-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KTennTzfSbVys7zP+LjrwGfWOS0SMaiw6GohD3VtoAPkeaPksDzd2N4mo0XGZi+u 6d+zTvADMmJuocCdws49Hg== 0000891554-01-501578.txt : 20010327 0000891554-01-501578.hdr.sgml : 20010327 ACCESSION NUMBER: 0000891554-01-501578 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20010326 GROUP MEMBERS: EM.TV &MERCHANDISING AG GROUP MEMBERS: HENSON JIM CO INC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CROWN MEDIA HOLDINGS INC CENTRAL INDEX KEY: 0001103837 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 841524410 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-59037 FILM NUMBER: 1579464 BUSINESS ADDRESS: STREET 1: 6430 S FIDDLERS GREEN CIRCLE #500 CITY: GREENWOOD VILLAGE STATE: CO ZIP: 80111 BUSINESS PHONE: 3032207990 MAIL ADDRESS: STREET 1: 6430 S FIDDLERS GREEN CIRCLE #500 CITY: GREENWOOD VILLAGE STATE: CO ZIP: 80111 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: HENSON JIM CO INC CENTRAL INDEX KEY: 0001136477 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 132571101 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 1416 N LA BREA AVE CITY: LOS ANGELES STATE: CA ZIP: 90028 BUSINESS PHONE: 3238021500 MAIL ADDRESS: STREET 1: 1416 N LA BREA AVE CITY: LOS ANGELES STATE: CA ZIP: 90028 SC 13D 1 d25193_13d.txt SCHEDULE 13D ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) Crown Media Holdings, Inc. (Name of Issuer) Class A Common Stock, Par Value $0.01 Per Share (Title of Class of Securities) 228411 10 4 (CUSIP Number) Peter Schube Executive Vice President and General Counsel The Jim Henson Company, Inc. 1416 North La Brea Avenue Hollywood, CA 90028 (323) 802-1570 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) March 15, 2001 (Date of Event Which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box: |_|. ================================================================================ CUSIP No. 228411 10 4 - -------------------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON EM.TV & Merchandising AG (No I.R.S. Identification No. - non-U.S. entity) - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_| (b) |X| - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) |_| - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Germany - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 5,377,721 Shares of Class A Common Stock SHARES ------------------------------------------------------ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY EACH 0 Shares of Class A Common Stock REPORTING ------------------------------------------------------ PERSON 9. SOLE DISPOSITIVE POWER WITH 5,377,721 Shares of Class A Common Stock ------------------------------------------------------ 10. SHARED DISPOSITIVE POWER 0 Shares of Class A Common Stock - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 5,377,721 Shares of Class A Common Stock - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES |_| - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) Approximately 15.5% of the Class A Common Stock. - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- 2 CUSIP No. 228411 10 4 - -------------------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON The Jim Henson Company, Inc. (13-2571101) - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_| (b) |X| - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) |_| - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION New York - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 5,377,721 Shares of Class A Common Stock SHARES ------------------------------------------------------ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY EACH 0 Shares of Class A Common Stock REPORTING ------------------------------------------------------ PERSON 9. SOLE DISPOSITIVE POWER WITH 5,377,721 Shares of Class A Common Stock ------------------------------------------------------ 10. SHARED DISPOSITIVE POWER 0 Shares of Class A Common Stock - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 5,377,721 Shares of Class A Common Stock - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES |_| - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) Approximately 15.5% of the Class A Common Stock. - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- 3 ITEM 1. SECURITY AND ISSUER. This Statement on Schedule 13D relates to shares of Class A common stock, par value $0.01 per share (the "Class A Common Stock"), of Crown Media Holdings, Inc., a Delaware corporation (the "Issuer"). The Issuer's principal executive offices are located at 6430 S. Fiddlers Green Circle, Suite 500, Englewood, Colorado 80111. ITEM 2. IDENTITY AND BACKGROUND. (a) - (c) and (f): The Jim Henson Company, Inc. ("Henson") has its principal executive office at 1416 North La Brea Avenue, Hollywood, CA 90028. Henson's principal business is the production and marketing of entertainment products and the provision of entertainment-related services. Henson is a New York corporation and a wholly owned subsidiary of EM.TV & Merchandising AG ("EMTV"), a German corporation with its principal executive office at Betastrasse 11, 85774 Unterfohring, Germany. EMTV's primary business in the production and licensing of television and music rights, merchandising and consumer products. As Henson's sole stockholder, EMTV exercises control over Henson. Henson and EMTV are also referred to herein from time to time as the "Reporting Persons". The name, business address, present principal occupation or employment and citizenship of each director and executive officer of Henson and EMTV is set forth in Schedule 1 hereto and is incorporated herein by reference. (d) and (e): During the last five years, none of Henson, EMTV or, to the actual knowledge of Henson and EMTV, any of the persons listed on Schedule 1 hereto, (1) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (2) has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. Henson acquired 5,377,721 shares of Class A Common Stock on March 15, 2001 (the "Closing Date") from the Issuer in exchange for contributing to the Issuer its interest in H&H Programming - Asia, LLC ("H&H") and causing its wholly owned subsidiary, Henson Cable Networks, Inc. ("Henson Cable"), to contribute to the Issuer its interest in Odyssey Holdings, L.L.C. ("Odyssey"), in each case pursuant to a Contribution Agreement dated as of March 15, 2001 (the "Contribution Agreement") by and among Henson, the Issuer and Crown Media International, Inc., a wholly owned subsidiary of the Issuer. A copy of the Contribution Agreement is filed as an Exhibit hereto and is incorporated by reference. ITEM 4. PURPOSE OF TRANSACTION. Henson acquired the Class A Common Stock for investment purposes. The Reporting Persons do not seek to exercise control over the Issuer through Henson's ownership of Common Stock. Neither of the Reporting Persons has any present intention of acquiring additional shares 4 of Common Stock. The Reporting Persons may determine to sell all or a portion of Henson's shares of Common Stock at any time (by exercising Henson's registration rights under the Stockholders Agreement or otherwise) based on future market conditions and other relevant factors. As described in Item 5, Henson's shares of Class A Common stock currently are pledged as collateral security for EMTV's obligations to a group of its lenders. Upon the release of such security interest, when such financing is paid down or otherwise, Henson may pledge all or some of the shares as collateral for EMTV's or Henson's obligations to a substitute or additional lender or group of lenders. ITEM 5. INTERESTS IN SECURITIES OF THE ISSUER. (a)-(b): Henson owns 5,377,721 shares of Class A Common Stock, representing beneficial ownership of approximately 15.5% of the shares of Class A Common Stock and 8.22% of the shares of Class A Common Stock that would be outstanding if the Class B Common Stock, par value $0.01 per share, of the Issuer was fully converted. Henson has sole power to vote and dispose such shares. Through its ownership of Henson, EMTV also beneficially owns such shares. To the knowledge of the Reporting Persons, no shares of Common Stock of the Issuer are beneficially owned by any executive officer or director of Henson and EMTV. (c): Except as described in Item 3, neither of the Reporting Persons, nor, to the best knowledge of the Reporting Persons, any of their respective directors or executive officers, has effected any transactions in shares of Common Stock during the past 60 days. (d): EMTV is the borrower under a Bridge Loan Facility dated as of April 21, 2000, as amended and restated as of May 2, 2000, as amended and waived as of December 29, 2000, and as further amended and restated as of January 31, 2001 (the "Bridge Loan Facility"), among EMTV, Speed Investments Limited, the Banks (as defined below), Credit Suisse First Boston, London Branch ("CSFB"), as arranger, CSFB, as facility agent, and CSFB, as security trustee (the "Security Trustee"). In the event of a sale of a material portion of Henson's shares of Class A Common Stock, EMTV may be required to use the net cash proceeds thereof to prepay the loan under the Bridge Loan Facility. Pursuant to a Pledge Agreement dated as of January 31, 2001 by and among Henson, Tadpole Productions, Inc. and the Security Trustee, Henson has pledged all of its shares of Class A Common Stock to the Security Trustee to secure amounts due under the Bridge Loan Facility. The "Banks" are Credit Suisse First Boston Aktiengesellschaft (Frankfurt, Germany), DG Bank Deutsche Genossenschaftsbank (Munich, Germany), Commerzbank Aktiengesellschaft, Regionalfilale Munchen-ost (Munich, Germany), Bayerische Landesbank Girozentrale (Munich, Germany), Deutsche Bank Luxembourg S.A. (Luxembourg), Westdeutsche Landesbank Girozentrale (Frankfurt, Germany), BHF-Bank Aktiengesellschaft, FFM (Frankfurt, Germany). (e): Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. In connection with the Contribution Agreement, Henson entered into an Amended and Restated Stockholders Agreement dated as of the Closing Date (the "Stockholders Agreement") with Hallmark Entertainment, Inc. ("HEI"), Liberty Media Corporation ("Liberty"), VISN Management Corp. ("VISN"), JP Morgan Partners (BHCA), L.P. ("JP Morgan") and the Issuer. The Stockholders Agreement provides that the Issuer's Board of Directors will 5 consist of not less than 11 directors, with six nominated by HEI, one nominated by each of Liberty, VISN and JP Morgan and two independent directors who will not be officers or employees of any of the parties or their affiliates nominated by the Board of Directors. The right of each of such parties to nominate a director will terminate on the later of (1) such party owning less than 5% of the Common Stock then outstanding or (2) such party ceasing to own at least 75% of the Common Stock such party owns immediately following the completion of the initial public offering of shares of the Class A Common Stock (the "IPO"). The Stockholders Agreement also provides that the Issuer will not enter into any material transactions, except for specified transactions, with any of the other parties or their affiliates involving an aggregate value of (1) $35.0 million or less, unless such transactions are approved by a majority of the independent directors, and (2) more than $35.0 million, unless such transactions are approved by a majority of the members of the Board of Directors not nominated by the interested party. The stockholder parties to the Stockholders Agreement agree not to transfer more than 25% of certain Common Stock owned by them (in the case of Henson, its shares acquired pursuant to the Contribution Agreement) prior to May 9, 2002 without the written consent of each other party, except to their affiliates, another party to the Stockholder Agreement or their affiliates, to their executives under a stock-based compensation package, to one or more other stockholder parties, or in a transaction involving a merger, consolidation or business combination with, or sale of all of our common stock to, a third party that is not affiliated with the Issuer. Transfers by Liberty Sub to UnitedGlobalCom, Inc. are also expected. A pledge of Common Stock to a financial institution in a bona fide transaction is not deeemd a transfer for purposes of the Stockholder Agreement, so long as the pledgor retains full voting power prior to any event of default. In addition, the Stockholders Agreement provides that, in the event HEI proposes to transfer 20% or more of the outstanding Common Stock to an unaffiliated third party, each other stockholder party to the Stockholders Agreement will have the right to participate on the same terms in that transaction with respect to the proportionate number of such other party's shares. The Stockholders Agreement also provides that if the Issuer issues for cash an amount of the Common Stock, in either a public offering or private transaction, that causes Liberty and its affiliates to own, in the aggregate, less than 10% of the outstanding Common Stock, Liberty will have the right to purchase, at such public offering price or the average closing price of the Class A Common Stock over a five-day period prior to the closing of such private transaction, as applicable, an amount of the Class A Common Stock so as to restore its and its affiliates' aggregate 10% ownership interest. Liberty must exercise such right not less than seven days prior to the closing of such issuance. Under the Stockholders Agreement, HEI has the right to require the Issuer on four occasions, and the other stockholder parties, as a group, have the right to require the Issuer on two occasions, to register for sale the shares of the Common Stock they hold, so long as the number of shares they require the Issuer to register in each case is at least 7% of the Common Stock then outstanding. The stockholder parties also have an unlimited number of "piggy back" registration rights. The Stockholders Agreement also provides that the Issuer will be obligated to pay all expenses that result from the registration of the stockholder parties' Common Stock under 6 the Stockholders Agreement, other than registration and filing fees, attorneys fees for the selling stockholders, underwriter fees or expenses and underwriting discounts and commissions. The Issuer also agreed upon the effectiveness of any such registration, to indemnify such parties against any liabilities that may result from their sale of Common Stock, including liabilities under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Under the Stockholders Agreement, the Issuer also agreed that, for so long as the Issuer or any of its affiliates are entitled to have a representative on the Odyssey governance committee or is otherwise entitled to consent to the taking of the following actions under the Amended and Restated Company Agreement of Odyssey, effective as of November 13, 1998, as amended (the "Odyssey Agreement"), and VISN and its affiliates either (a) are entitled to nominate to, or designate a member of, the Issuer's Board of Directors or (b) beneficially own any preferred interests in Odyssey Holdings, then neither the Issuer nor any of its affiliates will, without the written consent of the member of the Issuer's Board of Directors nominated by VISN or a representative of the National Interfaith Cable Coalition, Inc. ("NICC"), vote in favor of: o any specified change in, or action described in, the Odyssey Agreement that relates to VISN's preferred interest in Odyssey (the "VISN Preferred Interest") or that relates to VISN's rights to programming on the Odyssey Network or its programming budget; o any repayment or redemption of specified equity interests in Odyssey that are junior to, or pari passu with, the VISN Preferred Interest; o any transfer of all or substantially all of Odyssey's assets or any business combination involving Odyssey where Odyssey is not the surviving entity, unless the transferee assumes the VISN Preferred Interest under the Odyssey Agreement until the later of the fifth anniversary of the IPO or the second anniversary of the transfer or business combination; o the dissolution of Odyssey, except in connection with a complete liquidation; o any transfer of all or substantially all of Odyssey's assets to, or any business combination involving Odyssey with, the Issuer or any of its affiliates, or any other material transaction with the Issuer or any of its affiliates, unless the Issuer complies with specified restrictions relating to any financial benefit the Issuer receives from the transaction that is more than what the Issuer would have received had the transaction been on an arm's-length basis or on commercially reasonable terms; o any transfer of all or substantially all of Odyssey's assets or any business combination involving Odyssey where Odyssey is not the surviving entity, prior to the second anniversary of the IPO; or 7 o any amendment to the Odyssey Agreement that would result in none of the Issuer or its affiliates having the right to consent to take any of the actions listed in the above bullet points or which would result in increased liability to VISN or an adverse change to its Capital Account (as defined in the Odyssey Agreement). The Issuer also agreed under the Stockholders Agreement not to transfer any of its interest in Odyssey prior to the second anniversary of the IPO without the consent of VISN or NICC. In addition, the Issuer agreed not to transfer any of its interests in Odyssey after the second anniversary of the IPO unless the transfer is conditioned on the requirement that the transferee assume the Issuer's obligations described above. Under the terms of the Stockholders Agreement, the transferee's obligations will generally expire on the later of (1) the fifth anniversary of the IPO, (2) the second anniversary of the transfer or (3) the repayment of VISN's preferred interest in Odyssey, except that the obligations of the transferee will expire upon dissolution of Odyssey. The foregoing summary is qualified in its entirety by reference to the text of the Stockholders Agreement which is filed as an Exhibit hereto and hereby incorporated by reference. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. See Exhibit Index. SIGNATURES After reasonable inquiry and to the best of our respective knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct. Dated: March 26, 2001 THE JIM HENSON COMPANY, INC. By: /s/ Peter Schube --------------------------- Name: Peter Schube Title: Secretary and Executive Vice President for Business & Legal Affairs EM.TV & MERCHANDISING AG By: /s/ Rolf Rickmeyer --------------------------- Name: Rolf Rickmeyer Title: Member of the Managing Board By: /s/ Manfred Hohn --------------------------- Name: Manfred Hohn Title: Executive Vice President 8 SCHEDULE 1 The name and present principal occupation of each director and executive officer of each of The Jim Henson Company, Inc. and EM.TV & Merchandising AG are set forth below. The business address for the directors and executive officers of The Jim Henson Company, Inc. is 1416 North La Brea Avenue, Hollywood, CA 90028. The business address for the directors and executive officers of EM.TV & Merchandising AG is Betastrasse 11, 85774 Unterfohring, Germany. THE JIM HENSON COMPANY, INC. - ------------------------------------------------------------------------------------------ Brian Henson Director/Chairman United States citizen - ------------------------------------------------------------------------------------------ Lisa Henson Director/Vice-Chairman United States citizen - ------------------------------------------------------------------------------------------ Charles Rivkin Director/President and Chief United States citizen Executive Officer - ------------------------------------------------------------------------------------------ Thomas Haffa Director German citizen - ------------------------------------------------------------------------------------------ Rolf Rickmeyer Director German citizen - ------------------------------------------------------------------------------------------ Dr. Sylvia Rothblum Director Austrian citizen - ------------------------------------------------------------------------------------------ Hans Peter Vriens Director German citizen - ------------------------------------------------------------------------------------------ Peter Schube Exec. Vice President & Secretary United States citizen - ------------------------------------------------------------------------------------------ Isabel Miller Exec. Vice President United States citizen - ------------------------------------------------------------------------------------------ Linda Govreau Chief Financial Officer United States citizen - ------------------------------------------------------------------------------------------
EM.TV. & MERCHANDISING AG - ------------------------------------------------------------------------------------------ Thomas Haffa Chairman of the Managing Board German citizen - ------------------------------------------------------------------------------------------ Rainer Huther Member of the Managing Board German citizen - ------------------------------------------------------------------------------------------ Rolf Rickmeyer Member of the Managing Board German citizen - ------------------------------------------------------------------------------------------ Dr. Sylvia Rothblum Member of the Managing Board Austrian citizen - ------------------------------------------------------------------------------------------ Dr. Nickolaus Becker Member of the Supervisory Board German citizen - ------------------------------------------------------------------------------------------ Prof. Dr. Axel Kollar Member of the Supervisory Board German citizen - ------------------------------------------------------------------------------------------ Prof. Dr. Mathias Schwarz Member of the Supervisory Board German citizen - ------------------------------------------------------------------------------------------ Dr. Volker Schott Executive Vice President German citizen - ------------------------------------------------------------------------------------------ Manfred Hohn Executive Vice President German citizen - ------------------------------------------------------------------------------------------
