the terms and
conditions of CMUS agreements with SES Americom (the “SES Agreements”).

 

2.             Transmission and Compression Services shall be provided
for the CMUS’ Channel(s), on a 24 hour per day basis, in a digital compressed
mode using a Scientific Atlanta PowerVu Plus Digital Compression/Encryption
Encoder System (the “Buyer Encoder”) as part of the compression chain, provided,
however, that CMUS may specify other operational parameters for the
compression system.  Buyer will not be
obligated to implement any such new operational parameters if they interfere
with Buyer’s ability to continue to provide compression services on the same
Buyer Encoder for the signals of other parties or degrade the quality of such
signals.  If CMUS wishes to implement new
operational parameters for the Buyer Encoder or upgrade the Buyer Encoder
software or hardware, it will pay or reimburse Buyer for the costs
thereof.  Any utilization by Buyer of the
Buyer Encoder to provide compression/encryption services for channels or other
services transmitted over the CMUS’ Transponder, other than the services
provided third parties as of the date hereof, will be subject to CMUS’ written
approval.  CMUS
may use the Buyer Encoder to provide compression services for the signals of
third parties which are utilizing the CMUS Transponder and Buyer will permit
such use provided that CMUS delivers the third party signals to the NOC “demarcation
point” at its cost and reimburses Buyer for its actual costs of labor and
materials necessary to modify the Buyer Encoder to accommodate the additional
signals.  Buyer shall provide a protected
microwave and/or fiber path from the NOC to CMUS’ transmission facility with
equipment meeting the specifications contained in this Exhibit B.  Such technical specifications for the
Services are based on the assumption that, if programming material is being
received via third party transport, Buyer shall not be responsible for any
failure of the Services to comply with the technical specifications of this
Exhibit B, to the extent that such failure is caused by the third party
transport systems.

 

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

 

a.       The design and maintenance for Compressed
Services shall be video and audio performance as specified by the compression
system manufacturer.

 

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

 

c.       The Buyer Encoder comprising the
compression system shall transport both MPEG audio and AC-3 audio as available
from Scientific-Atlanta.

 

3

 

4.             Obligations of CMUS and Buyer
with respect to satellite transponders: 
CMUS shall obtain the rights to use the transponder(s) to which the
Channel(s) shall be transported by Buyer and shall obtain all technical
information necessary to enable Buyer to provide the Services to such
transponder(s).  CMUS and Buyer shall
each remain in compliance with all terms and conditions contained in this
Exhibit B, as they relate to CMUS’ and/or Buyer’s specific obligations.

 

5.             Future Uplink Services:  As provided above, Buyer shall deliver a
signal to CMUS current uplink service provider or any new uplink service
provider designated by CMUS (in either case the “Uplink Provider”).  The Uplink Provider is currently Comcast
Digital Media Centers in Denver (“CDMC”). 
Until expiry or termination of the current agreement between CDMC and
CMUS (the “Uplink Agreement”) CMUS shall be solely responsible for all costs
arising in connection with the uplink of such signal to the CMUS Transponder,
through use of Buyer facilities to those of the Uplink Provider.  At least sixty (60) days prior to the
expiration of the Uplink Agreement, CMUS will negotiate in good faith with
Buyer regarding the possible provision of uplink services by Buyer.  If the parties do not reach agreement within
30 days of the commencement of these negotiations, CMUS will be free to enter
into an agreement for uplink services with a third party (including a renewal
of its Uplink Agreement with CMDC) and Buyer will deliver the Channel Signals
at Buyer’s cost to the new Uplink Provider as provided herein.  To the extent Buyer’s reasonable cost of
delivery to the new Uplink Provider, including the costs of modifying its
equipment to meet any new technical standards of the Uplink Provider, exceeds
the costs of delivery to the previous Uplink Provider, CMUS will reimburse
Buyer for such excess cost.  The signal
provided by Buyer to the Uplink Provider in connection with the Services shall
be a high quality broadcast signal which permits a high quality of aural and
visual signal transmission and reception. 
Buyer agrees that all rights to the vertical blanking interval (“VBI”)
on the CMUS contracted channels are expressly retained and reserved to CMUS.

 

4

 

EXHIBIT C

 

POST PRODUCTION SERVICES

 

	
  Service

  	
   

  	
  Rate with Operator

  	
   

  	
  Rate without Operator

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Avid Media
  Composer

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Weekly Rate

  	
   

  	
  $

  	
  1,250.00

  	
   

  	
  $

  	
  750.00

  	
   

  
	
  Daily Rate

  	
   

  	
  $

  	
  415.00

  	
   

  	
  $

  	
  250.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Linear Editing
  Bay

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Weekly Rate

  	
   

  	
  $

  	
  1,500.00

  	
   

  	
  $

  	
  900.00

  	
   

  
	
  Daily Rate

  	
   

  	
  $

  	
  500.00

  	
   