9 Exhibit Index ------------- Exhibit Description - ------- ----------- 7.1 Contribution Agreement, dated as of March 15, 2001, by and among The Jim Henson Company, Inc., Crown Media International, Inc. and Crown Media Holdings, Inc. 7.2 Amended and Restated Stockholders Agreement, dated as of March 15, 2001, by and among Crown Media Holdings, Inc., Hallmark Entertainment, Inc., Liberty Media Corporation, VISN Management Corp., JP Morgan Partners (BHCA), L.P. and The Jim Henson Company, Inc. 10 EX-7.1 2 d25193_ex7-1.txt CONTRIBUTION AGREEMENT EXECUTION COPY ================================================================================ CONTRIBUTION AGREEMENT by and among THE JIM HENSON COMPANY, INC. CROWN MEDIA INTERNATIONAL, INC. and CROWN MEDIA HOLDINGS, INC. dated as of March 15, 2001 ================================================================================ TABLE OF CONTENTS Page ---- ARTICLE 1 DEFINITIONS 1.1 Definitions............................................................1 ARTICLE 2 THE CLOSING 2.1 The Closing............................................................6 ARTICLE 3 THE EXCHANGE 3.1 The Exchange...........................................................6 3.2 Delivery of Assignment and Assumption Agreement........................6 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 4.1 Corporate Existence....................................................6 4.2 Power and Authority....................................................7 4.3 Enforceability, etc....................................................7 4.4 Capitalization.........................................................7 4.5 Consents and Approvals.................................................7 4.6 Financial Statements...................................................8 4.7 Material Adverse Change................................................8 4.8 Events Subsequent to the Date of the Last Audited Financial Statement..............................................................9 4.9 Absence of Undisclosed Liabilities.....................................8 4.10 Taxes..................................................................9 4.11 Litigation.............................................................9 4.12 Insurance.............................................................10 4.13 Conflicts of Interests................................................10 4.14 Licenses..............................................................11 4.15 Intellectual Property Rights..........................................11 4.16 Contracts and Commitments.............................................11 4.17 Customers and Suppliers...............................................13 4.18 Plans.................................................................14 4.19 Employee Matters......................................................14 4.20 Brokers, etc..........................................................15 4.21 Year 2000 Compliance..................................................15 4.22 Compliance with Laws..................................................15 4.23 Public Filings........................................................14 4.24 Continuity of Business Enterprise.....................................14 i ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF HENSON 5.1 Existence; Power and Authority........................................15 5.2 Enforceability, etc...................................................16 5.3 Ownership.............................................................16 5.4 Consents and Approvals................................................16 5.5 Purchase for Investment...............................................16 5.6 Financial Matters.....................................................17 5.7 Brokers, etc..........................................................16 5.8 Litigation............................................................17 ARTICLE 6 CONDITIONS PRECEDENT; CONDUCT OF PARTIES PRIOR TO CLOSING 6.1 Conditions Precedent..................................................17 6.2 Conditions Precedent to Obligations of Each of the Company and Crown.................................................................18 6.3 Conditions Precedent to Obligations of Henson.........................19 6.4 Access for Investigation; Confidentiality.............................18 6.5 Conduct of Business...................................................18 6.6 Performance of Obligations............................................19 6.7 Further Assurances....................................................19 ARTICLE 7 INDEMNIFICATION 7.1 Indemnification by the Company and Crown..............................21 7.2 Procedure for Indemnification.........................................22 7.3 Time Limitations on Indemnity.........................................23 7.4 Limitations on Indemnity..............................................23 ARTICLE 8 TAX MATTERS 8.1 Tax Compliance........................................................23 8.2 Tax Characterization..................................................22 ARTICLE 9 TERMINATION 9.1 Termination by Mutual Consent.........................................24 9.2 Termination by Any of the Parties.....................................25 9.3 Effect of Termination and Abandonment.................................23 ii ARTICLE 10 GENERAL PROVISIONS; OTHER AGREEMENTS 10.1 Current Public Information............................................23 10.2 Consent to Transfer...................................................23 10.3 Expenses..............................................................24 10.4 Governing Law.........................................................24 10.5 Headings..............................................................24 10.6 Notices...............................................................24 10.7 Parties in Interest...................................................25 10.8 Entire Agreement......................................................25 10.9 Counterparts..........................................................25 10.10 Amendment.............................................................25 10.11 Gender, etc...........................................................25 10.12 Severability..........................................................25 10.13 No Waiver.............................................................27 EXHIBITS Exhibit A Program License Agreement between Odyssey and EM.TV & Merchandising AG Exhibit B Amendment to Program License Agreement dated as of November 13, 1998 by and between Odyssey and Henson Exhibit C Trademark License Agreement between Odyssey and Henson Exhibit D Side letter among Henson, H&H, Crown and the Company Exhibit E Assignment and Assumption Agreement between Henson and Crown Exhibit F Assignment and Assumption Agreement between Henson Cable and HEN Domestic Holdings, Inc. SCHEDULES Schedule I Disclosure Schedule Company and Crown Item 4.1 Corporate Existence Item 4.4 Company Capitalization Item 4.8 Subsequent Events Item 4.10 Taxes Item 4.13 Conflicts of Interest Item 4.14 Licenses Item 4.15 Intellectual Property Item 4.16 Material Agreements iii Item 4.17 Distributors Item 4.18 Plans Henson Item 5.1 Corporate Existence Item 5.3 Ownership Item 5.4 Consents and Approvals iv CONTRIBUTION AGREEMENT, dated as of March 15, 2001 (this "Agreement"), by and among The Jim Henson Company, Inc., a New York corporation ("Henson"), Crown Media International, Inc., a Delaware corporation ("Crown"), and Crown Media Holdings, Inc., a Delaware corporation (the "Company"). WHEREAS, the Parties hereto desire to consummate the transactions contemplated herein, pursuant to which Henson will contribute to the Company all of its Interests in H&H Programming-Asia, LLC ("H&H") and cause Henson Cable Networks, Inc. ("Henson Cable") to contribute all of its equity interest in Odyssey Holdings, L.L.C. ("Odyssey") in exchange for shares of Common Stock of the Company. NOW, THEREFORE, in consideration of the premises and the representations, warranties and agreements herein contained, the Parties hereto agree as follows: ARTICLE 1 - DEFINITIONS 1.1 Definitions. As used herein, the following terms shall have the following meanings: "Actions" means all complaints, actions, suits, proceedings or investigations. "Actually Realizes" or "Actually Realized" means, for purposes of determining the timing of the incurrence of any Tax liability or the realization of a Tax refund or any related Tax cost or benefit by a person in respect of a payment, transaction, occurrence or event, the time at which the amount of Taxes paid by such person is increased above or reduced below the amount of Taxes that such person would have been required to pay but for such payment, transaction, occurrence or event. "Adjustment" means an adjustment arising in a Tax Proceeding. "Adverse Consequences" means all claims, judgments, damages, penalties, fines, costs, losses, liabilities or other monetary obligations (including all reasonable attorney and expert fees incurred to enforce the terms of this Agreement) net of any recovery from any third party including, without limitation, insurance proceeds. "Affiliate Transactions" is defined in Section 6.5. "Agreement" is defined in the Preamble. "Amended and Restated Odyssey Agreement" means the Amended and Restated Company Agreement of Odyssey effective as of November 13, 1998. "Balance Sheet" is defined in Section 4.6. "Blue Sky Laws" is defined in Section 4.4. 1 "Class A Stock" means Class A Voting Common Stock of the Company, par value $0.01 per share. "Class B Stock" means Class B Voting Common Stock of the Company, par value $0.01 per share. "Closing" is defined in Section 2.1. "Closing Date" is defined in Section 2.1. "Code" means the Internal Revenue Code of 1986, as amended. "Commission" means the Securities and Exchange Commission. "Common Stock" means, collectively, the Class A Stock and the Class B Stock of the Company. "Company" means Crown Media Holdings, Inc., a Delaware corporation. "Company Capitalization Schedule" is defined in Section 4.4. "Company Indemnified Persons" is defined in Section 7.1. "Company Stockholders Agreement" means the Amended and Restated Stockholders Agreement to be entered into by and among the Company, HEI, Liberty, Liberty Sub, VMC, JPM and Henson. "Contributor Indemnified Persons" is defined in Section 7.1. "Crown" means Crown Media International, Inc., a Delaware corporation. "Crown Capitalization Schedule" is defined in Section 4.4. "Crown Programming Agreement" means the Programming Agreement, dated as of July 1, 1999 by and between HED and Crown. "Disclosure Schedule" means the Schedule referred to from time to time herein and set forth as Schedule I hereto. "Distributors" is defined in Section 4.17. "Encumbrance" means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against or interest in property to secure payment of a debt or performance of an obligation or other priority or preferential arrangement of any kind or nature whatsoever, including the interest of a vendor, lessor or licensor under any conditional sale, capitalized lease, exclusive license or other title retention agreement. "ERISA" is defined in Section 4.18. 2 "Exchange" means the exchange set forth in Section 3.1. "Financial Statements" is defined in Section 4.6. "GAAP" is defined Section 4.6. "Governmental Entity" means any Federal, state or local government or any court, administrative agency or commission or other governmental authority or agency, domestic or foreign. "H&H" means H&H Programming - Asia, L.L.C., a New York limited liability company. "H&H Assignment Agreement" is defined in Section 3.2. "Hallmark" means Hallmark Cards, Incorporated, a Missouri corporation. "Hallmark Group" means Hallmark and each of its Subsidiaries (other than (i) the Company, (ii) Crown and (iii) each Person that is or was at any time a Subsidiary of or otherwise held directly or indirectly by the Company or Crown, except, in the case of (iii), for such a Person that was never, on or after the Closing Date, a Subsidiary of or otherwise held directly or indirectly by the Company or Crown). "HED" means Hallmark Entertainment Distribution, LLC, a Delaware limited liability company. "HEI" means Hallmark Entertainment, Inc., a Delaware corporation. "Henson" means The Jim Henson Company, Inc., a New York corporation. "Henson Cable" means Henson Cable Networks, Inc., a New York corporation. "Henson Cable Shares" is defined in Section 8.2. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Income Taxes" means federal, state, local or foreign Taxes measured by net income or capital gains. "Income Tax Return" means any Tax Return with respect to Income Taxes. "Indemnified Party" is defined in Section 7.2. "Indemnifying Party" is defined in Section 7.2. "Intellectual Property" is defined in Section 4.15. 3 "Intercompany Services Agreement" means the Intercompany Services Agreement dated as of January 1, 2000 by and between Hallmark and Crown. "Interest" means any evidence of equity ownership of any Person, whether represented by common stock, preferred stock, securities, options, warrants or other rights to repurchase or acquire any equity ownership of such Person (including convertible debentures, notes or other securities convertible or exchangeable into or exercisable for the purchase or other acquisition of capital stock), trust certificates, general or limited partnership interests, limited liability company membership interests or any other type of capital stock or equity interest. "IPO" means the initial public offering of shares of the Company's Class A Stock on May 4, 2000. "JPM" means JP Morgan Partners (BHCA), L.P., a Delaware limited liability partnership. "Law" means any law, statute, regulation, rule, ordinance, requirement or other binding action or requirement of any governmental, regulatory or administrative body, agency or authority or any court of judicial authority. "Liberty" means Liberty Media Corporation, a Delaware corporation. "Liberty Sub" means Liberty Crown, Inc., a Delaware corporation. "Licenses" is defined in Section 4.14. "Material Adverse Effect" means a material adverse effect on (i) with respect to the Company or Crown, the business, results of operation or financial condition of Crown and Crown's Subsidiaries, taken as a whole; and (ii) with respect to Henson, the legal ability of Henson to consummate the transactions contemplated by this Agreement. "Material Agreements" is defined in Section 4.16. "NICC" means National Interfaith Cable Coalition, Inc., a Maryland non-for-profit corporation. "Odyssey" means Odyssey Holdings, L.L.C., a Delaware limited liability company. "Odyssey Assignment Agreement" is defined in Section 3.2. "Odyssey Common Interests" means the outstanding common equity interests in Odyssey. "Order" means any decree, order, judgment, writ, award, injunction, stipulation or consent of or by any governmental, regulatory or administrative body, agency or authority or any court or judicial authority. 4 "Original Contribution Agreement" means the Contribution Agreement dated as of January 27, 2000 by and among HEI, Crown, Liberty, VGI, VMC, NICC, Chase Equity Associates, L.P. (now known as JPM) and the Company. "Party" means the Company, Crown or Henson. "Person" means any individual, corporation, general or limited partnership, joint venture, association, limited liability company, joint stock company, trust, business trust, bank, trust company, estate (including any beneficiaries thereof), unincorporated entity, cooperative, association, government branch, agency or political subdivision thereof or organization of any kind. "Prospectus" means the prospectus filed pursuant to Rule 424(b) of the Securities Act. "Registration Statement" means a Registration Statement on Form S-1 of the Company, as amended at the time it was declared effective. "Related Documents" means the Company Stockholders Agreement, the Original Contribution Agreement, the Crown Programming Agreement, the Intercompany Services Agreement, the Amended and Restated Odyssey Agreement and the Tax Sharing Agreement. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations issued in respect thereto. "Subsidiary" of any Person means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the Board of Directors or other Persons performing similar functions are at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person. "Tax Proceeding" means a Tax audit, contest, litigation or other proceeding with or against a Governmental Entity. "Tax Returns" is defined in Section 4.10. "Tax Sharing Agreement" means the Tax Sharing Agreement dated as of May 9, 2000 entered into by and among HEI, Crown, the Company and others. "Taxes" is defined in Section 4.10. "VGI" means Vision Group Incorporated, a Colorado corporation. "VMC" means VISN Management Corp., a Delaware corporation. "WARN" is defined in Section 4.19. "Written Notice" is defined in Section 7.2. 5 ARTICLE 2 - THE CLOSING 2.1 The Closing. Subject to the terms and conditions of this Agreement, the closing of the transactions contemplated herein (the "Closing") shall take place at the offices of the Company, Denver, Colorado, at 9:00 a.m., Mountain time, on March 14, 2001, or such other date as the Parties may agree (the "Closing Date"). ARTICLE 3 - THE EXCHANGE 3.1 The Exchange. At the Closing, Henson shall contribute to the Company all of its Interests in H&H and shall cause Henson Cable to contribute to the Company all of its Odyssey Common Interests, representing 22.5% of the outstanding Odyssey Common Interests, and the Company shall issue to Henson 5,377,721 shares of Class A Stock, representing 8.22% of the Common Stock outstanding immediately after the Closing. 3.2 Delivery of Assignment and Assumption Agreements. At the Closing, (i) Henson will deliver to the Company an assignment and assumption agreement substantially in the form attached as Exhibit E (the "H&H Assignment Agreement"), duly executed by Henson, transferring to the Company all title and interest in and to the Interests in H&H to be contributed to the Company pursuant to Section 3.1, (ii) Henson Cable will deliver to the Company an assignment and assumption agreement substantially in the form attached as Exhibit F (the "Odyssey Assignment Agreement"), duly executed by Henson Cable, transferring to the Company all title and interest in and to the Odyssey Common Interests to be contributed to the Company pursuant to Section 3.1 and (iii) the Company will deliver to Henson the H&H Assignment Agreement duly executed by HEN Domestic Holdings, Inc. (a wholly-owned subsidiary of Crown) and the Odyssey Assignment Agreement, duly executed by Crown, and share certificates representing the Common Stock to be issued to Henson pursuant to Section 3.1. ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company and Crown jointly and severally hereby represent and warrant as follows: 4.1 Corporate Existence. Each of the Company and Crown and each of Crown's Subsidiaries is a corporation or limited liability company duly incorporated or organized, validly existing and in good standing under the laws of the jurisdiction set forth opposite the name of such corporation or limited liability company on Item 4.1 of the Disclosure Schedule, and is duly qualified to do business as a foreign corporation or limited liability company and is in good standing in each jurisdiction in which the ownership or use of its assets or properties, or the conduct or nature of its business, makes such qualification necessary, except for any jurisdictions in which the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect on Crown. Except as set forth on Item 4.1 of the Disclosure Schedule, Crown and each of Crown's Subsidiaries is wholly-owned directly or indirectly by the Company. The Company and Crown and each of Crown's Subsidiaries have all requisite power and authority to conduct their respective businesses and own their respective properties as now conducted and owned. The Company has previously provided to Henson true and complete 6 copies of the Certificate of Incorporation and By-laws of the Company and Crown as in effect on the date hereof. 4.2 Power and Authority. Each of the Company and Crown has the requisite power and authority, and has taken all required action necessary, to execute, deliver and perform this Agreement and the Company Stockholders Agreement. None of the execution, delivery and performance of this Agreement or the Company Stockholders Agreement by the Company nor the consummation by the Company or Crown of any transaction related hereto or thereto, nor the issuance or delivery of the Common Stock will (i) violate any provision of the By-laws, Certificate of Incorporation or other organizational document of the Company or Crown or any of Crown's Subsidiaries, (ii) result in the breach of or constitute a default under any contract, lease, license, franchise, permit, indenture, mortgage, deed of trust, note, agreement or other instrument to which the Company or Crown, or any of Crown's Subsidiaries is a party or by which any of them is bound, (iii) result in the creation or imposition of any material, claim or Encumbrance on any asset of Crown or any of its Subsidiaries, (iv) to the knowledge of the Company or Crown, give any Person rights to terminate any contracts or agreements of Crown or any of its Subsidiaries or otherwise to exercise rights against Crown or any of its Subsidiaries or (v) violate any Law or Order applicable to or bearing upon the Company or Crown or any of Crown's Subsidiaries or any of their assets or businesses except, in the case of each of clauses (ii), (iii), (iv) or (v) for such violations, breaches, defaults, rights and impairments that could not reasonably be expected to have a Material Adverse Effect on Crown. 4.3 Enforceability, etc. Assuming the due authorization, execution and delivery of this Agreement by Henson, and the due authorization, execution and delivery of the Company Stockholders Agreement by each of the other parties to the Company Stockholders Agreement, this Agreement has been duly executed and delivered by the Company and constitutes, and when the Company Stockholders Agreement is executed, the Company Stockholders Agreement will constitute the legal, valid and binding obligation of the Company enforceable against it in accordance with its terms, subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and (ii) general equitable principles (whether considered in a proceeding in equity or at law). 4.4 Capitalization. (a) Item 4.4 of the Disclosure Schedule hereto sets forth, as of the date of this Agreement, a true and complete statement of the outstanding Interests of the Company. Except as set forth on Item 4.4 or Item 4.18 of the Disclosure Schedule or as contemplated by this Agreement, there are no outstanding rights to acquire or purchase any Interests of the Company, Crown or any of Crown's Subsidiaries. Except for Encumbrances set forth on Item 4.4 of the Disclosure Schedule, the shares of Crown Class A Stock owned by the Company are owned free and clear of any Encumbrances. (b) The Common Stock to be delivered to Henson, when issued and delivered to Henson pursuant to this Agreement against payment of the consideration set forth herein, will be duly authorized, validly issued, fully paid and non-assessable and will be free and clear of any Encumbrances, preemptive rights, escrows, options, rights of 7 first refusal or other agreements, arrangements, commitments, understandings or obligations, whether written or oral, or any other restrictions affecting rights and other incidents of record and beneficial ownership, other than (i) as set forth herein or in the Company Stockholders Agreement, and (ii) restrictions on transferability imposed generally under the Securities Act and under the securities laws of the several states and the rules and regulations issued in respect thereto (such state laws, rules and regulations, being, collectively, "Blue Sky Laws"). (c) The issuance and delivery of the Common Stock to Henson on the terms and conditions contemplated herein are exempt from the registration requirements of the Securities Act and the Blue Sky Laws or will be qualified as may be necessary. 4.5 Consents and Approvals. None of the execution, delivery and performance of this Agreement by the Company nor the consummation by the Company or Crown of any transaction related hereto, nor the issuance or delivery of the Common Stock will require any consent, approval, Order or authorization of, filing, registration, declaration or taking of any other action with, or notice to, any Person, other than such consents, approvals, filings or actions (i) under the Federal securities laws, the Blue Sky Laws or HSR Act, (ii) the failure of which to obtain, make or take would not reasonably be expected to have a Material Adverse Effect on the Company or Crown, as applicable or (iii) which have already been obtained. 4.6 Financial Statements. Crown has furnished to Henson its audited consolidated financial statements for the fiscal years ended December 31, 1999, 1998 and 1997 consisting of the audited consolidated balance sheets, income statements and statements of stockholders' equity for each such fiscal year (all of the preceding financial statements being, collectively, the "Financial Statements" and the most recent consolidated balance sheet included within the Financial Statements being the "Balance Sheet"). The Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), consistently applied, and fairly present in all material respects the financial position of Crown and its Subsidiaries and the results of its operations and cash flows for the periods covered thereby. 4.7 Material Adverse Change. Except as described in the Prospectus (other than the "Risk Factors" included therein) or as contemplated by this Agreement or the Related Documents, since December 31, 1999, the business of Crown has been conducted in all material respects in the ordinary course and in substantially the same manner as previously conducted and there has been no Material Adverse Effect on Crown. 4.8 Events Subsequent to the Date of the Last Audited Financial Statement. Since December 31, 1999, except as described in the Prospectus (other than the "Risk Factors" included therein) or as contemplated by this Agreement or the Related Documents or as set forth in the Financial Statements or on Item 4.8 of the Disclosure Schedule or as described in the Registration Statement, none of the Company, Crown or any of its Subsidiaries has (i) issued any stock, bond or other security, (ii) incurred any indebtedness except in the ordinary course of business, (iii) declared or made any payment or distribution to stockholders or purchased or redeemed any of its capital stock, (iv) sold, assigned, leased, mortgaged, pledged, subjected to any Encumbrance or otherwise conveyed or transferred any of its assets except in the ordinary course of business, or cancelled any debt or claim owed to the Company, Crown or any of its Subsidiaries except in the ordinary 8 course of business, (v) sold, assigned, transferred or granted any exclusive license with respect to any Intellectual Property, (vi) suffered any substantial loss of property or waived any right of substantial value other than in the ordinary course of business or (vii) made any change in officer compensation except in the ordinary course of business and consistent with past practice. 4.9 Absence of Undisclosed Liabilities. Since December 31, 1999, except as described in the Prospectus (other than the "Risk Factors" included therein) or as contemplated by this Agreement and the Related Documents, Crown and its Subsidiaries incurred no material liabilities or obligations of any kind, matured or unmatured, fixed or contingent, which are not fully reflected or provided for on the Balance Sheet, or any material loss contingency (as defined in Statement of Financial Accounting Standards No. 5) whether or not required by GAAP to be shown on the Financial Statements, except (i) liabilities and contingencies incurred in the ordinary course of business consistent with past practice or as otherwise disclosed in the Registration Statement and (ii) tax and related liabilities which have been disclosed pursuant to Section 4.10 below. 4.10 Taxes. (a) Except as set forth on Item 4.10 of the Disclosure Schedule, or as would not reasonably be expected to have a Material Adverse Effect on Crown, each of Crown and its Subsidiaries (i) has timely filed or will timely file (including extensions of time approved by the appropriate taxing authority) all Tax Returns required to be filed with the Internal Revenue Service, the State of Delaware, any other states or governmental subdivisions, all foreign countries or any other taxing authority and all such Tax Returns are true, complete and correct and (ii) has paid all Taxes due and payable (except for Taxes being contested in good faith pursuant to appropriate proceedings for which adequate accruals in the Financial Statements have been provided). Except as would not reasonably be expected to have a Material Adverse Effect on Crown, there are (i) no unpaid assessments for additional Taxes for any fiscal period for Crown and (ii) no Tax Encumbrances, whether imposed by any Federal, state, county, municipal or foreign taxing authority, outstanding against the assets or businesses of Crown or any of its Subsidiaries, except for Taxes not yet due and payable. Except as set forth on Item 4.10 of the Disclosure Schedule or as would not reasonably be expected to have a Material Adverse Effect on Crown, neither Crown nor any of its Subsidiaries have waived any statute of limitations with respect to Taxes. Except as set forth on Item 4.10 of the Disclosure Schedule or as would not reasonably be expected to have a Material Adverse Effect on Crown, no Tax Returns of Crown or any of its Subsidiaries have ever been audited and there are not pending or threatened in writing any audits, examinations, investigations or other proceedings in respect of Taxes or Tax Returns of Crown. (b) For the purposes of this Agreement, (i) the term "Tax" or "Taxes" includes all taxes, charges, fees, levies, imposts, or other assessments imposed by any Federal, state, local, foreign or other taxing authority, including all income, gross receipts, gains profits, windfall profits, gift, severance, ad valorem, capital, social 9 security, unemployment disability, premium, recapture, credit, excise, property, sales, use, occupation, service, service use, leasing, leasing use, value added, transfer, payroll, employment, withholding, estimated, license, stamp, franchise or similar taxes, assessments, or other governmental charges of any kind whatsoever, including interest earned thereon or penalties, additions, or fines thereto or attributable to any failure to comply with any requirement regarding Tax Returns and any interest in respect of such penalties, additions or fines, provided that any interest, penalties, additions or fines that relate to Taxes for any taxable period shall be deemed to be Taxes for such taxable period regardless of when such items are incurred, accrued, assessed or charged, and (ii) the term "Tax Return" or "Tax Returns" shall mean any report, return, documents, declaration or other information (and any supporting schedules or attachments thereto) required to be supplied to any taxing authority or jurisdiction with respect to Taxes (including any returns or reports filed on a consolidated, unitary, or combined basis). 4.11 Litigation. There are no actions, suits, proceedings, orders, investigations or claims pending or, to the knowledge of the Company or Crown, threatened against or affecting the Company or Crown or any of Crown's Subsidiaries, or their respective assets or businesses, at law or in equity, before any court, arbitration panel, tribunal or governmental commission, bureau, agency or instrumentality which would reasonably be expected to have a Material Adverse Effect on the Company or Crown or which seeks to enjoin or restrain the consummation of the transactions contemplated by this Agreement. 4.12 Insurance. Crown and its Subsidiaries hold valid insurance policies in full force and effect which the Company believes provides adequate coverage and limits for the business of Crown and its Subsidiaries. 4.13 Conflicts of Interests. Since December 31, 1999, except for the Related Documents or as set forth on Item 4.13 of the Disclosure Schedule, neither the Company, Crown nor any of Crown's Subsidiaries has engaged in any material transactions with HED, HEI or Hallmark, and neither the Company, Crown nor any of its Subsidiaries is a party to or bound by any contract, lease, purchase contract, obligation, instrument, arrangement, commitment or other agreement (oral or written) with any director or executive officer of any such entities which has not been entered into on an arm's-length basis. 4.14 Licenses. Set forth on Item 4.14 of the Disclosure Schedule is a true and complete list of all material qualifications, registrations, filings, privileges, immunities, franchises, permits, licenses and other material rights, including, without limitation, all material governmental regulatory or administrative authority approvals, authorizations, consents, licenses and permits, as of the date of this Agreement, which are necessary or required for the conduct by Crown and each of its Subsidiaries of the businesses currently conducted by them (collectively, the "Licenses"). Neither the Company nor Crown knows of any basis upon which the renewal of any Licenses would be denied in the future. Each such License has been validly issued to and is in full force and effect, and neither Crown nor any of its Subsidiaries is in violation of any such License except for such failure to be validly issued and in full force and effect or such violations that could not reasonably be expected to have a Material Adverse Effect on Crown. 10 4.15 Intellectual Property Rights. Set forth on Item 4.15 of the Disclosure Schedule is a true and complete list of all material patents, trademarks, service marks, trade names, copyrights or other similar proprietary rights, whether registered or unregistered, or any rights or licenses to use the same, and any and all applications therefor, presently owned or held by Crown and its Subsidiaries as of the date of this Agreement (collectively, the "Intellectual Property"). Except with respect to Crown's current use of the Hallmark name in its business, such Intellectual Property constitutes all material intellectual property and similar proprietary information necessary to permit Crown and its Subsidiaries to conduct their businesses as currently conducted and as contemplated to be conducted. None of Crown nor any of its Subsidiaries has received any formal or informal claim of infringement or other complaint that any of their operations infringe any rights under intellectual property of any other Person, nor does Crown or any of its Subsidiaries have any reason to believe that there is any valid basis for such claim, in either case which would reasonably be expected to have a Material Adverse Effect on Crown. No material royalties, honorariums or fees are or will be, as of the Closing Date, payable by Crown or any of its Subsidiaries to any other Person by reason of the ownership or use by any of them of any Intellectual Property. Crown or its Subsidiaries own, or has a valid right to use, free and clear of all Encumbrances, all of the Intellectual Property except as would not reasonably be expected to have a Material Adverse Effect on Crown. To Crown's knowledge, except as would not reasonably be expected to have a Material Adverse Effect on Crown, no third party is infringing any Intellectual Property owned or used by Crown or any of its Subsidiaries and no such claims, suits, arbitrations or other adversarial proceedings have been brought against any third party by Crown or any of its Subsidiaries. 4.16 Contracts and Commitments. (a) Except as expressly contemplated by this Agreement or any Related Documents or as set forth on Item 4.16 of the Disclosure Schedule, as of the date of this Agreement, neither Crown nor any of its Subsidiaries is a party to any written or oral agreement (all items set forth thereon are referred to as "Material Agreements"): (i) pension, profit sharing, stock option, employee stock purchase or other plan or arrangement providing for deferred or other compensation to employees or any other employee benefit plan or arrangement, or any contract with any labor union, or any severance agreements; (ii) contract for the employment of any officer, individual employee or other Person on a full-time, part-time, consulting or other basis providing annual compensation in excess of $100,000 or contract relating to loans to officers, directors, shareholders or Affiliates; (iii) contract under which it has advanced or loaned any other Person amounts in the aggregate exceeding $100,000; (iv) agreement or indenture relating to the borrowing of money or the mortgaging, pledging or otherwise placing an Encumbrance on any material asset or material group of assets; 11 (v) guarantee of any obligation; (vi) lease, sublease, license or other agreement under which it is lessee or sublessee or licensee of or holds, uses, occupies or operates any property, real or personal, owned by any other party, except for any such agreement relating to real or personal property under which the aggregate annual rental payments do not exceed $100,000; (vii) lease, sublease, license or other agreement under which it is lessor or sublessor or licensor of or permits any third party to hold, use, occupy or operate any property, real or personal, owned or controlled by it in excess of $100,000; (viii) assignment, license or indemnification with respect to any intangible property (including, without limitation, any patent, trademark, trade name, copyright, know-how, trade secret or confidential information); (ix) warranty agreement with respect to its services rendered or its products sold or leased; (x) agreement under which it has granted any Person any registration rights or similar rights (including piggyback rights) or co-sale or similar rights in respect of any of its securities; (xi) sales, distribution or franchise agreements involving amounts in excess of $100,000; (xii) agreement with a term of more than six months which is not terminable by it upon less than 30 days' notice without penalty involving amounts in excess of $100,000; (xiii) contract or agreement prohibiting it or materially restricting it from freely engaging in any business or competing anywhere in the world; (xiv) contract, agreement or other arrangement, including, without limitation, any stockholders or voting agreement, voting trust or similar arrangement with respect to any of its Interests with any officer, director, employee, or holder of Interests; (xv) joint venture, partnership or similar agreement involving a sharing of profits or expenses; or (xvi) any other agreement which is material to its operations and business prospects or involves a consideration in excess of $100,000 annually. (b) True and complete copies of all written Material Agreements, and accurate and complete summaries of the material terms of all oral Material Agreements, have been made available to Henson or its counsel. Except as set forth on Item 4.16 of 12 the Disclosure Schedule, or where the failure would not have a Material Adverse Effect on Crown, all of the Material Agreements set forth on such Item 4.16 are in full force and effect and are valid, binding and enforceable against Crown and each of its Subsidiaries in accordance with their respective terms, subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and (ii) general equitable principles (whether considered in a proceeding in equity or at law). Each of Crown and each of its Subsidiaries has performed all material obligations required to be performed by it under such Material Agreements and neither Crown nor any of its Subsidiaries is in default under or in breach of, nor is any of them in receipt of any claim of default or breach under, nor does any of them have knowledge of any event which, with the passing of time, the giving of notice, or both would constitute a breach or default under any such Material Agreement to which it is subject which would reasonably be expected to have a Material Adverse Effect on Crown; neither Crown nor any of its Subsidiaries has any knowledge of any breach or anticipated breach by the other parties to any Material Agreement to which it is a party which would be reasonably expected to have a Material Adverse Effect on Crown. 4.17 Customers and Suppliers. Set forth on Item 4.17 of the Disclosure Schedule hereof is a list of the distributors ("Distributors") of Crown and its Subsidiaries for each of the two years ending December 31, 1999 and December 31, 2000, and set forth opposite the name of each such Distributor is the percentage of consolidated net sales and subscribers attributable to such Distributor. Except as contemplated by this Agreement or the Related Documents, to the knowledge of the Company and Crown, since the date of the Balance Sheet, no material supplier of Crown or any of its Subsidiaries has indicated that it shall materially change the pricing of its programming or that it shall stop, or materially decrease the rate of, distributing programming to Crown or any of its Subsidiaries, and no Distributor listed on the aforementioned Item 4.17 has indicated that it shall stop, or materially decrease the rate of, purchasing, distributing or licensing rights to television programming from Crown and its Subsidiaries. 4.18 Plans. (a) Except as set forth on Item 4.18 of the Disclosure Schedule, neither Crown nor any of its Subsidiaries is a party to any Plan, as defined in the Employee Retirement Income Security Act of 1974 ("ERISA"). (b) With respect to each Plan, except as set forth on Item 4.18 of the Disclosure Schedule and except as would not reasonably be expected to have a Material Adverse Effect on Crown: (i) each Plan has been administered in compliance with its terms, (ii) there are no proceedings by the IRS, the Department of Labor or any Plan participant (other than routine claims for benefits) pending or to the knowledge of Crown, threatened, with respect to any Plan, the assets of any trust thereunder, or the Plan sponsor or the Plan administrator with respect to the design or operation of any Plan, (iii) each Plan which is intended to be qualified within the meaning of Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service that has not been revoked, and to the knowledge of Crown, there are no existing 13 circumstances nor any events that have occurred that could adversely affect the qualified status of any such qualified plan or the related trust, (iv) no unsatisfied liabilities to participants, the IRS, the Department of Labor, the Pension Benefit Guaranty Corporation or to any other Person or Plan have been incurred under Title IV of ERISA as a result of the termination of any Plan or any partial or complete withdrawal from a Plan that is a "multiple employer plan" and (v) there has been no event with respect to a Plan which would require disclosure under Sections 4062(c), 4063(a) or 4041(e) of ERISA. (c) Neither Crown nor any of its Subsidiaries maintains or is obligated to contribute to or, during the six-year period prior to the Closing Date, has maintained or been obligated to contribute to a Multiemployer Plan or any "multiple employer plan." (d) Except as would not reasonably be expected to have a Material Adverse Effect on Crown, the consummation of the transactions contemplated by this Agreement will not, either alone or in a combination with another event, (i) entitle any employee of Crown or any of its Subsidiaries to severance pay or (ii) accelerate the time of payment or vesting or increase the amount of compensation due to any such employee. 4.19 Employee Matters. Except for occurrences that would not have a Material Adverse Effect on Crown, (a) to the knowledge of the Company or Crown, Crown and its Subsidiaries are in compliance with all applicable laws respecting employment and employment practices, terms and conditions of employment, health and safety, and wages and hours; (b) Crown or its Subsidiaries are not party to any collective bargaining agreement and there is no labor strike, slowdown or stoppage actually pending or to the knowledge of the Company or Crown, threatened against or affecting Crown and its Subsidiaries; (c) Crown or its Subsidiaries have not received notice that any representation petition respecting the employees of Crown or its Subsidiaries has been filed with the National Labor Relations Board, and (d) to the knowledge of the Company or Crown, Crown and its Subsidiaries are and have been in compliance with all notice and other requirements under the Worker Adjustment and Retaining Notification Act ("WARN") or similar state statute. 4.20 Brokers, etc. Neither the Company or Crown is obligated to pay any fee or commission to any broker, finder or other similar Person in connection with any of the transactions contemplated by this Agreement. 4.21 Year 2000 Compliance. To the knowledge of Crown, the software, hardware and equipment of Crown and its Subsidiaries will continue to operate without causing serious interruption in the business of Crown and its Subsidiaries in the year 2000 and beyond. 4.22 Compliance with Laws. Each of the Company, Crown and Crown's Subsidiaries is in compliance with, and is not in violation of, any applicable Laws or Orders (including the Foreign Corrupt Practices Act of 1977, any Federal "fraud and abuse legislation" or Federal "anti-kickback laws" and any applicable building, zoning, environmental protection, water use, occupational health and safety, employment or disability rights, law, ordinance or regulation) affecting its properties or the operation of its business which would reasonably be expected to have a Material Adverse Effect on the Company or Crown. 14 4.23 Public Filings. The Company has filed all reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted thereunder. None of the Company's Forms 10-Q for the quarters ended September 30, 2000, June 30, 2000 or March 31, 2000 contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 4.24 Continuity of Business Enterprise. It is the present intention of the Company to continue at least one significant historic business line of Henson Cable and Odyssey, or to use a significant portion of Henson Cable's or Odyssey's historic business assets in a business, in each case within the meaning of Treasury Regulation ss. 1.368-1(d). ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF HENSON Henson hereby represents and warrants as follows: 5.1 Existence; Power and Authority. Each of Henson and Henson Cable is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction set forth opposite the name of such corporation on Item 5.1 of the Disclosure Schedule. Henson has all requisite power and authority and has taken all required action necessary to execute, deliver and perform this Agreement and the Company Stockholders Agreement, and each other document or instrument related hereto or thereto to which it is a party, and to carry out the terms hereof and thereof. Henson Cable has all requisite power and authority and has taken all required action necessary to perform the transaction contemplated by this Agreement. Subject to obtaining the consents and approvals set forth on Item 5.4 of the Disclosure Schedule, neither the execution, delivery and performance of this Agreement or the Company Stockholders Agreement by Henson, nor the consummation by Henson or Henson Cable of any transaction related hereto or thereto, will (i) violate any provision of the organizational documents of Henson or Henson Cable, (ii) result in the breach of or constitute a default under any material contract, lease, license, franchise, permit, indenture, mortgage, deed of trust, note, agreement or other instrument to which Henson or Henson Cable is a party or is bound, (iii) violate any Law or Order applicable to or bearing upon Henson or Henson Cable or any of their respective assets or business, except, in the case of (ii) and (iii), for such conflicts, violations, breaches, rights and impairments that could not reasonably be expected to have a Material Adverse Effect on Henson. 5.2 Enforceability, etc. Assuming the due authorization, execution and delivery of this Agreement by the Company, and the due authorization, execution and delivery of the Company Stockholders Agreement by each of the other parties to the Company Stockholders Agreement, this Agreement has been duly executed and delivered by Henson and constitutes, and when the Company Stockholders Agreement is executed, the Company Stockholders Agreement will constitute the legal, valid and binding obligation of Henson, enforceable against it in accordance with its terms, subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and (ii) general equitable principles (whether considered in a proceeding in equity or at law). 15 5.3 Ownership. (a) Henson Cable is a wholly-owned subsidiary of Henson and owns 22.5% of the Odyssey Common Interests. Except for the Encumbrances set forth on Item 5.3(a) of the Disclosure Schedule, the Odyssey Common Interests owned by Henson Cable are owned free and clear of any Encumbrances. (b) Henson owns 50% of the Interests of H&H. Except for the encumbrances set forth on Item 5.3(b) of the Disclosure Schedule, the Interests of H&H owned by Henson are owned free and clear of any Encumbrances. 5.4 Consents and Approvals. Except as set forth on Item 5.4 of the Disclosure Schedule, neither the execution, delivery and performance of this Agreement by Henson, nor the consummation by Henson of any transaction related hereto will require any consent, approval, Order or authorization of, filing, registration, declaration or taking of any other action with, or notice to, any Person, other than such consents, approvals, filings or actions (i) under the Federal securities laws, the Blue Sky Laws or the HSR Act, (ii) the failure of which to take or obtain would not reasonably be expected to have a Material Adverse Effect on Henson or (iii) which have already been obtained. 5.5 Purchase for Investment. Henson is acquiring the Class A Stock pursuant to Section 3.1 for its own account and not as a nominee or agent for any other Person and with no present intention to engage in a distribution thereof. Henson understands that the Class A Stock must be held indefinitely unless it is registered under the Securities Act or an exemption from such registration becomes available. 5.6 Financial Matters. Henson represents and understands that the acquisition of the Class A Stock involves substantial risk and that Henson 's financial condition and investments are such that it is in a financial position to hold the Class A Stock for an indefinite period of time and to bear the economic risk of, and withstand a complete loss of, such Class A Stock. Henson represents that it is an "accredited investor" as that term is defined in Regulation D promulgated under the Securities Act, and that it is a sophisticated investor, capable of evaluating the merits and risks of investing in the Company given its current stage of development. 5.7 Brokers, etc. Henson is not obligated to pay any fee or commission to any broker, finder or other similar Person in connection with the Exchange or any of the transactions contemplated by this Agreement. 5.8 Litigation. Except as set forth on Item 5.8 of the Disclosure Schedule, there are no actions, suits, proceedings, orders, investigations or claims pending or, to the knowledge of Henson, threatened against or affecting Henson, at law or in equity, before any court, arbitration panel, tribunal or governmental commission, bureau, agency or instrumentality which would reasonably be expected to have a Material Adverse Effect on Henson or which seeks to enjoin or restrain the consummation of the transactions contemplated by this Agreement and the Company Stockholder Agreement. 16 ARTICLE 6 - CONDITIONS PRECEDENT; CONDUCT OF PARTIES PRIOR TO CLOSING 6.1 Conditions Precedent. The respective obligations of each Party to this Agreement shall be subject to the fulfillment, at or prior to the Closing Date, of the following conditions, or waiver by the Party to whom such obligation is owed: (a) Legality. At the time of the Closing, the transactions contemplated by this Agreement shall be legally permitted by all applicable Laws and Orders. (b) Absence of Proceedings to Restrain Consummation of the Agreement. No judgment, injunction or order shall have been entered restraining or prohibiting the transactions contemplated herein. (c) HSR Act. The waiting periods (and any extensions thereof) applicable to consummation of the Exchange under the HSR Act shall have expired or been terminated. (d) Secretary's Certificates. Each Party shall have received certificates from a Secretary or Assistant Secretary of the other Party (i) certifying organizational documents of such Party and relevant board (or partnership) resolutions authorizing the transactions contemplated by this Agreement and the Company Stockholders Agreement and (ii) as to the incumbency of each person signing this Agreement and the Company Stockholders Agreement on behalf of such Party. (e) Consent. The consent or approval of each third party whose consent or approval shall be required in connection with the transactions contemplated hereby or by the Company Stockholders Agreement shall have been obtained, except for any such consents the failure of which to obtain would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company or Crown. (f) Stockholders Agreement. HEI, Liberty, VMC, Liberty Sub, JPM, Henson and the Company shall have duly authorized, executed and delivered the Company Stockholders Agreement. (g) Program License Agreements. Odyssey and EM.TV & Merchandising AG shall have executed and delivered a Program License Agreement dated as of the Closing Date, substantially in the form attached as Exhibit A, and Odyssey and Henson shall have executed and delivered an Amendment to the Program License Agreement dated as of November 13, 1998, substantially in the form attached as Exhibit B. (h) License Agreement. Odyssey and Henson shall have executed and delivered a License Agreement dated as of the Closing Date, substantially in the form attached as Exhibit C. 17 (i) Certain H&H Matters. Each of Henson, H&H, Crown and the Company shall have executed a letter agreement substantially in the form attached as Exhibit D. 6.2 Conditions Precedent to Obligations of Each of the Company and Crown. The respective obligations of each of the Company and Crown are further subject to the fulfillment or waiver, at or prior to the Closing Date, of the following conditions: (a) Representations and Warranties. The representations and warranties of Henson set forth in this Agreement that are qualified as to materiality shall be true and correct, and the representations and warranties of Henson set forth in this Agreement that are not so qualified shall be true and correct in all material respects, in each case as of the date of this Agreement and as of the Closing Date (except for representations and warranties that speak as of a specific date). (b) Performance of Obligations. Henson shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, including, without limitation, paying the amount required under Section 6.8(a). 