  	
  $

  	
  300.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Discreet
  Inferno/Fire

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Weekly Rate

  	
   

  	
  $

  	
  1,900.00

  	
   

  	
   

  	
   

  
	
  Daily Rate

  	
   

  	
  $

  	
  640.00

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  QC Workstation

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hourly Rate

  	
   

  	
   

  	
   

  	
  $

  	
  25.00

  	
   

  

 

1

 

EXHIBIT D

 

SATELLITE RECEPTION AUTHORIZATION
SERVICES

 

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

 

2.             Satellite Authorization Services
Performed by CMUS:  In the
alternative, CMUS may perform its own satellite authorizations.  In such event, Buyer will provide a dial-up
modem interface into the multiplex equipment used to trigger authorizations to
enable CMUS to directly control the authorizations of CMUS’ affiliates. The transfer of this responsibility will be
in writing by CMUS with 30 days notice. 
After the transfer of responsibility, Buyer will assume no
responsibility for authorization or database management, and no reduction in
fees will be applied to this Agreement.

 

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

 

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

 

1

 

EXHIBIT E

 

REPORTING
SERVICE PROBLEMS

 

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

 

Business
Hours Contacts (9:00 AM - 5:00 PM Mountain Time):

	
  Jose Perez, Sr. Manager
  of Broadcast Support and Affiliate Operations (IRD Authorizations)

  	
   

  	
  (303) 967 4624

  
	
  Doug Miller, Sr.
  Manager of Network Operations

  	
   

  	
  (303) 967 4621

  
	
   

  	
   

  	
  cell (303) 881 8698

  
	
  Brett Pierce, Chief
  Engineer

  	
   

  	
  (303) 967 4763

  
	
   

  	
   

  	
   

  
	
  24-Hour
  Emergency Telephone:

  	
   

  	
   

  
	
  Broadcast Operations
  Control

  	
   

  	
  (720) 554 1851

  
	
   

  	
   

  	
  (720) 554-1852

  
	
  Broadcast Operations
  Control Fax

  	
   

  	
  (720) 554 1863

  

 

All
notices involving an emergency response shall indicate

-Urgent,
immediate response required-

Buyer
will promptly update these contact names/numbers as needed

 

1

 

EXHIBIT F

 

SERVICES

 

1.                                      Monthly
Services

 

The following services
shall apply for the Service Term.

 

a.                Origination
and Playback of Hallmark East Coast Channel

 

b.               Origination
and Playback of Hallmark West Coast Channel

 

c.                Origination
and Playback of Hallmark Movie Channel

 

d.               Compression
and Transmission of all channels to CMUS’ Uplink Provider

 

e.                IRD
Authorization

 

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

 

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

 

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

 

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

 

(ii)  HVAC.

 

(iii)
Access control security systems

 

(iv)  Fire detection and protection sprinkler
systems.

 

(v)
Environmental monitoring and response.

 

Up to two
employees or contractors of CMUS may have unrestricted access to this Server
Room on a 24 hour basis.  No other
personnel of Buyer or a third party will have access to the Server Room without
CMUS’ consent, provided however, that Buyer will be given a master key to the
premises and be allow to access the Server Room without consent in case of
emergency or to satisfy the requirements of applicable law, such as safety
inspection requirements.  All equipment
in the Server Room will be owned by CMUS and maintained by the CMUS contractors
or employees.

 

1

 

2.                                      Security
Deposit.

 

Because the CMUS
channels are currently originating from the NOC, the security deposit
requirement is waived.  If new channels
are launched pursuant to the Additional Channel Options, a security deposit may
be required to help defray additional capital outlays by Buyer, but such
security deposit will not exceed an amount equal to two months Monthly Service
Fee for such Channel.

 

3.                                      Service
Interruption Credits.

 

A “Service
Interruption” shall mean the failure of Buyer to deliver a signal meeting the
technical standards hereunder as well as conforming in all respects to and
containing all the audio and video elements described in the broadcast log
prepared by CMUS, which is not the result of CMUS’ failure to timely perform
any of its obligations or provide accurate materials and elements under this
Agreement, including program or channel schedules, program logs, accurately
labeled program tapes, commercials, or output(s) of CMUS or as a result of any
other breach of this Agreement by CMUS. 
Buyer shall grant CMUS a Service Interruption Credit of the Monthly
Service Fees in Paragraphs 1(a) and (b) above, as appropriate, based upon the
ratio of total number of Outage minutes divided by 43,200 (total minutes in a
30-day month).  Failure to provide other
Services hereunder will be subject to a pro rata reduction in the applicable
fees for those Services.  The issuance of
or CMUS entitlement to Service Interruption Credits under this paragraph shall
not affect CMUS termination rights under Paragraph 10.2.  CMUS will not be entitled to a Service
Interruption Credit unless and until it has paid the Monthly Fee for the period
for which the Service Interruption Credit is due.

 

2

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