6.3 Conditions Precedent to Obligations of Henson . The obligations of Henson are further subject to the fulfillment or waiver, at or prior to the Closing Date, of the following conditions: (a) Representations and Warranties. The representations and warranties of the Company and Crown set forth in this Agreement that are qualified as to materiality shall be true and correct, and the representations and warranties of the Company and Crown set forth in this Agreement that are not so qualified shall be true and correct in all material respects, in each case as of the date of this Agreement and as of the Closing Date (except for representations and warranties that speak as of a specific date). (b) Performance of Obligations. Each of the Company and Crown shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, including, without limitation, causing payment of the amounts required under Section 6.8(b). 6.4 Access for Investigation; Confidentiality. (a) At reasonable times and places, and upon reasonable notice, the Company and Crown shall permit Henson and its accountants and counsel and other representatives to have full access to the premises and to all the books, contracts, commitments and records (including, but not limited to, Tax Returns filed and those in preparation) of the Company, Crown and Crown's Subsidiaries during customary business hours and furnish Henson with such financial and operating data and other information with respect to the business and properties of Crown as they shall from time to time reasonably request. 18 (b) Except as required by law, each Party will hold, and will cause its respective officers, employees, accountants, counsel, financial advisors and other representatives and affiliates to hold, any nonpublic information received in connection with the transactions contemplated by this Agreement in confidence until such time as such information becomes publicly available (otherwise than through the wrongful act of any such Person) and shall use its best efforts to ensure that such Persons do not disclose such information to others without the prior written consent of the applicable Party from whom such information was received. In the event of the termination of this Agreement for any reason, each Party shall promptly return or destroy all documents containing nonpublic information so obtained from any other Party or any of its subsidiaries and any copies made of such documents. 6.5 Conduct of Business. (a) Except as disclosed in Item 6.5 of the Disclosure Schedule or as contemplated by this Agreement or the Related Documents, from the date hereof and prior to the Closing Date, without the prior written consent of Henson (which consent shall not be unreasonably withheld or delayed), Crown shall and shall cause each of its Subsidiaries to: (i) conduct its business in the ordinary course in all material respects, consistent with past practice or as otherwise disclosed in the Registration Statement; (ii) use its reasonable best efforts to maintain and preserve its business organization, material rights, franchises and all Material Agreements; (iii) use its reasonable best efforts to retain the services of its respective officers and key employees and maintain its respective existing relationships with customers and suppliers; (iv) not declare or pay any dividend or make any distribution of any kind in respect of any shares of capital stock of Crown or any of its Subsidiaries (other than dividends or distributions by Crown's wholly owned Subsidiaries to Crown or Crown's other wholly owned Subsidiaries); (v) not modify or amend its organizational documents; (vi) not enter into any material transaction with the beneficial holder of a majority of its outstanding common stock or any of its affiliates or any officer, director or employee of any of them (collectively, "Affiliate Transactions") other than Affiliate Transactions entered into on or after the date hereof that are consistent with past practice; (vii) not enter into any agreement to do any of the foregoing; and 19 (viii) not to take, or agree to take, any action that would make any representation of the Company or Crown inaccurate in any material respect at the Closing Date. 6.6 Performance of Obligations. Each of the Company and Crown shall perform in all material respects all of its respective obligations and comply in all material respects with all laws affecting the operation of its respective businesses and pay when due (unless contested in good faith by such Party) all required Taxes, licenses and fees and file all required Tax Returns as and when such returns are required to be filed. 6.7 Further Assurances. Each Party agrees to use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other Parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement and the Company Stockholders Agreement to which it is a Party, including, without limitation, (a) the obtaining of all other necessary actions or nonactions, waivers, consents, licenses, permits, authorizations, orders and approvals from any Governmental Entity and the making of all other necessary registrations and filings (including, without limitation, filings required under the HSR Act), (b) the obtaining of all consents, approvals or waivers from third parties that are necessary to consummate the transactions contemplated by this Agreement and the Related Documents or required to prevent a Material Adverse Effect, and (c) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement. 6.8 Payments of Outstanding Obligations. (a) Henson shall pay to H&H the amount of $1,932,396 on the Closing Date. The parties agree that such amount is equal to the difference of (i) $2,300,000, constituting the total amount of capital contributions due from Henson to H&H through the date hereof, net of the total amount of license fees due from H&H to Henson for all periods ending on or before June 30, 2000, minus (ii) $367, 604. (b) The Company and Crown shall cause H&H to pay to Henson the amount of $1,764,383 on the Closing Date. (c) Each of the payments made pursuant tot his Section 6.8 shall be delivered by wire transfer of immediately available funds to the account or accounts designated in writing by the recipient of the payment to the party making the payment prior to date on which the payment is due. ARTICLE 7 - INDEMNIFICATION 7.1 Indemnification by the Company and Crown. (a) The Company and Crown agree jointly and severally from and after the Closing to (i) indemnify and hold harmless Henson, its officers, directors, affiliates, employees and agents, and its successors and assigns (the "Contributor 20 Indemnified Persons") from and against any Adverse Consequences (but excluding any consequential damages of the Contributor Indemnified Persons), and (ii) defend the Contributor Indemnified Persons against any Actions, to the extent such Adverse Consequences or Actions arise out of or result from (A) the breach or inaccuracy of any representation or warranty of the Company contained in Sections 4.1, 4.2, 4.3, 4.4 or 4.20 or the corresponding Items of the Disclosure Schedules hereto, (B) the breach or inaccuracy of any representation or warranty of the Company contained in Section 4.23 or (C) any untrue statement of a material fact in the Prospectus or omission of a material fact required to be stated in the Prospectus or necessary to make the statements in the Prospectus, in light of the circumstances under which they were made, not misleading, provided that in no event shall the Company be liable for the indemnification contained (i) in Section 7.l(a)(ii)(B) unless a claim for indemnification has been asserted in writing by such Contributor Indemnified Person prior to the expiration of the statue of limitations period that would apply to such a claim if made by a purchaser of Class A Stock on the Nasdaq market on the date hereof or (ii) in Section 7.1(a)(ii)(C) unless a claim for indemnification has been asserted in writing by such Contributor Indemnified Person prior to the expiration of the statute of limitations period that would apply to such a claim if made by a purchaser of Class A Stock in the IPO. For purposes of indemnification under Section 7.1(a)(ii)(B) or (C), the Contributor Indemnified Persons shall be treated as if they were purchasers of Class A Stock on the Nasdaq market on the date hereof or as if they were purchasers of Class A Stock in the IPO, respectively. (b) Henson agrees from and after Closing to (i) indemnify and hold harmless the Company, all of its officers, directors, affiliates, employees and agents, and each of the successors and assigns of any of the foregoing (the "Company Indemnified Persons" from and against, and waive any claim for contribution against the Company with respect to, any Adverse Consequences (but excluding any consequential damages of the Company Indemnified Persons), and (ii) defend the Company Indemnified Persons against any Actions, to the extent such Adverse Consequences or Actions arise out of or result from the breach or inaccuracy of any of its representations or warranties contained in Section 5.1, 5.2, 5.3 or 5.7 or the corresponding Items of the Disclosure Schedule hereto. To clarify the intention of the Parties with respect to the indemnification obligations of the Company and Henson under this Section 7.1, the Parties acknowledge that if the indemnification of any Indemnified Person(s) pursuant to this Section 7.1 directly or indirectly reduces or eliminates the Adverse Consequences suffered by any other Indemnified Person(s), the Indemnifying Party shall not be required to indemnify such other Indemnified Person(s) to the extent that such Adverse Consequences have been reduced or eliminated. 7.2 Procedure for Indemnification. If any Person shall claim indemnification (the "Indemnified Party") hereunder for any claim other than a third party claim, the Indemnified Party shall promptly give written notice to the Party from whom indemnification is sought (the "Indemnifying Party") of the nature and amount of the claim. If an Indemnified Party shall claim indemnification hereunder arising from any claim or demand of a third party, the Indemnified Party shall promptly give written notice (a "Written Notice") to the Indemnifying Party of the basis for such claim or demand, setting forth the nature of the claim or demand in 21 detail. The Indemnifying Party shall have the right to compromise or, if appropriate, defend at its own cost and through counsel of its own choosing (reasonably acceptable to the Indemnified Party), any claim or demand set forth in a Written Notice giving rise to such claim for indemnification. In the event the Indemnifying Party undertakes to compromise or defend any such claim or demand, it shall promptly (and in any event, no later than thirty (30) days after receipt of the Written Notice) notify the Indemnified Party in writing of its intention to do so. If the Indemnifying Party fails to notify the Indemnified Party of its intent to undertake the compromise or defense of such claim or demand, then the Indemnified Party may do so at the expense of the Indemnifying Party. The Parties shall fully cooperate in the defense or compromise of any indemnified claim or demand. After the assumption of the defense by the Indemnifying Party, the Indemnifying Party shall not be liable for any legal or other expenses subsequently incurred by the Indemnified Party, in connection with such defense, but the Indemnified Party may participate in such defense at its own expense. No settlement of a third party claim or demand defended by the Indemnifying Party shall be made without the written consent of the Indemnified Party, such consent not to be unreasonably withheld. The Indemnifying Party shall not, except with written consent of the Indemnified Party, consent to the entry of a judgment or settlement which does not include as an unconditional term thereof, the giving by the claimant or plaintiff to the Indemnified Party of an unconditional release from all liability in respect of such third party claim or demand. 7.3 Time Limitations on Indemnity. Except as set forth in Section 7.1(a)(ii)(B) and (C), the representations and warranties made herein by the Parties hereto shall not survive the Closing and no Party shall bring a claim or action with respect to such representation or warranty at any time following the Closing or termination of this Agreement; provided, that the representations and warranties set forth in Sections 4.1, 4.2, 4.3, 4.4, 4.20, 5.1, 5.2, 5.3 and 5.7 and the corresponding indemnifications contained in Section 7.1 shall survive without limitation. This Section 7.3 shall not limit any covenant or agreement of the Parties hereto, which by its terms contemplates performance after the Closing or after the termination of this Agreement. 7.4 Limitations on Indemnity. The sole and exclusive remedies of the Parties with respect to breaches of this Agreement shall be pursuant to this Article 7 or Article 8; provided, that nothing herein shall limit the rights of either Party to seek any relief in equity or limit in any way either Party's remedies in respect of fraud by another party in connection herewith or the transactions contemplated hereby. ARTICLE 8 - TAX MATTERS 8.1 Tax Compliance. (a) The Company shall, and shall cause its Subsidiaries to, provide the information relating to the Tax Items of the Company and its Subsidiaries that is necessary or reasonably useful for Henson to satisfy its obligations with respect to any Tax Return for 2000 or 2001. 22 (b) Henson and the Company shall, and shall cause their respective Subsidiaries, to cooperate with one another with respect to Tax matters. Such cooperation shall include promptly forwarding copies of the relevant portions of notices and forms or other communications received from or sent to any Governmental Entity that pertain to the other Party, and, upon the request of a Party, making available knowledgeable employees and providing information and data reasonably requested by such Party (it being agreed and understood that Henson and its Subsidiaries shall not be required to provide any information or data, other than information and data relating solely to the Company or any of its Subsidiaries. 8.2 Tax Characterization. (a) The Parties and H&H shall treat the contribution to the Company of Henson's Interests in H&H as a taxable disposition of Henson's Interests in H&H in exchange for the proportion of the 5,377,721 Class A Shares to be issued by the Company representing the fair market value of the Interests in H&H for purposes of all federal, state and local income Tax purposes. The Parties and H&H shall take no action or position inconsistent with such characterization on any Tax Return. (b) It is the intent of the Parties and Henson Cable that the contribution of the Odyssey Common Interests in exchange for the proportion of the 5,377,721 Class A Shares (the "Henson Cable Shares") to be issued by the Company representing the fair market value of the Odyssey Common Interests constitute a tax-free "reorganization" as defined in Section 368(a)(1)(C) of the Code and any comparable provision of any applicable state and local income tax laws. The Parties and Henson Cable acknowledge that (i) the Odyssey Common Interests constitute substantially all of the assets of Henson Cable, (ii) Henson Cable will liquidate as part of its contribution of the Odyssey Common Interests to the Company in exchange for the Henson Cable Shares and (iii) the Henson Cable Shares will be issued by the Company to Henson in connection with such liquidation and in accordance with other provisions of this Agreement. The Parties and Henson Cable expect that the contribution of the Odyssey Common Interests to the Company in exchange for the Henson Cable Shares will further certain of their business objectives (including, without limitation, the development and expansion of the Odyssey business enterprise). The Company intends to continue at least one significant historic business line of Henson Cable or Odyssey, or use at least a significant portion of Henson Cable's or Odyssey's historic business assets in a business, in each case within the meaning of Treasury Regulation ss. 1.368-1(d), except that the Company may transfer Henson Cable's or Odyssey's historic business assets (i) to a corporation that is a member of the Company's "qualified group," within the meaning of Treasury Regulation ss. 1.368-1(d)(4)(ii), or (ii) to a partnership if (A) one or more members of the Company's "qualified group" have active and substantial management functions as a partner with respect to Henson Cable's or Odyssey's historic business or (B) members of the Company's "qualified group" in the aggregate own an interest in the partnership representing a significant interest in Henson Cable's or Odyssey's historic business, in each case within the meaning of Treasury Regulation ss. 1.368-1(d)(4)(iii). The Parties and Henson Cable shall take all additional actions in support of such characterization, including but not limited to, the filing of any necessary Tax Returns or filings and shall 23 not take any actions or positions on any Tax Return or otherwise inconsistent with such characterization. ARTICLE 9 - TERMINATION 9.1 Termination by Mutual Consent. This Agreement may be terminated and transactions contemplated hereby may be abandoned at any time prior to the Closing by the written consent of the Parties. 9.2 Termination by Any of the Parties. This Agreement may be terminated (upon written notice from the terminating Party to the other Parties) and the transactions contemplated hereby may be abandoned by action of any Party, if (i) the Closing shall not have been consummated by March 23, 2001 (provided that the right to terminate this Agreement under this clause shall not be available to any Party whose failure to fulfill any obligation under this Agreement has been the cause of or resulted in the failure of the Closing to occur on or before such date) or (ii) any Governmental Entity shall have issued a Law or Order permanently restraining, enjoining or otherwise prohibiting the transactions contemplated hereby and such Law or Order shall have become final and nonappealable. 9.3 Effect of Termination and Abandonment. In the event of termination of this Agreement and other transactions contemplated hereby pursuant to this Article 9, no Party hereto (or any of its directors or officers) shall have any liability or further obligation to any other Party to this Agreement, except Article 10 shall survive termination of this Agreement and nothing herein will relieve any Party from liability for any breach of this Agreement occurring prior to such termination. ARTICLE 10 - GENERAL PROVISIONS; OTHER AGREEMENTS 10.1 Current Public Information. At all times after the date hereof, the Company shall file all reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted thereunder to the extent required to enable the Parties to sell Class A Stock pursuant to Rule 144 under the Securities Act (as such rule may be amended from time to time) or any similar rule or regulation hereafter adopted by the Securities and Exchange Commission. Upon the reasonable request of Henson, the Company shall deliver to Henson a written statement as to whether it has complied with such requirement. 10.2 Consent to Transfer. At Liberty's request, Henson agrees to consent to the transfer by Liberty of Liberty's Company Common Stock to UnitedGlobalCom or an affiliate thereof, subject to the transferee executing a signature page of the Company Stockholders Agreement and thereby becoming a party to the Company Stockholders Agreement (as a Stockholder, as defined therein) and agreeing that it shall receive the same rights thereunder and be bound by the same obligations thereunder, except as provided in Section 3.4 and Section 3.5 thereof, as Liberty. 10.3 Expenses. If the transactions contemplated hereby are not consummated, all legal and other costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the Party incurring such costs and expenses. If 24 the transactions contemplated by this Agreement are consummated, the Company shall reimburse Henson for its reasonable expenses (including reasonable legal fees and expenses) incurred in connection with the transactions contemplated by this Agreement, up to a maximum reimbursement of $75,000. The Company shall pay for all of its expenses incurred in connection with the transactions contemplated by this Agreement. 10.4 Governing Law. This Agreement shall be governed by and construed in accordance with the procedural and substantive laws of the State of New York, including Section 5-1401 of the New York General Obligations Law. 10.5 Headings. Article and Section headings used in this Agreement are for convenience only and shall not affect the meaning or construction of this Agreement. 10.6 Notices. All notices, requests, demands or other communications required by or otherwise with respect to this Agreement shall be in writing and shall be deemed to have been duly given to any Party when delivered by hand, by messenger or by a nationally recognized overnight delivery company, when delivered by facsimile and confirmed by return facsimile, or when delivered by first class mail, postage prepaid and return receipt requested, in each case to the applicable addresses set forth below: (a) if to the Company, HEI or Crown to: Hallmark Cards, Incorporated Department 339 2501 McGee Kansas City, MO 64108 Attention: Judith C. Whittaker, Vice President, General Counsel Telephone: (816) 274-5583 Facsimile: (816) 274-7171 with copies to: Crown Media Holdings, Inc. 6430 S. Fiddlers Green Circle Suite 500 Englewood, CO 80111 Attention: William J. Aliber, Chief Financial Officer Telephone: (303) 220-7990 Facsimile: (303) 220-7660 (b) if to Henson to: The Jim Henson Company, Inc. 1416 N. LaBrea Avenue Hollywood, CA 90028 Attention: General Counsel Telephone: (323) 802-1570 Facsimile: (323) 802-1849 25 with a copy to: Dorsey & Whitney LLP 250 Park Avenue New York, NY 10177 Attention: Robert P. Wessely, Esq. Telephone: (212) 415-9200 Facsimile: (212) 953-7201 10.7 Parties in Interest. All the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the Parties and their respective successors and permitted assigns; provided, that, except as otherwise expressly set forth in this Agreement, neither the rights nor the obligations of any Party may be assigned or delegated without the prior written consent of each of the other Parties and any purported assignment in violation hereof shall be null and void. 10.8 Entire Agreement. This Agreement, the Company Stockholder Agreement, and any agreements set forth as an exhibit to this Agreement or the Company Stockholder Agreement constitutes the entire agreement among the Parties hereto and supersede all prior agreements and understandings, both written and oral, with respect to the subject matters hereof. 10.9 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be considered an original, but all of which together shall constitute the same instrument. 10.10 Amendment. This Agreement may be modified or amended only by an instrument in writing signed by all of the Parties. 10.11 Gender, etc. Whenever the context may require, any pronouns used herein shall be deemed to refer to the masculine, feminine, or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural, and vice versa. Whenever used herein, the terms "include," "includes" and "including" shall mean to include without limitation. 10.12 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provisions shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 10.13 No Waiver. No failure to exercise and no delay in exercising any right, power or privilege granted under this Agreement shall operate as a waiver of such right, power or privilege. No single or partial exercise of any right, power or privilege granted under this Agreement shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 26 10.14 Kermit Name. As soon as reasonably possible after the Closing Date, the Company and Crown shall cause Kermit (L) Ltd. to legally change its name to an alternative name which does not contain "Kermit" or any derivation thereof, or any name confusingly similar thereto. Furthermore, from and after the Closing Date, the Company and Crown shall not, and shall not permit any of their respective Affiliates (as defined in the Original Stockholders Agreement) to, do business under any name containing the word "Kermit" or any derivation thereof, or any name confusingly similar thereto. IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the date first written above. Crown Media Holdings, Inc. By: /s/ William J. Aliber --------------------------------- Name: William J. Aliber Title: Chief Financial Officer Crown Media International, Inc. By: /s/ William J. Aliber --------------------------------- Name: William J. Aliber Title: Chief Financial Officer The Jim Henson Company, Inc. By: /s/ Peter Schube -------------------------------- Name: Peter Schube Title: Secretary and Executive Vice President for Business & Legal Affairs 27 EX-7.2 3 d25193_ex7-2.txt AMENDED AND RESTATED STOCKHOLDERS AGREEMENT LAST DRAFT ================================================================================ AMENDED AND RESTATED STOCKHOLDERS AGREEMENT by and among HALLMARK ENTERTAINMENT, INC., LIBERTY MEDIA CORPORATION, LIBERTY CROWN, INC., VISN MANAGEMENT CORP., JP MORGAN PARTNERS (BHCA), L.P. THE JIM HENSON COMPANY, INC. and CROWN MEDIA HOLDINGS, INC. dated as of March 15, 2001 ================================================================================ LAST DRAFT TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS Section 1.1 Definitions......................................................2 ARTICLE II CORPORATE GOVERNANCE Section 2.1 Composition of the Board of Directors of the Company.............7 Section 2.2 Removal..........................................................7 Section 2.3 Vacancies........................................................7 Section 2.4 Board Committees.................................................7 Section 2.5 Termination of Rights and Obligations............................8 Section 2.6 Limitation on Transactions with Affiliates.......................8 Section 2.7 Directors' Indemnification.......................................9 Section 2.8 Corporate Opportunities Policy...................................9 ARTICLE III TRANSFERABILITY AND PURCHASE RIGHTS Section 3.1 Restrictions on Transferability..................................9 Section 3.2 Restrictive Legend...............................................9 Section 3.3 Notice of Proposed Transfers; Securities Law Compliance.........10 Section 3.4 Permitted Transfers.............................................10 Section 3.5 Tag-Along Rights................................................10 Section 3.6 Purchase Rights.................................................12 ARTICLE IV REGISTRATION RIGHTS Section 4.1 Demand Registration.............................................13 Section 4.2 Piggy-back Registration.........................................15 Section 4.3 Registration Procedures.........................................16 Section 4.4 Registration Expenses...........................................19 Section 4.5 Indemnification and Contribution................................19 Section 4.6 Other Provisions................................................23 ARTICLE V RIGHTS RELATING TO INVESTMENT IN ODYSSEY Section 5.1 Actions of Odyssey Governance Committee.........................23 Section 5.2 Restriction on Transfer of the Company's Interests in Odyssey...26 i Section 5.3 Termination of Rights and Obligations...........................26 ARTICLE VI GENERAL Section 6.1 Entire Agreement................................................26 Section 6.2 Amendment and Waiver............................................26 Section 6.3 Notices.........................................................26 Section 6.4 Assignment; Benefit.............................................29 Section 6.5 Absence of Presumption..........................................29 Section 6.6 Counterparts ...................................................29 Section 6.7 Headings .......................................................29 Section 6.8 Governing Law; Jurisdiction and Forum ..........................29 Section 6.9 Specific Enforcement ...........................................30 Section 6.10 Severability ...................................................30 Section 6.11 Covered Shares .................................................30 Exhibit A Notice of Registration Statement and Selling Securityholder Questionnaire Exhibit B Corporate Opportunites Policy Exhibit C Designated Representative of NICC ii AMENDED AND RESTATED STOCKHOLDERS AGREEMENT This AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of March 15, 2001 by and among Hallmark Entertainment, Inc., a Delaware corporation ("HEI"), Liberty Media Corporation, a Delaware corporation ("Liberty"), Liberty Crown, Inc., a Delaware corporation ("Liberty Sub") and transferee of Liberty's interest herein pursuant to Section 3.4 of the Original Stockholders Agreement (as defined below), VISN Management Corp., a Delaware corporation ("VISN"), JP Morgan Partners (BHCA), L.P., a Delaware limited partnership ("JPM") and successor to Chase Equity Associates, L.P., The Jim Henson Company, Inc., a New York corporation ("Henson ") and together with Liberty Sub, VISN and JPM, the "Minority Stockholders" and the Minority Stockholders together with HEI, the "Contributing Stockholders"), and Crown Media Holdings, Inc., a Delaware corporation (the "Company"). WITNESSETH: WHEREAS, the Contributing Stockholders, as amended, other than Henson and Liberty Sub are parties to a Contribution Agreement, dated as of January 27, 2000 (the "Contribution Agreement") pursuant to which they acquired shares of Class A common stock, par value $.01 per share ("Class A Stock") or of Class B common stock, par value $.01 per share ("Class B Stock") in return for, among other things, the contribution of certain assets to the Company; and WHEREAS, the Contributing Stockholders other than Henson have previously entered into a Stockholders Agreement dated as of May 9, 2000 (the "Original Stockholders Agreement") to govern certain of their rights, duties and obligations; and WHEREAS, on May 9, 2000, Liberty transferred (as defined below) its interests in Company Common Stock (as defined below) to its Affiliate (as defined below) Liberty Sub in accordance with Section 3.4 of the Original Stockholders Agreement; and WHEREAS, Henson and the Company are parties to a Contribution Agreement dated as of the date hereof (the "Henson Contribution Agreement") pursuant to which Henson is acquiring shares of Class A Stock, in return for, among other things, the contribution of certain assets to the Company; and WHEREAS, pursuant to the Contribution Agreement and the Henson Contribution Agreement, the Contributing Stockholders have acquired and own the number of shares of Class A Stock and Class B Stock set forth opposite their respective names on Appendix I attached hereto and hereby made a part hereof; and WHEREAS, the parties hereto desire to enter into this Amended and Restated Stockholders Agreement to amend the Original Stockholders Agreement to add Henson as a party and to govern certain of their rights, duties and obligations. NOW THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree as follows: 1 ARTICLE I DEFINITIONS Section 1.1. Definitions. (a) As used in this Agreement the following defined terms shall have the following meanings: "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean (a) the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise or (b) beneficial ownership of 10% or more of the voting securities of such Person. "Affiliate Transaction" has the meaning set forth in Section 2.6. "Agreement" has the meaning set forth in the Preamble. "Applicable Securities" means in relation to a Registration Statement the Registrable Securities identified in the related Demand Notice or Piggy-back Notice. "Average Price" means a price equal to the average of the closing prices of the shares of Class A Stock on the exchange or national market on which the Class A Stock is traded or listed for the five trading days immediately preceding the date of the closing of a specified transaction. "Board" has the meaning set forth in Section 2.1. "Class A Stock" has the meaning set forth in the Recitals. "Class B Stock" has the meaning set forth in the Recitals. "Commission" means the United States Securities and Exchange Commission. "Company" has the meaning set forth in the Preamble. "Company Common Stock" means Class A Stock and Class B Stock. "Company Voting Stock" means Class A Stock and Class B Stock and all other securities of the Company entitling the holder thereof to vote for the election of directors to the Board. "Contributing Stockholders" has the meaning set forth in the Preamble. "Contribution Agreement" has the meaning set forth in the Recitals. "Demand" has the meaning set forth in Section 4.1(a). "Demand Notice" has the meaning set forth in Section 4.1(a). 2 "Demanding Stockholder" has the meaning set forth in Section 4.1(a). "DLJ" means Donaldson, Lufkin and Jenrette Securities Corporation. "Effective Time" means the date on which the Commission declares a Registration Statement effective or on which a Registration Statement otherwise becomes effective. "Effectiveness Period" means as to a Registration Statement the period during which such Registration Statement is effective. "Election" means, with respect to a Registration, that a Stockholder has delivered a completed and signed Notice and Questionnaire to the Company in accordance with the provisions hereof and provided such other information with respect to such Stockholder and its Applicable Securities as may be required by the Company to enable such Stockholder to use the related Prospectus in connection with sales of such Applicable Securities. "Exchange Act" means the United States Securities Exchange Act of 1934, as amended. "Exercise Notice" has the meaning set forth in Section 3.6(c). "HEI" has the meaning set forth in the Preamble. "Henson " has the meaning set forth in the Preamble. "Henson Contribution Agreement" has the meaning set forth in the Recitals. "Indemnified Person" has the meaning set forth in Section 4.5(a). "Indemnitee" has the meaning set forth in Section 4.5(c). "Indemnitor" has the meaning set forth in Section 4.5(c). "Independent Directors" means members of the Company's Board who are not officers, partners, employees or directors of the Stockholders, the Company or their respective Affiliates, who have been selected in accordance with Section 2.1(c) and who comply with the applicable definition of independent director for purposes of the exchange or national market on which the Class A Stock is traded or listed. "Intended Offering Notice" has the meaning set forth in Section 4.2(a). "IPO" means the initial public offering of shares of the Company's Class A Stock on May 4, 2000. "IPO Lock-up Period" has the meaning set forth in Section 3.1(b). "JPM" has the meaning set forth in the Preamble. "Liberty" has the meaning set forth in the Preamble. 3 "Liberty Sub" has the meaning set forth in the Preamble. "Minority Stockholders" has the meaning set forth in the Preamble. "NASD Rules" means the Rules of the National Association of Securities Dealers, Inc., as amended. "NICC" means the National Interfaith Cable Coalition, Inc., a Maryland not-for-profit corporation. "NICC Representative" has the meaning set forth in Section 5.1. "Notice and Questionnaire" means a Notice of Registration Statement and Selling Securityholder Questionnaire substantially in the form of Exhibit A hereto. "Odyssey" means Odyssey Holdings, L.L.C., a Delaware limited liability company. "Odyssey Agreement" has the meaning set forth in Section 5.1. "Original Stockholders Agreement" has the meaning set forth in the Recitals. "Parent" of a Person means any other Person which is the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of a majority of the securities ordinarily entitled to vote for the election of directors (or persons performing similar functions) or the specified Person or directly, or indirectly, through one or more intermediaries, controls the Person specified. For purposes of this definition, control of a Person means the power, direct or indirect, to direct or cause the direction of the management or policies of such Person whether by contract or otherwise. "Participating Stockholder" has the meaning set forth in Section 4.2(a). "Person" means an individual, partnership, corporation, trust, limited liability company or unincorporated organization, or other entity or organization, including a government or agency or political subdivision thereof. "Piggy-back Notice" has the meaning set forth in Section 4.2(a). "Prospectus" means the prospectus (including, without limitation, any preliminary prospectus, any final prospectus and any prospectus that discloses information previously omitted from a prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A under the Securities Act or any successor rule thereto) included in a Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Applicable Securities covered by a Registration Statement and by all other amendments and supplements to such prospectus, including all material incorporated by reference in such prospectus and all documents filed after the date of such prospectus by the Company under the Exchange Act and incorporated by reference therein. "Purchase Right Notice" has the meaning set forth in Section 3.6(c). 4 "Registrable Securities" means (a) the shares of the applicable class of Company Common Stock acquired by any Stockholder pursuant to the Contribution Agreement or the Henson Contribution Agreement, (b) the shares of the applicable class of Company Common Stock acquired by any Stockholder pursuant to Section 3.4(i), (c) the shares of the applicable class of Company Common Stock otherwise acquired by any Stockholder up to a maximum of 5% of the outstanding shares of Company Common Stock (calculated on a fully diluted basis) as of the date of a Demand Notice or an Intended Offering Notice, as the case may be, and (d) any securities of the Company issued or issuable with respect to any shares of Company Common Stock referred to in subdivision (a), (b) or (c) upon conversion of such shares or by way of stock dividend or stock split or in connection with a combination or conversion of shares, recapitalization, merger, consolidation or other reorganization or otherwise, other than in each case Unrestricted Securities. "Registration" means a registration under the Securities Act effected pursuant to Section 4.1 or Section 4.2. "Registration Expenses" means all expenses incident to the Company's performance of or compliance with any Registration of Registrable Securities pursuant to this Agreement, including, without limitation, National Association of Securities Dealers, Inc. fees, all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of any special audits or "comfort" letters required by or incident to such performance and compliance, premiums and other costs of policies of insurance obtained by the Company against liabilities arising out of the public offering of Registrable Securities being registered, but excluding fees and disbursements of counsel retained by any Stockholder, premiums and other costs of policies of insurance obtained by any Stockholder or its agents or underwriter against liabilities arising out of the public offering of the Registrable Securities being registered, any fees and disbursements of underwriters customarily paid by sellers of securities who are not the issuers of such securities, all underwriting discounts and commissions and transfer taxes, if any, and registration and filing fees relating to Registrable Securities. "Registration Statement" means a registration statement filed under the Securities Act by the Company pursuant to the provisions of Section 4.1 or Section 4.2, including the Prospectus contained therein, any amendments and supplements to such registration statement, including post-effective amendments, all exhibits and all material incorporated by reference in such registration statement. "Related Documents" has the meaning set forth in the Contribution Agreement. "Rules and Regulations" means the published rules and regulations of the Commission promulgated under the Securities Act or the Exchange Act, as in effect at any relevant time. "Sale Notice" has the meaning set forth in Section 3.5(c). "Securities Act" means the United States Securities Act of 1933, as amended. "Stockholder Allotment" has the meaning set forth in Section 3.5(a). 5 "Stockholders" means each Person, other than the Company, who has executed this Agreement and each Person who is required to become a party to this Agreement in the future in accordance with the terms hereof. "Stockholders' Shares" has the meaning set forth in Section 3.5(a). "Subsidiary" of any Person means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the Board of Directors or other Persons performing similar functions are at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person. "Tag-Along Notice" has the meaning set forth in Section 3.5(c). "Tag-Along Sale" has the meaning set forth in Section 3.5(a). "Tag-Along Sale Date" has the meaning set forth in Section 3.5(c). "Transfer" means a sale, assignment, encumbrance, gift, pledge, hypothecation or other disposition of Company Common Stock or any interest therein; provided that a pledge of Company Common Stock to a financial institution in a bona fide transaction shall not be deemed to be a Transfer for the purposes of this Agreement, so long as the Stockholder retains full voting power in such shares prior to any event of default, it being understood that in the event of such default such transferee shall have no rights or obligations under this Agreement. "Transferor Stockholder" has the meaning set forth in Section 3.3. "Underwriter" means any underwriter of Applicable Securities designated pursuant to Section 4.1(f) hereof. "Unrestricted Securities" means any shares of Company Common Stock that (i) have been registered under an effective registration statement under the Securities Act and have been disposed of pursuant to such effective registration statement, (ii) have been transferred in compliance with Rule 144 or Rule 145 under the Securities Act (or in each case any successor provision thereto) under circumstances in which any legend relating to restrictions on transfer under the Securities Act is removed, (iii) are transferable pursuant to paragraph (k) of Rule 144 or paragraph (d) of Rule 145 under the Securities Act (or in each case any successor provision thereto), (iv) have otherwise been transferred and a new security not subject to transfer restrictions under the Securities Act has been delivered upon such transfer by or on behalf of the Company or (v) cease to be outstanding. "VISN" has the meaning set forth in the Preamble. "VISN Director" has the meaning set forth in Section 5.1. (b) For the purposes hereof, (i) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (ii) the terms "hereof," "herein," and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any 6 particular provision of this Agreement, and Article, Section and paragraph references are to the Articles, Sections and paragraphs to this Agreement unless otherwise specified, (iii) the word "including" and words of similar import when used in this Agreement shall mean "including, without limitation," unless the context otherwise requires or unless otherwise specified, (iv) the word "or" shall not be exclusive, and (v) provisions shall apply, when appropriate, to successive events and transactions. ARTICLE II CORPORATE GOVERNANCE Section 2.1. Composition of the Board of Directors of the Company. Subject to Section 2.5, each of the Stockholders hereby agrees to take, at any time and from time to time, all action necessary such that the Board of Directors of the Company (the "Board") shall consist of not less than 11 directors, who shall be nominated as follows: (a) HEI shall have the right to nominate six members of the Board; provided that one such nominee shall be the Chief Executive Officer of the Company, (b) Liberty, VISN and JPM shall each have the right to nominate one member of the Board and (c) at least two members of the Board shall be Independent Directors nominated by the Board. Each Stockholder entitled to vote for the election of directors to the Board shall vote its shares of Company Voting Stock or execute written consents, as the case may be, and shall take all other action necessary in order to ensure compliance with this Section 2.1. The Company shall take such action as may be required under applicable law to and shall otherwise use reasonable efforts to cause the composition of the Board to be as set forth in this Section 2.1. Section 2.2. Removal. Each Stockholder agrees that at any time that it is then entitled to vote or execute a written consent for the removal and/or replacement of any director of the Company, (a) it shall not vote or execute a written consent for any of its shares of Company Voting Stock in favor of the removal and/or replacement of any individual who shall have been nominated pursuant to Section 2.1, unless the Stockholder entitled to nominate such director shall have requested such removal and/or replacement in writing and (b) it shall vote or execute a written consent for all of its shares of Company Voting Stock in favor of and shall take all other action necessary to cause the removal and/or replacement of an individual nominated pursuant to Section 2.1 if so requested in writing by the Stockholder entitled to nominate such individual. Subject to Section 2.5, nothing contained in this Section 2.2 shall affect the right of any Stockholder to nominate a member of the Board pursuant to Section 2.1. Section 2.3. Vacancies. If, as a result of the death, disability, retirement, resignation, removal or otherwise there shall exist or occur any vacancy on the Board, then the Stockholder entitled under Section 2.1 to nominate such director whose death, disability, retirement, resignation or removal resulted in such vacancy, may, subject to the provisions of Section 2.5, designate another individual to fill such capacity and serve as a director of the Company. Each Stockholder shall, if such Stockholder is then entitled to vote for the election of such designee as a director of the Company, vote or execute a written consent for its shares of Company Voting Stock in order to ensure that such designee be elected to the Board and the Company shall use reasonable efforts to cause such vacancy to be filled by such designee. Section 2.4. Board Committees. The Board shall establish an Audit Committee which shall consist of the Independent Directors. 7 Section 2.5. Termination of Rights and Obligations. The right of any Stockholder to nominate or designate a member or members of the Board pursuant to this Article II, and all related obligations of the Company and each other Stockholder with respect thereto contained in this Article II, shall terminate on the later of such date as such Stockholder (i) ceases to beneficially own in the aggregate at least 5% of the shares of Company Common Stock then issued and outstanding and (ii) ceases to beneficially own at least 75% of the Company Common Stock set forth opposite such Stockholder's name on Appendix I (appropriately adjusted for stock splits, dividends or combinations of shares of Company Common Stock after the IPO); provided that the provisions of Section 4.5 shall survive the termination of this Agreement. Section 2.6. Limitation on Transactions with Affiliates. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, sell any of its material properties or assets to, or purchase any material property or assets from, or enter into any material contract, transaction, agreement, understanding, loan, advance or guaranty with, or for the benefit of, any Affiliate of the Contributing Stockholders (each of the foregoing, an "Affiliate Transaction"), unless such Affiliate Transactions are entered into in good faith and on commercially reasonable terms and (i) with respect to any Affiliate Transactions that, together with all related Affiliate Transactions, have an aggregate value of not more than $35,000,000, such Affiliate Transactions are approved by a majority of the Independent Directors and (ii) with respect to any Affiliate Transactions that, together with all related Affiliate Transactions, have an aggregate value of more than $35,000,000, such Affiliate Transactions are approved by a majority of the members of the Board not nominated by such Contributing Stockholder. Notwithstanding the foregoing, the following shall be deemed not to be Affiliate Transactions: (i) transactions pursuant to the Trademark License Agreement dated as of December 1, 2000, by and between Hallmark Cards, Incorporated and Crown Media International, Inc., the Trademark License Agreement dated as of December 1, 2000, by and between Hallmark Cards, Incorporated and Crown Entertainment Limited, the Trademark License Agreement dated as of May 1, 2000 by and between Hallmark Licensing, Inc. and Odyssey, the Program License Agreement dated May 12, 1998 between HED and H&H Programming - Asia, LLC (or its assignee), the Security Agreement dated as of August 1, 1999 by and between Hallmark Entertainment Networks, Inc. and Hallmark Cards, Incorporated, the Promissory Note dated as of November 19, 1999, by and between HC Crown Corporation and Crown Media, Inc., any of the Related Documents or any contract, agreement, understanding, loan or guaranty described in, or filed as an exhibit to, the registration statement, as amended, under which shares were sold in the IPO; (ii) transactions pursuant to the Contribution Agreement or the Henson Contribution Agreement; (iii) transactions in connection with the non- exclusive licensing of any service mark or trademark of an Affiliate or Affiliates of any Contributing Stockholder to the Company that do not require payment (other than in connection with names of movies, miniseries or series); (iv) transactions pursuant to the Program License Agreement dated as of the date hereof between EM.TV & Merchandising AG and Odyssey, the Program License Agreement dated November 13, 1998 between Henson and Odyssey and the Amendment thereto dated as of the date hereof, the License Agreement dated as of the date hereof between Henson and Odyssey, the Program License Agreement dated May 12, 1998 between Henson and H&H Programming-Asia, LLC (or its assignee), and the License Agreement dated May 12, 1998 between Henson and H&H Programming-Asia, LLC; and (v) 8 transactions between or among the Company and any wholly owned Subsidiary of the Company, provided that such Subsidiary remains a wholly owned Subsidiary of the Company. Section 2.7. Directors' Indemnification. During the term of this Agreement, the Company will use its reasonable best efforts to obtain directors' and officers' liability insurance covering the full Board in a form and amount consistent with industry practice to the extent such insurance is available on reasonable terms. Section 2.8. Corporate Opportunities Policy. The Board of Directors of HEI has adopted and approved a corporate opportunities policy substantially in the form of Exhibit B. HEI shall act in accordance with the provisions of its corporate opportunities policy during the term of such policy unless otherwise agreed by a majority of the members of the Board not nominated by HEI. ARTICLE III TRANSFERABILITY AND PURCHASE RIGHTS Section 3.1. Restrictions on Transferability. (a) No Company Common Stock may be Transferred except upon compliance with the provisions of the Securities Act and this Agreement, and any attempted Transfer other than in accordance with the terms hereof is void ab initio and transfers no right, title or interest in or to such Company Common Stock to the purported transferee, buyer, donee, assignee or encumbrance holder. (b) Except as permitted by Section 3.4, the Stockholders agree that they will not Transfer more than 25% of the shares of Company Common Stock set forth opposite such Stockholder's name on Appendix I (appropriately adjusted for stock splits, stock dividends or combinations of shares of Company Common Stock after the date hereof) prior to the second anniversary of the Original Stockholders Agreement, without the written consent of each other Stockholder. Section 3.2. Restrictive Legend. (a) Each certificate representing any portion of Company Common Stock that is held by a Stockholder shall be stamped or otherwise imprinted with a legend in substantially the following form (in addition to any legend required under applicable state securities laws): "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE DISTRIBUTED EXCEPT IN CONJUNCTION WITH AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT, OR IN COMPLIANCE WITH RULE 144 OR PURSUANT TO ANOTHER EXEMPTION. THE SECURITIES ARE ALSO SUBJECT TO PROVISIONS OF THE STOCKHOLDERS AGREEMENT DATED MAY 9, 2000, AS IT MAY BE AMENDED FROM TIME TO TIME IN ACCORDANCE WITH THE PROVISIONS 9 THEREOF (THE "AGREEMENT"), WHICH CONTAINS RESTRICTIONS ON TRANSFER AND TAG-ALONG PROVISIONS. COPIES OF THE AGREEMENT MAY BE OBTAINED FROM THE SECRETARY OF THE COMPANY." (b) If any shares of Company Common Stock shall cease to be Registrable Securities, the Company shall, upon the written request of the holder thereof and such other documentation as may be reasonably requested, issue to such holder a new certificate evidencing such shares without the legend required by Section 3.2(a) endorsed thereon. Section 3.3. Notice of Proposed Transfers; Securities Law Compliance. Prior to any proposed Transfer of any Company Common Stock, unless there is in effect a Registration Statement covering the proposed Transfer, the Stockholder intending to Transfer such Company Common Stock (the "Transferor Stockholder") shall give written notice to the Company of such Transferor Stockholder's intention to effect such Transfer. Each such notice shall set forth the name of the proposed transferee, the number of shares proposed to be transferred and the proposed amount and form of consideration to be paid for such Company Common Stock (other than Transfers by a Stockholder to one or more Affiliates of such Stockholder); provided that in the event of a Transfer pursuant to Rule 144 under the Securities Act, the Transferor may satisfy the requirements of this Section 3.3 by filing Form 144 with the Company at the time such form is filed with the Securities and Exchange Commission. Section 3.4. Permitted Transfers. Notwithstanding Section 3.1, but subject to compliance with the applicable provisions of the Securities Act and Section 3.3, the following Transfers may be made and HEI shall have no obligation under Section 3.5 with respect thereto: (i) Transfers by a Stockholder to one or more Affiliates of such Stockholder, or to one or more executives of such Stockholder pursuant to a stock-based compensation plan, or to one or more other Stockholders, or to one or more Affiliates of any other Stockholder, subject to the transferee executing a signature page hereof and thereby becoming a party hereto (as a Stockholder) and agreeing that it shall receive the same rights hereunder and be bound by the same obligations hereunder, except as provided in this Section 3.4 and Section 3.5, as the Transferor Stockholder; (ii) Transfers pursuant to a merger, consolidation or other business combination involving all of the outstanding Company Common Stock and a third party which, prior to entering into an agreement with the Company with respect to such business combination, was not an Affiliate of the Company or tender or exchange offer for all of the outstanding Company Common Stock by a third party which, prior to the commencement of such offer, was not an Affiliate of the Company; or (iii) Transfers by Liberty Sub to UnitedGlobalCom, Inc. or an Affiliate thereof. Section 3.5. Tag-Along Rights. (a) Except as permitted by Section 3.4 or in the case of sales pursuant to Article IV, if HEI, at any time or from time to time, in a single transaction or series of related transactions occurring within a six-month period, or within a longer period if pursuant to a single agreement, proposes to Transfer 20% or more of the outstanding shares of Company Common Stock (a "Tag-Along Sale"), then each Minority Stockholder shall have the right, but not the obligation, to participate in such Tag-Along Sale by selling the number of shares of Company Common Stock respectively owned by it as calculated in the following manner. Such shares of Company Common Stock which were acquired by the Minority 10 Stockholders pursuant to the Contribution Agreement or the Henson Contribution Agreement and which are owned by the Minority Stockholders or their Affiliates which are Parties to this Agreement are hereinafter referred to as the "Stockholders' Shares;" provided, however that shares of Company Common Stock transferred from another Stockholder to a Minority Stockholder or its Affiliates (other than an Affiliate of such transferring Stockholder) shall not be deemed to be Stockholders' Shares. The number of shares of Company Common Stock that each Minority Stockholder shall be entitled to include in such Tag-Along Sale (the "Stockholder Allotment") shall equal the product of (i) the total number of shares of Company Common Stock proposed to be Transferred pursuant to the Tag-Along Sale or such greater number of shares that the proposed purchaser in the Tag-Along Sale shall agree to purchase or otherwise acquire, times (ii) a fraction, the numerator of which shall equal the number of Stockholders' Shares owned by such Minority Stockholder and its Affiliates which are parties to this Agreement on the date of the Sale Notice, and the denominator of which shall equal the sum of (A) the number of shares of Company Common Stock owned by HEI and its Affiliates on the date of the Sale Notice plus (B) the total number of Stockholders' Shares owned by all Minority Stockholders and their Affiliates which are parties to this Agreement on the date of the Sale Notice. (b) Any such sales by the Minority Stockholders shall be on the same terms and conditions as the proposed Tag-Along Sale by HEI; provided, however that no participating Minority Stockholder shall be required to make any representation or warranty in connection with the Tag-Along Sale, other than as to the enforceability of each agreement entered into in connection with such Tag- Along Sale with respect to the Minority Stockholder and its ownership and authority to sell, free of consent and approval requirements, liens, claims and encumbrances, the shares of Company Common Stock proposed to be sold by it. Each participating Minority Stockholder shall (and hereby agrees to), without limitation as to time, indemnify and hold harmless, to the full extent permitted by law, each of the other Stockholders against all losses, claims, damages, liabilities, costs (including costs of preparation) and expenses (including attorneys' fees and disbursements) arising out of or relating to any representation or warranty made by, or covenant of, such participating Minority Stockholder or any agent, employee, officer, or director of such participating Minority Stockholder in connection with or relating to or under the terms of each agreement entered into in connection with such Tag-Along Sale, except insofar as the same are based solely upon written information furnished in writing to such participating Minority Stockholder by such other Minority Stockholder expressly for use therein. (c) HEI shall promptly provide each of the Minority Stockholders with written notice (the "Sale Notice") not less than 15 days prior to the proposed date of the Tag-Along Sale (the "Tag-Along Sale Date"). In order to facilitate the prompt delivery of the Sale Notice, the Company hereby covenants to provide HEI and the Minority Stockholders participating in a Tag-Along Sale access to the stock record books of the Company. Each Sale Notice shall set forth: (i) the name of each proposed transferee or purchaser of Company Common Stock in the Tag-Along Sale; (ii) the number of shares of Company Common Stock proposed to be Transferred by HEI and, if applicable, such greater number of shares that the proposed purchaser is willing to purchase in connection with the Tag-Along Sale; 11 (iii) the proposed amount and form of consideration to be paid for such shares of Company Common Stock and the material terms and conditions of payment offered by each proposed transferee or purchaser; (iv) confirmation that the proposed purchaser or transferee has been informed of the "Tag-Along Rights" provided for herein and has agreed to purchase shares of Company Common Stock in accordance with the terms hereof; (v) such Minority Stockholder's Stockholder Allotment; and (vi) the Tag-Along Sale Date. Each Minority Stockholder who wishes to participate in the Tag-Along Sale shall provide written notice (or oral notice confirmed immediately in writing) (the "Tag-Along Notice") to HEI not less than seven days prior to the Tag-Along Sale Date. The Tag-Along Notice shall set forth the number of shares of Company Common Stock that such Minority Stockholder elects to include in the Tag-Along Sale, which shall not exceed such Minority Stockholder's Stockholder Allotment. HEI shall determine the aggregate number of shares of Company Common Stock to be sold by each participating Minority Stockholder in any given Tag-Along Sale in accordance with the terms hereof, and the Tag-Along Notices given by the Minority Stockholders shall constitute their binding agreements to sell such shares at the price and on the terms and conditions applicable to such sale. If a Tag-Along Notice is not received by HEI participating in the Tag-Along Sale from a Minority Stockholder prior to the seven-day period specified above, HEI shall have the right to Transfer the number of shares of Company Common Stock specified in the Sale Notice to the proposed purchaser or transferee without any participation by such Minority Stockholder, but only at a price and upon terms and conditions no more favorable to HEI than stated in such Sale Notice and only if such sale occurs on a date within 60 days of the Tag-Along Sale Date. Section 3.6. Purchase Rights. (a) In the event that the Company proposes to issue Company Common Stock in a public offering in exchange for cash, and as a result thereof Liberty and its Affiliates which are Parties to this Agreement would cease to own in the aggregate at least 10% of the outstanding Company Common Stock, then Liberty shall have the right to purchase from the Company for cash, at a price per share equal to the public offering price, that number of shares of Class A Stock such that it and its Affiliates which are Parties to this Agreement own in the aggregate 10% of the outstanding Company Common Stock immediately following such public offering. (b) In the event that the Company proposes to issue Company Common Stock in a private transaction in exchange for cash, and as a result thereof Liberty and its Affiliates which are Parties to this Agreement would cease to own in the aggregate at least 10% of the outstanding Company Common Stock, then Liberty shall have the right to purchase from the Company for cash, at a price per share equal to the Average Price on the closing date of such transaction, that number of shares of Class A Stock such that it and its Affiliates which are 12 Parties to this Agreement own in the aggregate 10% of the outstanding Company Common Stock immediately following such private transaction. (c) The Company shall promptly provide Liberty with written notice (the "Purchase Right Notice") not less than 15 days prior to the proposed date of the issuance of Company Common Stock that is subject to Section 3.6(a) or (b). Each Purchase Right Notice shall set forth the number of shares of Company Common Stock proposed to be issued, the proposed date of the issuance and the number of shares of Class A Stock which Liberty is entitled to purchase pursuant to Section 3.6(a) and (b). If Liberty wishes to purchase shares pursuant to Section 3.6(a) or (b), Liberty shall provide written notice (or oral notice confirmed immediately in writing) (the "Exercise Notice") to the Company not less than seven days prior to the proposed issuance date. The delivery of the Exercise Notice shall constitute Liberty's binding agreement to purchase the number of shares of Class A Stock set forth in the Purchase Right Notice at the price and on the terms set forth in this Section 3.6. The closing of such purchase shall be on the closing date for the public offering under Section 3.6(a) or the private transaction under Section 3.6(b), as the case may be. If an Exercise Notice is not received by the Company prior to the seven-day period specified above, Liberty's rights under this Section 3.6 shall expire with respect to such issuance. ARTICLE IV REGISTRATION RIGHTS Section 4.1. Demand Registration. (a) (i) HEI shall have the right, on not more than four occasions in the aggregate, and no more frequently than once during any six-month period, and (ii) the Minority Stockholders as a group shall have the right (though such right need not be jointly exercised by the Minority Stockholders), on not more than two occasions in the aggregate (it being understood and agreed that two or more Minority Stockholders may make joint Demands hereunder or any Minority Stockholder may join in a Demand made by any other Minority Stockholder, and any such joint Demand or joining in of a Demand shall be deemed to be a single Demand for all purposes hereof), and no more frequently than once during any six- month period, to require the Company to register for offer and sale under the Securities Act (a "Demand") all or a portion of the Registrable Securities held by such Stockholder, subject to the restrictions set forth herein; provided that no Stockholder shall be entitled to make a Demand hereunder unless the Registrable Securities subject to such Demand represent at least 7% of the aggregate shares of Company Common Stock then issued and outstanding. As promptly as practicable after the Company receives from a Stockholder (the "Demanding Stockholder") a notice pursuant to this Section 4.1(a) (a "Demand Notice"), a copy of which shall have also been delivered to each other Minority Stockholder at the same time as to the Company, demanding that the Company register for offer and sale under the Securities Act Registrable Securities, subject to Section 4.1(b), the Company shall (i) use all reasonable efforts to file as promptly as reasonably practicable with the Commission a Registration Statement relating to the offer and sale of the Applicable Securities on such form as the Company may reasonably deem appropriate (provided that the Company shall not, unless the Company 13 otherwise determines, be obligated to register any securities on a "shelf" registration statement or otherwise to register securities for offer or sale on a continuous or delayed basis) and, thereafter, (ii) after the filing of an initial version of the Registration Statement, use reasonable efforts to cause such Registration Statement to be declared effective under the Securities Act as promptly as practicable after the date of filing of such Registration Statement; provided, however, that no Demanding Stockholder shall be entitled to be named as a selling securityholder in the Registration Statement or to use the Prospectus forming a part thereof for resales of Registrable Securities unless such Demanding Stockholder has made an Election. Subject to Section 4.1(b), the Company shall use reasonable efforts to keep each Registration Statement continuously effective in order to permit the Prospectus forming a part thereof to be usable by such Demanding Stockholder for resales of Registrable Securities for an Effectiveness Period ending on the earlier of (i) 30 days from the Effective Time of such Registration Statement and (ii) such time as all of such securities have been disposed of by the selling securityholders. (b) The Company shall have the right to postpone (or, if necessary or advisable, withdraw) the filing, or delay the effectiveness, of a Registration Statement, or fail to keep such Registration Statement continuously effective or not amend or supplement the Registration Statement or included Prospectus, if the Company determines based upon the advice of counsel that it would be advisable to not disclose in the Registration Statement a planned or proposed financing, acquisition or other corporate transaction or other material information, and the Company shall have determined in good faith that such disclosure is not in the best interests of the Company and its stockholders; provided that no one such postponement shall exceed 90 days in any six-month period and all such postponements shall not exceed 180 days in the aggregate. The Company shall advise the Demanding Stockholder of any such determination as promptly as practicable after such determination. (c) In connection with an underwritten offering, if the managing underwriter or underwriters advise the Company that in its or their opinion the number of Applicable Securities subject to a Demand exceeds the number which can be sold in such offering, the Company shall include in such Registration the number of Applicable Securities that, in the opinion of such managing underwriter or underwriters, can be sold in such offering (provided that, in the event of a joint Demand, the Applicable Securities included shall be allocated pro rata among the Demanding Stockholders on the basis of the relative number of Applicable Securities each such Demanding Stockholder has requested to be included in such Registration). (d) The Company may include in any registration requested pursuant to Section 4.1(a) hereof other securities for sale for its own account or for the account of another Person, subject to the following sentence. In connection with an underwritten offering, if the managing underwriter or underwriters advise the Company that in its or their opinion the number of Applicable Securities requested by the Demanding Stockholder, together with other securities for sale for the account of the Company or any other Person, to be registered exceeds the number which can be sold in such offering, the Company shall include in such Registration the number of Applicable Securities and other securities that, in the opinion of such managing underwriter or underwriters, can be sold in such offering as follows: (i) first, the Applicable Securities requested to be registered by the Demanding Stockholder and (ii) second, any other securities requested to be included in such Registration. 14 (e) A Demanding Stockholder shall have the right to withdraw any Demand (i) prior to the time the Registration Statement in respect of such Demand has been declared effective, (ii) upon the issuance by the Commission or any other governmental agency of a stop order, injunction or other order which interferes with such Registration, (iii) upon the Company's availing itself of Section 4.1(b), or (iv) if such Demanding Stockholder is prevented pursuant to Section 4.1(c) or (d) from selling all of the Applicable Securities it requested to be registered. Notwithstanding such request to withdraw the Demand, the Registration requested by such Demanding Stockholder shall nonetheless be deemed to have been effected (and, therefore, requested) for purposes of Section 4.1(a) hereof if such Demanding Stockholder withdraws any Demand (A) pursuant to clause (i) of the preceding sentence after the Commission filing fee is paid with respect thereto or (B) pursuant to clause (iv) of the preceding sentence in circumstances where at least 50% of the Applicable Securities requested to be included in such Registration by such Demanding Stockholder could have been included, and in each case, (x) the Company has not availed itself of Section 4.1(b) with respect to such Registration request or (y) the Company has availed itself of Section 4.1(b) and the withdrawal request is not made within 10 days after the termination of the suspension period occasioned by the Company's exercise of its rights under Section 4.1(b). If a Demanding Stockholder withdraws a Demand but the Company nevertheless determines to complete, within 30 days after such withdrawal, the Registration so requested as to securities other than the Applicable Securities, such Demanding Stockholder shall be entitled to participate in such Registration pursuant to Section 4.2, but in such case the Intended Offering Notice shall be required to be given to such Demanding Stockholder at least five business days prior to the anticipated filing date of the Registration Statement, or if such Registration Statement has already been filed, within 10 business days after receipt of the request to withdraw Demand from such Demanding Stockholder and such Demanding Stockholder shall be required to give the Piggy-back Notice no later than 3 business days after the Company's delivery of such Intended Offering Notice. (f) In the event that any Registration pursuant to this Section 4.1 shall involve, in whole or in part, an underwritten offering, one co-lead managing underwriter shall be selected by the Company and shall be reasonably acceptable to the Demanding Stockholder, and the other co-lead underwriter shall be selected by the Demanding Stockholder, provided that, in the event of a joint Demand, the other co-lead underwriter shall be selected by a majority in interest (by reference to the number of Applicable Securities requested to be included in the Registration) of the Demanding Stockholders, and shall be reasonably acceptable to the Company. Any additional co-managing underwriters shall be selected by the Company. Section 4.2. Piggy-back Registration. (a) If at any time the Company intends to file on its behalf or on behalf of any of its securityholders a registration statement under the Securities Act in connection with a public offering of any securities of the Company on a form and in a manner that would permit the registration for offer and sale under the Securities Act of Registrable Securities, other than a registration statement on Form S-8 or Form S-4, then the Company shall give written notice (an "Intended Offering Notice") of such intention to each Stockholder then holding Registrable Securities at least 20 business days prior to the anticipated filing date of such registration statement. Such Intended Offering Notice shall offer to include in such registration statement for offer to the public such number of Registrable Securities as each Stockholder may request, subject to the conditions set forth herein, and shall specify, to the extent then known, the number and class of securities proposed to be registered, the proposed 15 date of filing of such registration statement, any proposed means of distribution of such securities, any proposed managing underwriter or underwriters of such securities and a good faith estimate by the Company of the proposed maximum offering price of such securities, as such price is proposed to appear on the facing page of such registration statement. Each Stockholder shall advise the Company in writing (such written notice being a "Piggy-back Notice") not later than 10 business days after the Company's delivery to such Stockholder of the Intended Offering Notice, if such stockholder desires to participate in such offering. The Piggy- back Notice shall set forth the number of Registrable Securities such Stockholder desires to have included in the registration statement and offered to the public. Upon the request of the Company, each Stockholder electing to include Registrable Securities in the Registration Statement (a "Participating Stockholder") shall enter into such underwriting, custody and other agreements as are customary in connection with registered secondary offerings or necessary or appropriate in connection with the offering. No Participating Stockholder shall be entitled to be named as a selling securityholder in the Registration Statement or to use the Prospectus forming a part thereof for sales of Registrable Securities unless such Participating Stockholder has made an Election. (b) In connection with an underwritten offering, if the managing underwriter or underwriters advise the Company in writing that in its or their opinion the number of securities proposed to be registered exceeds the number that can be sold in such offering, the Company shall include in such Registration the number of securities that, in the opinion of such managing underwriter or underwriters, can be sold as follows: (i) first, the securities that the Company proposes to sell or, if the Registration is in response to a Demand, the securities that the Demanding Stockholder proposes to sell (in the event of a joint Demand, pro rata in proportion to the number of Applicable Securities requested to be included by each Demanding Stockholder), (ii) second, Applicable Securities requested to be included in such Registration by the Participating Stockholders, and, if the Registration is in response to a Demand, the securities that the Company proposes to sell (pro rata in proportion to the number of Applicable Securities requested to be included by each Participating Stockholder and, if applicable, the Company) and (iii) third, other securities requested to be included in such Registration. (c) The rights of each Stockholder pursuant to Section 4.1 hereof and this Section 4.2 are cumulative, and the exercise of rights under one such Section shall not exclude the subsequent exercise of rights under the other such Section (except to the extent expressly provided otherwise herein). Notwithstanding anything herein to the contrary, the Company may abandon and/or withdraw any registration as to which any right under Section 4.2 may exist at any time and for any reason without liability hereunder. In such event, the Company shall notify each Stockholder to the extent that it has delivered a Piggy-back Notice to such Stockholder to participate therein. Section 4.3. Registration Procedures. In connection with a Registration Statement, the following provisions shall apply: (a) The Company shall furnish to each Demanding Stockholder or Participating Stockholder, prior to the Effective Time, a copy of the Registration Statement as initially filed with the Commission, and each amendment thereto and each amendment or supplement, if any, to the Prospectus included therein. 16 (b) Subject to Section 4.1(b) and in respect of a Registration Statement under Section 4.1, the Company shall use reasonable best efforts to promptly take such action as may be necessary so that (i) each of the Registration Statement and any amendment thereto and the Prospectus forming part thereof and any amendment or supplement thereto (and each report or other document incorporated therein by reference in each case), when it becomes effective, complies in all material respects with the Securities Act and the Exchange Act and the Rules and Regulations, (ii) each of the Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) each of the Prospectus forming part of the Registration Statement, and any amendment or supplement to such Prospectus, does not at any time during the period during which the Company is required to keep a Registration Statement effective under Section 4.1(a) include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (c) The Company shall, promptly upon learning thereof, advise each Demanding Stockholder or Participating Stockholder, and shall confirm such advice in writing if so requested by any Demanding Stockholder or Participating Stockholder: (i) when a Registration Statement and any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the Commission for amendments or supplements to the Registration Statement or the Prospectus included therein or for additional information with respect to the Registration Statement and Prospectus; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for such purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the securities included in the Registration Statement for sale in any jurisdiction or the initiation of any proceeding for such purpose; and (v) following the effectiveness of any Registration Statement, of the happening of any event or the existence of any state of facts that requires the making of any changes in the Registration Statement or the Prospectus included therein so that, as of such date, such Registration Statement and Prospectus do not contain an untrue statement of a material fact and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading (which advice shall be accompanied by an instruction to each Demanding Stockholder or Participating Stockholder to suspend the use of the Prospectus until the requisite changes have been made, which instruction each Demanding Stockholder or Participating Stockholder agrees to follow). 17 (d) In respect of a Registration Statement under Section 4.1 (and not Section 4.2), the Company shall use all reasonable efforts to prevent the issuance, and if issued to obtain the withdrawal, of any order suspending the effectiveness of the Registration Statement at the earliest possible time. (e) The Company shall furnish to each Demanding Stockholder or Participating Stockholder, without charge, at least one copy of the Registration Statement and all post- effective amendments thereto, including financial statements and schedules, and, if such holder so requests in writing, all reports, other documents and exhibits that are filed with or incorporated by reference in the Registration Statement. (f) The Company shall, during the period during which the Company is required to keep a Registration Statement continuously effective under Section 4.1(a) or elects to keep such effective under Section 4.2, deliver to each Demanding Stockholder or Participating Stockholder, without charge, as many copies of the Prospectus (including each preliminary Prospectus) included in the Registration Statement and any amendment or supplement thereto as each Demanding Stockholder or Participating Stockholder may reasonably request, and the Company consents (except during the continuance of any event described in Section 4.1(b) or Section 4.3(c)(v) hereof) to the use of the Prospectus, with any amendment or supplement thereto, by each Demanding Stockholder or Participating Stockholder in connection with the offering and sale of the Applicable Securities covered by the Prospectus and any amendment or supplement thereto during such period. (g) Prior to any offering of Applicable Securities pursuant to the Registration Statement, the Company shall use reasonable efforts to (i) register or qualify or cooperate with each Demanding Stockholder or Participating Stockholder and its respective counsel in connection with the registration or qualification of such Applicable Securities for offer and sale under the securities or "blue sky" laws of such jurisdictions within the United States as each Demanding Stockholder or Participating Stockholder may reasonably request, (ii) keep such registrations or qualifications in effect and comply with such laws so as to permit the continuance of offers and sales in such jurisdictions for the period during which the Company is required to keep a Registration Statement continuously effective under Section 4.1(a) and (iii) take any and all other reasonable actions requested by each Demanding Stockholder or Participating Stockholder which are necessary to enable the disposition in such jurisdictions of such Applicable Securities; provided, however, that in no event shall the Company be obligated to (1) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to so qualify but for this Agreement or (2) file any general consent to service of process or subject itself to tax in any jurisdiction where it is not so subject. (h) The Company shall cooperate with each Demanding Stockholder or Participating Stockholder to facilitate the timely preparation and delivery of certificates representing Applicable Securities to be sold pursuant to the Registration Statement, which certificates shall comply with the requirements of any United States securities exchange upon which any Applicable Securities are listed (provided that nothing herein shall require the Company to list any Registrable Securities on any securities exchange on which they are not currently listed) or the NASD Rules, as applicable, and which certificates shall be free of any restrictive legends and in such permitted denominations and registered in such names as each Demanding Stockholder 18 or Participating Stockholder may request in connection with the sale of Applicable Securities pursuant to the Registration Statement. (i) The Company shall use reasonable efforts to: (i) make such reasonable representations and warranties in the applicable underwriting agreement to the Underwriters, in form, substance and scope as are customary; (ii) in connection with any underwritten offering, obtain opinions of counsel to the Company (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the Underwriters) addressed to the Underwriters, covering such matters as are customary to the extent reasonably required by the applicable underwriting agreement; (iii) in connection with any underwritten offering, obtain "cold comfort" letters and updates thereof from the independent public accountants of the Company (and, if necessary, from the independent public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each Demanding Stockholder or Participating Stockholder (if such Demanding Stockholder or Participating Stockholder has provided such letter, representations or documentation, if any, required for such cold comfort letter to be so addressed) and the Underwriters, in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with secondary underwritten offerings of equity securities; and (iv) in connection with any underwritten offering, deliver such documents and certificates as may be reasonably requested by each Demanding Stockholder or Participating Stockholder and the Underwriters, if any, including, without limitation, certificates to evidence compliance with any conditions contained in the underwriting agreement or other agreements entered into by the Company. (j) In respect of a Registration Statement under Section 4.1 (and not Section 4.2), the Company shall use reasonable efforts to take all other steps reasonably necessary to effect the timely registration, offering and sale of the Applicable Securities covered by the Registration Statements contemplated hereby. Section 4.4. Registration Expenses. The Company shall bear the Registration Expenses in connection with the performance of its obligations under Sections 4.1, 4.2 and 4.3. Each Demanding Stockholder or Participating Stockholder shall bear all other expenses relating to any Registration or sale in which such Demanding Stockholder or Participating Stockholder participates pro rata with the other Stockholders participating therein, including all of the fees and expenses of counsel to such Demanding Stockholder or Participating Stockholder, any applicable underwriting discounts or commissions and registration or filing fees with respect to the Applicable Securities. Section 4.5. Indemnification and Contribution. (a) Upon the effectiveness of the Registration of Applicable Securities pursuant to Section 4.1 or 4.2, the Company shall 19 indemnify and hold harmless each Demanding Stockholder or Participating Stockholder and each Underwriter or selling agent, and each of their respective officers and directors and each Person who controls such Demanding Stockholder or Participating Stockholder, Underwriter or selling agent within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each such Person being sometimes referred to as an "Indemnified Person") from and against any losses, claims, damages or liabilities, joint or several, (or actions in respect thereof) to which such Indemnified Person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Registration Statement under which such Applicable Securities are registered under the Securities Act, or any Prospectus contained therein or furnished by the Company to any Indemnified Person, or any amendment or supplement thereto in each case relating to the sale of Applicable Securities, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Company hereby agrees to reimburse such Indemnified Person for any reasonable legal or other expenses reasonably incurred by it in connection with investigating or defending any such loss, claim, damage or liability (or action in respect thereof) as such expenses are incurred; provided, however, that (i) the Company shall not be liable to any such Indemnified Person in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Registration Statement or Prospectus, or amendment or supplement, in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Indemnified Person or by or on behalf of any Demanding Stockholder or Participating Stockholder expressly for use therein; (ii) the Company shall not be liable to the extent that any loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon (a) the use of any Prospectus after such time as the obligation of the Company to keep the same effective and current has expired, or (b) the use of any Prospectus after such time as the Company has advised each Demanding Stockholder or Participating Stockholder in writing that a post-effective amendment or supplement thereto is required, except such Prospectus as so amended or supplemented; and (iii) the Company shall not be liable to any Person who participates as an Underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such Underwriter within the meaning of the Securities Act, to the extent that any loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of the matters described in the first proviso of this sentence or in (a) or (b) above or such Person's failure to send or give a copy of the final prospectus or supplement to the Persons asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was timely corrected in such final prospectus or supplement. (b) Each Demanding Stockholder or Participating Stockholder agrees, severally and not jointly, as a consequence of the inclusion of Applicable Securities in such Registration Statement, and each Underwriter or selling agent shall agree, as a consequence of facilitating such disposition of Applicable Securities, severally and not jointly, to (i) indemnify and hold harmless the Company and each other Demanding Stockholder or Participating Stockholder, their respective directors and officers and each Person, if any, who controls the Company or each other Demanding Stockholder or Participating Stockholder, within the meaning of either Section 20 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, claims, damages or liabilities (or actions in respect thereof) to which the Company or each other Demanding Stockholder or Participating Stockholder, or such other Persons may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in such Registration Statement or Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, unless such untrue statement or alleged untrue statement or omission or alleged omission was subsequently remedied in an amendment or supplement to such Registration Statement or Prospectus and the Company failed to comply with the delivery requirements of the Securities Act, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of such indemnifying Demanding Stockholder or Participating Stockholder, the Underwriter or selling agent or its agent, expressly for use therein, and (ii) subject to the limitation set forth immediately preceding this clause (ii), reimburse the Company and each other Demanding Stockholder or Participating Stockholder, for any legal or other expenses reasonably incurred by it in connection with investigating or defending any such action or claim as such expenses are incurred. (c) Promptly after receipt by any Person entitled to indemnity (an "Indemnitee") under Section 4.5(a) or (b) hereof of notice of the commencement of any action or claim, such Indemnitee shall, if a claim in respect thereof is to be made against an indemnifying Person (an "Indemnitor") under this Section 4.5, notify such Indemnitor in writing of the commencement thereof, but the omission so to notify the Indemnitor shall not relieve it from any liability which it may have to any Indemnitee except to the extent of any actual prejudice. In case any such action shall be brought against any Indemnitee, it shall notify an Indemnitor of the commencement thereof, such Indemnitor shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other Indemnitor similarly notified, to assume the defense thereof, with counsel satisfactory to such Indemnitee, and, after notice from the Indemnitor to such Indemnitee of its election so to assume the defense thereof, such Indemnitor shall not be liable to such Indemnitee under this Section 4.5 for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such Indemnitee, in connection with the defense thereof. No Indemnitor shall, without the prior written consent of the Indemnitee, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the Indemnitee is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the Indemnitee from all liability arising out of such action or claim and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act, by or on behalf of any Indemnitee. Notwithstanding the foregoing, an Indemnitee shall have the right to employ separate counsel reasonably acceptable to the Indemnitor in any such proceeding and to participate in (but not control, other than as provided in (3) below) the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnitee unless (1) the Indemnitor has agreed to 21 pay such fees and expenses; (2) the Indemnitor shall have failed after notice to assume the defense of such proceeding; or (3) the named parties to any such proceeding (including any impleaded parties) include both such Indemnitee and the Indemnitor or any of its affiliates or controlling persons, and a conflict of interest will exist if such counsel represents such Indemnitee and the Indemnitor (or such affiliate or controlling person) and in the case of (3), the Indemnitee shall have the right to control the Indemnitee's defense and in each of the cases, if such Indemnitee notifies the Indemnitor in writing that it elects to employ separate counsel, the reasonable fees and expenses of such counsel shall be at the expense of the Indemnitor; it being understood, however, that the Indemnitor shall not, in connection with any one such proceeding or separate but substantially similar or related proceedings in the same jurisdiction, arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for all such Indemnitees, which firm shall be designated by the Indemnitee that had the largest number of shares included in the applicable registration statement. An Indemnitor shall not be liable for any settlement of an action effected without its written consent. (d) If the indemnification provided for in this Section 4.5 is unavailable to or insufficient to hold harmless an Indemnitee under Section 4.5(a) or (b) hereof in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each Indemnitor shall contribute to the amount paid or payable by such Indemnitee as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Indemnitor and the Indemnitee in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault of such Indemnitor and Indemnitee shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such Indemnitor or by such Indemnitee, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 4.5(d) were determined solely by pro rata allocation (even if each Demanding Stockholder or Participating Stockholder or any Underwriters or selling agents or all of them were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 4.5(d). The amount paid or payable by an Indemnitee as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such Indemnitee in connection with investigating or defending any such action or claim. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The obligations of each Demanding Stockholder or Participating Stockholder and any Underwriters or selling agents in this Section 4.5(d) to contribute shall be several in proportion to the number of Applicable Securities registered or underwritten or sold, as the case may be, by them and not joint. Notwithstanding any other provision of this Section 4.5(d), any Demanding Stockholder or Participating Stockholder shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Stockholder from the sale of Company 22 Common Stock pursuant to a Registration Statement exceeds the amount of damages which such Stockholder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. (e) The obligations of the Company under this Section 4.5 shall be in addition to any liability which the Company may otherwise have to any Indemnitee and the obligations of any Indemnified Person under this Section 4.5 shall be in addition to any liability which such Indemnified Person may otherwise have to the Company. The remedies provided in this Section 4.5 are not exclusive and shall not limit any rights or remedies that may otherwise be available to an Indemnitee at law or in equity. Section 4.6. Other Provisions. (a) The respective indemnities, agreements and other provisions set forth in this Article IV or made pursuant to this Article IV shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Stockholder, any director, officer or partner of any Stockholder, any agent or Underwriter, any director, officer or partner of such agent or Underwriter, or any Affiliate of any of the foregoing, and shall survive the registration, offering and sale of the Applicable Securities of each Stockholder. (b) Each Stockholder shall cooperate with respect to any Registration effected under this Agreement and shall provide such information, documents, and instruments as may be reasonably requested in connection therewith. (c) Each Stockholder agrees, if so requested by the managing underwriter in any underwritten offering of the Company's securities, not to effect any public sale or distribution of Registrable Securities (other than pursuant to such underwritten offering) during the 30 days prior to and the 90 days after any registration statement for any such underwritten offering of the Company's securities (either for its own account or for the benefit of the holders of any securities of the Company) has become effective (or such period of time shorter than 90 days that is sufficient and appropriate, in the sole opinion of the managing underwriter, in order to complete the sale and distribution of securities included in such registration). (d) Each Stockholder agrees to keep confidential the fact that the Company has exercised its rights under Section 4.1(b), any advice of the Company pursuant to Section 4.3(c) and any other confidential information provided by the Company in connection with this Agreement. (e) The Company shall use reasonable best efforts to file all reports required to be filed with respect to the Company under Section 13 or Section 15(d) of the Exchange Act during such time as there are any Registrable Securities. ARTICLE V RIGHTS RELATING TO INVESTMENT IN ODYSSEY Section 5.1. Actions of Odyssey Governance Committee. For so long as (a) the Company or any of its Affiliates shall be entitled to a representative on the Odyssey Governance Committee (as defined in the Amended and Restated Company Agreement of Odyssey, effective 23 as of November 13, 1998 (the "Odyssey Agreement")) or is otherwise entitled to consent to the taking of the actions set forth below pursuant to the Odyssey Agreement and (b) VISN and its Affiliates which are Parties to this Agreement either (i) are entitled to nominate or designate a member of the Board of Directors of the Company (the "VISN Director") or (ii) beneficially own any Odyssey Preferred Interests (as defined in the Odyssey Agreement), neither the Company nor any of its Affiliates shall, without the written consent of the VISN Director or the representative of NICC designated on Exhibit C, or otherwise designated by NICC and delivered in writing to the Company (the "NICC Representative"), vote in favor of (or otherwise consent to), directly or through their representatives: (i) (A) any change in the following provisions of the Odyssey Agreement: Section 5.7 (but solely in the case of Section 5.7.2, with respect to the creation or issuance of any interest senior to, or pari passu with, the Preferred Interest), Section 6.6, Section 6.7.2, Section 6.9, Section 8.1 (but only insofar as Section 8.1 relates to the Preferred Interest), Section 8.3 (but only insofar as Section 8.3 relates to or establishes the priority for the Preferred Interest), Section 10.1.1, Section 10.3 (but only insofar as Section 10.3 relates to the Preferred Interest) or Section 13.3 or (B) any of the actions described in the following provisions of the Odyssey Agreement: Section 6.2.2.1, Section 6.2.2.4 (but solely with respect to the creation or issuance of any interest senior to, or pari passu with, the Preferred Interest) or clause (b) of Section 6.2.2.5 (but solely with respect to the incurrence of debt which restricts payments made in connection with the NICC Budget (as defined in the Odyssey Agreement)); (ii) (A) any repayment or redemption of any Odyssey interest outstanding as of the date of the IPO junior to the Preferred Interest or (B) any repayment or redemption of any interest junior to, or pari passu with, the Preferred Interest created or issued after the IPO in an amount in excess of the aggregate proceeds received from the sale or issuance of such interests); (iii) any sale or transfer of all or substantially all of Odyssey's assets unless the transferee of such assets assumes all of the obligations contained in Section 6.6, Section 6.7.2 and Section 6.9 of the Odyssey Agreement and agrees not to take the actions described in Section 6.2.2.1 or clause (b) of Section 6.2.2.5 (but solely with respect to the incurrence of debt which restricts payments made in connection with the NICC Budget) of the Odyssey Agreement without the consent of the VISN Director or the NICC Representative, in each case until the later of the fifth anniversary of the IPO or the second anniversary of such sale or transfer; (iv) any merger or other business combination involving Odyssey where Odyssey is not the surviving entity unless at the time of such merger or business combination (A) the surviving entity assumes the Preferred Interest on terms no less favorable to VISN than those set forth in the Odyssey Agreement including, but not limited to, Section 5.7 (but solely in the case of Section 5.7.2, with respect to the creation or issuance of any interest senior to, or pari passu with, the Preferred Interest), Section 8.1 (but only insofar as Section 8.1 relates to the Preferred Interest), Section 8.3 (but only insofar as Section 8.3 relates or establishes the priority for the Preferred Interest), Section 10.1.1, Section 10.3 (but only insofar as Section 10.3 relates to the Preferred Interest) and 24 Section 13.3, (B) references to Odyssey in Sections 5.1(ii), (iii), (iv), (v), (vi) and (viii) of this Agreement shall be deemed to refer to such surviving entity and (C) the surviving entity assumes all of the obligations contained in Section 6.6, Section 6.7.2 and Section 6.9 of the Odyssey Agreement and agrees not to take the actions described in Section 6.2.2.1, Section 6.2.2.4 (but solely with respect to the creation or issuance of any interest senior to, or pari passu with, the Preferred Interest) and clause (b) of Section 6.2.2.5 (but solely with respect to the incurrence of debt which restricts payments made in connection with the NICC Budget) of the Odyssey Agreement until the later of the fifth anniversary of the IPO or the second anniversary of such merger or business combination, provided Section 6.2.2.4 shall only expire when the Preferred Interest has been redeemed, and provided, further that the obligations of the surviving entity under this clause (C) shall not so expire in the case of a merger or other business combination in which the holders of equity interests in Odyssey (not including the Preferred Interests) immediately before such transaction own at least a majority of the equity interests in such surviving entity (or its Parent) (not including the Preferred Interests) in substantially the same proportions as their ownership prior to such transaction. (v) the dissolution of Odyssey, except in connection with a complete liquidation of the business conducted by Odyssey because such business is being discontinued; (vi) (A) any sale or transfer of all or substantially all of Odyssey's assets to, or any merger or other business combination involving Odyssey with, the Company or any of its Affiliates or (B) any other material transaction (with respect to Odyssey) with the Company or any of its Affiliates that is not on an arm's length basis or on commercially reasonable terms if such transaction results in (1) an excessive or unfair financial benefit to the Company or any of its Affiliates and (2) an inability of Odyssey to satisfy its obligations under Section 6.6 of the Odyssey Agreement or with respect to the Preferred Interests. In such event the Company agrees to apply the amount by which its excessive or unfair financial benefit exceeds the financial benefit that the Company would have received if the transaction had been entered into on an arm's length basis or on commercially reasonable terms to satisfy such Odyssey obligations; (vii) any sale or transfer of all or substantially all of Odyssey's assets, or any merger or other business combination involving Odyssey where Odyssey is not the surviving entity, in each case prior to the second anniversary of the IPO; or (viii) any amendment or modification to the Odyssey Agreement, the result of which would be that (A) none of the Company or any of its Affiliates or their respective representatives would have the right to consent to the taking of the actions listed in subparagraphs (i) though (vii) above, (B) VISN would have any increased liability or additional obligations under the Odyssey Agreement, or (C) there would occur any adverse change to VISN's Capital Account (as defined in the Odyssey Agreement) with respect to the Preferred Interests except to reflect the redemption thereof pursuant to Section 5.7 of the Odyssey Agreement. 25 Section 5.2. Restriction on Transfer of the Company's Interests in Odyssey. (a) The Company shall not Transfer any of its Odyssey Common Interests (as defined in the Odyssey Agreement) prior to the second anniversary of the IPO without the consent of the VISN Director or the NICC Representative. (b) The Company shall not Transfer of any of its Odyssey Common Interests after the second anniversary of the IPO unless such Transfer is subject to a requirement that the transferee agree to assume the Company's obligations under Section 5.1 hereof, provided that the transferee's obligations under Section 5.1 hereof shall expire on the later of (i) the fifth anniversary of the IPO, (ii) the second anniversary of such Transfer or (iii) the repayment or redemption of VISN's Odyssey Preferred Interest, provided that notwithstanding the foregoing, the transferee's obligations under Section 5.1 shall expire upon the dissolution of Odyssey. Section 5.3. Termination of Rights and Obligations. The rights of VISN, or NICC, as the case may be, under Section 5.1 and 5.2 shall terminate (if not theretofore terminated) pursuant to the terms of Section 5.1 or 5.2 on the later of such date as VISN and its Affiliates which are Parties to this Agreement cease to (i) be entitled to nominate or designate a member of the Board of Directors of the Company or (ii) beneficially own any Odyssey Preferred Interests. ARTICLE VI GENERAL Section 6.1. Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the subject matter hereof and replaces the Original Stockholders Agreement and there are no agreements, understandings, representations or warranties between the parties hereto other than those set forth or referred to herein. Section 6.2. Amendment and Waiver. This Agreement, including this Section 6.2, may be amended, and waivers or consents to departures from the provisions hereof may be given, only by a written instrument duly executed, in the case of an amendment, by the Company and each Stockholder, or in the case of a waiver or consent, by each party against whom the waiver or consent, as the case may be, is to be effective. Section 6.3. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission) and shall be given as follows: (a) if to the Company or HEI to: Hallmark Cards, Incorporated Department 339 2501 McGee Kansas City, MO 64108 Attention: Judith C. Whittaker, Vice President, General Counsel Telephone: (816) 274-5111 Facsimile: (816) 274-8203 26 with copies to: Hallmark Entertainment, Inc. 1325 Avenue of the Americas New York, New York 10019 Attention: Peter von Gal Telephone: (212) 977-9001 Facsimile: (212) 977-9049 Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 Attention: Eric S. Robinson, Esq. Telephone: (212) 403-1000 Facsimile: (212) 403-2000 (b) if to JPM, to: JP Morgan Partners (BHCA), L.P. 380 Madison Avenue New York, NY 10017 Attention: Arnold Chavkin Telephone: (212) 622-3100 Facsimile: (212) 622-3101 with a copy to: Mayer, Brown & Platt 1675 Broadway, Suite 1900 New York, New York 10019 Attention: Kathleen A. Walsh, Esq. Telephone: (212) 506-2500 Facsimile: (212) 262-1910 (c) if to Liberty, to: Liberty Media Corporation 9197 South Peoria Street Englewood, Colorado 80112 Attention: David B. Koff, Senior Vice President Telephone: (303) 721-5421 Facsimile: (303) 721-5448 27 with a copy to: Liberty Media Corporation 9197 South Peoria Street Englewood, Colorado 80112 Attention: Charles Tanabe, Senior Vice President and General Counsel Telephone: (720) 875-5440 Facsimile: (720) 875-5382 with a further copy to: Skadden, Arps, Slate, Meagher & Flom LLP 300 South Grand Avenue Los Angeles, California 90071-3144 Attention: Rod Guerra, Esq. Telephone: (213) 687-5253 Facsimile: (213) 687-5600 (d) if to VISN, to: VISN Management Corp. 810 Twelfth Avenue South Nashville, Tennessee 37203 Attention: Wilford V. Bane Telephone: (615) 742-5451 Facsimile: (615) 742-5404 with a copy to: Clifford Chance Rogers & Wells LLP 200 Park Avenue New York, New York 10166-0153 Attention: Steven A. Hobbs, Esq. Telephone: (212) 878-8000 Facsimile: (212) 878-8375 e) if to Henson , to: The Jim Henson Company, Inc. 1416 N. LaBrea Avenue Hollywood, CA 90028 Attention: General Counsel Telephone: (323) 802-1570 Facsimile: (323) 802-1849 28 with a copy to: Dorsey & Whitney LLP 250 Park Avenue New York, NY 10177 Attention: Robert P. Wessely, Esq. Telephone: (212) 415 9200 Facsimile: (212) 953-7201 Section 6.4. Assignment; Benefit. The terms and provisions of this Agreement shall not be assignable or transferable and except for Indemnitees and as otherwise expressly provided herein there shall be no third party beneficiaries hereto; provided, however, that any Affiliate of a Stockholder that beneficially owns Registrable Securities may exercise such Stockholder's rights under Article III hereof. All the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the respective legal successors and permitted assigns of the parties hereto. Section 6.5. Absence of Presumption. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted. Section 6.6. Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Section 6.7. Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. Section 6.8. Governing Law; Jurisdiction and Forum. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS. THE PARTIES HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF DELAWARE SOLELY IN RESPECT OF THE INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS OF THIS AGREEMENT AND IN RESPECT OF THE TRANSACTIONS CONTEMPLATED HEREBY, AND HEREBY WAIVE, AND AGREE NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR PROCEEDING FOR THE INTERPRETATION OR ENFORCEMENT HEREOF, THAT IT IS NOT SUBJECT THERETO OR THAT SUCH ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN SAID COURTS OR THAT THE VENUE THEREOF MAY NOT BE APPROPRIATE OR THAT THIS AGREEMENT MAY NOT BE ENFORCED IN OR BY SUCH COURTS, AND THE PARTIES HERETO IRREVOCABLY AGREE THAT ALL CLAIMS WITH RESPECT TO SUCH ACTION OR PROCEEDING SHALL BE HEARD AND DETERMINED IN SUCH A DELAWARE STATE COURT. THE PARTIES HEREBY CONSENT TO AND GRANT ANY SUCH COURT JURISDICTION OVER SUCH PARTIES AND OVER THE SUBJECT MATTER OF SUCH DISPUTE AND AGREE THAT MAILING 29 OF PROCESS OR OTHER PAPERS IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING IN THE MANNER PROVIDED IN SECTION 6.3 OR IN SUCH OTHER MANNER AS MAY BE PERMITTED BY LAW SHALL BE VALID AND SUFFICIENT SERVICE THEREOF. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.8. Section 6.9. Specific Enforcement. Each party hereto acknowledges that remedies at law may be inadequate to protect any other party against any actual or threatened breach of this Agreement by the other parties and, without prejudice to any other rights and remedies otherwise available to any party, each party agrees to the granting of injunctive relief in any other party's favor without proof of actual damages. In the event of litigation relating to this Agreement, if a court of competent jurisdiction determines that this Agreement has been breached by a party, then such party shall reimburse the other party for costs and expenses (including, but not limited to, reasonable legal fees and expenses) incurred in connection with all such litigation. Section 6.10. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any Person or entity or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such original provision and (b) the remainder of this Agreement and the application of such provision to other Persons, entities or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction. Section 6.11. Covered Shares. All of the provisions of this Agreement shall apply to and include (a) Company Common Stock acquired pursuant to the Contribution Agreement or the Henson Contribution Agreement; (b) Company Common Stock acquired from another Stockholder and, (c) to the extent received in respect of shares of Company Common Stock acquired pursuant to the Contribution Agreement or the Henson Contribution Agreement, all securities and instruments (i) received by a Stockholder as a dividend or other payment, or (ii) 30 issued in connection with a split of such shares or as a result of any exchange for or reclassification of such shares or a reorganization, recapitalization, consolidation or merger. Appendix I hereto identifies those shares of Company Common Stock subject to the provisions of this Agreement as of the date hereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective authorized officers as of the day and year first above written. CROWN MEDIA HOLDINGS, INC. By: /s/ William J. Aliber ------------------------------- Name: William J. Aliber Title: Chief Financial Officer HALLMARK ENTERTAINMENT, INC. By: /s/ Judith Whittaker ------------------------------- Name: Judith Whittaker Title: Vice President LIBERTY MEDIA CORPORATION By: /s/ David Koff ------------------------------- Name: David Koff Title: Senior Vice President LIBERTY CROWN, INC. By: /s/ David Koff ------------------------------- Name: David Koff Title: Senior Vice President VISN MANAGEMENT CORP. By: /s/ Wilford Bane, Jr. ------------------------------- Name: Wilford Bane, Jr. Title: Chair-VMC 31 JP MORGAN PARTNERS (BHCA) L.P. By JPMP MASTER FUND MANAGER L.P. its general partner By JPMP CAPITAL CORP. its general partner By: /s/ Arnold Chazkin ------------------------------- Name: Arnold Chazkin Title: Director THE JIM HENSON COMPANY, INC. By: /s/ Peter Schube ------------------------------- Name: Peter Schube Title: Secretary and Executive Vice President for Business & Legal Affairs 32 APPENDIX I Name Class A Stock Class B Stock - ---- ------------- ------------- Hallmark Entertainment, Inc. -- 30,670,422 Liberty Crown, Inc. 9,154,930 -- VISN Management Corp. 6,338,028 -- JP Morgan Partners (BHCA), L.P. 3,836,620 -- The Jim Henson Company, Inc. 5,377,721 -- 33 Exhibit A [Name of Issuer] Notice of Registration Statement and Selling Securityholder Questionnaire (Date) Reference is hereby made to the Amended and Restated Stockholders Agreement (the "Stockholders Agreement") among Hallmark Entertainment, Inc., a Delaware corporation, Liberty Media Corporation, a Delaware corporation, Liberty Crown, Inc., a Delaware corporation, VISN Management Corp., a Delaware corporation, JP Morgan Partners (BHCA), L.P., a Delaware limited partnership, and The Jim Henson Company, Inc., a New York corporation (collectively, the "Stockholders") and Crown Media Holdings, Inc., a Delaware corporation (the "Company"). Pursuant to the Stockholders Agreement, the Company [has filed] with the United States Securities and Exchange Commission (the "Commission") a registration statement on Form ____ (the "Registration Statement") for the registration and resale under the Securities Act of 1933, as amended (the "Securities Act"), of shares of Company Common Stock. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Stockholders Agreement. The Stockholder is entitled to have the Registrable Securities owned by it included in the Registration Statement. In order to have Registrable Securities included in the Registration Statement, this Notice of Registration Statement and Selling Securityholder Questionnaire ("Notice and Questionnaire") must be completed, executed and delivered to the Company's counsel at the address set forth herein for receipt ON OR BEFORE [DEADLINE FOR RESPONSE]. If the Stockholder does not complete, execute and return this Notice and Questionnaire by such date, the Stockholder (i) will not be named as a selling securityholder in the Registration Statement and (ii) may not use the Prospectus forming a part thereof for resales of Registrable Securities. Certain legal consequences arise from being named as a selling securityholder in the Registration Statement and related Prospectus. Accordingly, the Stockholder is advised to consult its own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the Registration Statement and related Prospectus. 1 ELECTION The Stockholder (the "Selling Securityholder") hereby elects to include in the Registration Statement the Registrable Securities beneficially owned by it and listed below in Item (3). The Selling Securityholder, by signing and returning this Notice and Questionnaire, agrees to be bound with respect to such Registrable Securities by the terms and conditions of this Notice and Questionnaire. The Selling Securityholder hereby provides the following information to the Company and represents and warrants that such information is accurate and complete: 2 QUESTIONNAIRE (1) Full Legal Name of Selling Securityholder: (2) Address for Notices to Selling Securityholder: Telephone: Fax: Contact Person: (3) Except as set forth below in this Item (3), the undersigned does not beneficially own any shares of any class of Company Common Stock. (a) Number of Registrable Securities and shares of each class of Company Common Stock beneficially owned:___ (b) Number of Registrable Securities which the undersigned wishes to be included in the Registration Statement:___ (4) Beneficial Ownership of Other Securities of the Company: Except as set forth below in this Item (4), the undersigned Selling Securityholder is not the beneficial or registered owner of any shares of any class of Company Common Stock or any other securities of the Company, other than the Registrable Securities and shares of Company Common Stock listed above in Item (3). State any exceptions here: (5) Relationships with the Company: Except as set forth below, neither the Selling Securityholder nor any of its affiliates, officers, directors or principal equity holders (5% or more) has held any position or office or has 3 had any other material relationship with the Company (or its predecessors or affiliates) during the past three years. State any exceptions here: (6) Plan of Distribution: Except as set forth below, the undersigned Selling Securityholder intends to distribute the Registrable Securities listed above in Item (3) only as follows (if at all): Such Registrable Securities may be sold from time to time directly by the undersigned Selling Securityholder or, alternatively, through underwriters, broker-dealers or agents. Such Registrable Securities may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale, or at negotiated prices. Such sales may be effected in transactions (which may involve crosses or block transactions) (i) on any national securities exchange or quotation service on which the Registered Securities may be listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than on such exchanges or services or in the over-the-counter market, or (iv) through the writing of options. In connection with sales of the Registrable Securities or otherwise, the Selling Securityholder may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the Registrable Securities in the course of hedging the positions they assume. The Selling Securityholder may also sell Registrable Securities short and deliver Registrable Securities to close out such short positions, or loan or pledge Registrable Securities to broker-dealers that in turn may sell such securities. State any exceptions here: By signing below, the Selling Securityholder acknowledges that it understands its obligation to comply, and agrees that it will comply, with the provisions of the Exchange Act and the Rules and Regulations, particularly Regulation M. By signing below, the Selling Securityholder consents to the disclosure of the information contained herein in its answers to Items (1) through (6) above and the inclusion of such information in the Registration Statement and related Prospectus. The Selling Securityholder understands that such information will be relied upon by the Company in connection with the preparation of the Registration Statement and related Prospectus. In accordance with the Selling Securityholder's obligation under the Stockholders Agreement to provide such information as may be required by law for inclusion in the Registration Statement, the Selling Securityholder agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein which may occur subsequent to the date hereof at any time while the Registration Statement remains in effect. All notices hereunder 4 and pursuant to the Stockholders Agreement shall be made in writing, by hand-delivery or air courier guaranteeing overnight delivery as follows: (i) To the Company: [Name of Issuer] [Address] (ii) With a copy to: [Company Counsel] [Address] Once this Notice and Questionnaire is executed by the Selling Securityholder and received by the Company's counsel, the terms of this Notice and Questionnaire, and the representations and warranties contained herein, shall be binding on, shall inure to the benefit of and shall be enforceable by the respective successors, heirs, personal representatives, and assigns of the Company and the Selling Securityholders. This Agreement shall be governed in all respects by the laws of the State of New York. IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent. Dated: ________________ Selling Securityholder By: Name: Title: PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY'S COUNSEL AT: [Company Counsel] [Address] 5 Exhibit B Corporate Opportunities Policy Crown Media Holdings, Inc. will be the primary (but not exclusive) vehicle for the pursuit of corporate opportunities relating to the ownership and operation of pay television channels dedicated to family programming ("Pay Television Opportunities") that are provided or otherwise made available to Hallmark Entertainment, Inc. and its subsidiaries. However, the term Pay Television Opportunities does not include opportunities (1) developed by or made available to any public company that is a subsidiary of Hallmark Entertainment, Inc. or any of Hallmark Entertainment, Inc.'s subsidiaries (other than Crown Media Holdings, Inc. and its subsidiaries), (2) relating to the production or distribution of programming that is developed by, or provided or made available to, a subsidiary of Hallmark Entertainment, Inc. that does not own or operate pay television channels dedicated to family programming and whose primary business is the production or distribution of programming, (3) arising out of or relating to Pay Television Opportunities that have been provided or made available to Crown Media Holdings, Inc. but which Crown Media Holdings, Inc. has determined not to pursue or has failed to pursue within the applicable time period reasonably specified by Hallmark Entertainment, Inc., or (4) that Hallmark Entertainment, Inc. or any of its subsidiaries is legally or contractually obligated to provide or make available to a person other than Crown Media Holdings, Inc. Crown Media Holdings, Inc. is not obligated to pursue any Pay Television Opportunity presented to it by Hallmark Entertainment, Inc. If Crown Media Holdings, Inc. determines not to pursue or fails to pursue an opportunity, in each case within such time as Hallmark Entertainment, Inc. may reasonably specify (taking into account the type and nature of the Pay Television Opportunity provided or made available) in its communication to Crown Media Holdings, Inc. relating to such Pay Television Opportunity, then Hallmark Entertainment, Inc. and its subsidiaries may pursue such Pay Television Opportunity. This policy is effective from the completion of the initial public offering of Class A Common Stock of Crown Media Holdings, Inc. This policy automatically terminates upon the first to occur of (1) Hallmark Entertainment, Inc. and its subsidiaries ceasing to beneficially own, in the aggregate, at least a majority in voting power of the outstanding voting securities of Crown Media Holdings, Inc. entitled to vote generally upon all matters submitted to common stockholders and (2) the third anniversary of the completion of the initial public offering of Class A Common Stock of Crown Media Holdings, Inc. The Hallmark Entertainment, Inc. board of directors is required to act in accordance with its fiduciary duties owed to Hallmark Entertainment, Inc. and Hallmark Entertainment, Inc.'s fiduciary duties, if any, to its subsidiaries in making all determinations in connection with this policy. With respect to any Pay Television Opportunity that may be subject to this policy and any obligation (fiduciary or otherwise) to one or more other subsidiaries, the Hallmark Entertainment, Inc. board of directors will have discretion to determine, without reference to this policy, to which of Crown Media Holdings, Inc. or such other subsidiary of Hallmark Entertainment, Inc. such Pay Television Opportunity will be provided or made available. Notwithstanding anything set forth in this policy, Hallmark Entertainment, Inc. will have no obligation to exercise any rights it may have as a shareholder, partner or member of any entity that is not a wholly owned subsidiary or to exercise any rights available to it under agreements with other shareholders, partners or members, in order to implement determinations under this 1 policy. All determinations of the Hallmark Entertainment, Inc. board of directors with respect to this policy and the interpretation of this policy are conclusive and binding. Hallmark Entertainment, Inc.'s board of directors from time to time may amend, modify or rescind this policy or adopt additional or other policies or make exceptions with respect to the application of this policy in connection with particular facts and circumstances, all as the Hallmark Entertainment, Inc. board of directors may determine, consistent with its fiduciary duties and in accordance with Section 2.8 of the Stockholders Agreement dated as of May 9, 2000 by and among Hallmark Entertainment, Inc., Liberty Media Corporation, VISN Management Corp., Chase Equity Associates, L.P. and Crown Media Holdings, Inc. The transactions contemplated by the Contribution Agreement shall not create any inference or course of dealing as to the opportunities to which this policy applies. 2 Exhibit C Designated Representative of NICC NICC representative: Wilford Bane 1 -----END PRIVACY-ENHANCED MESSAGE-----