MEMBERSHIP UNIT SUBSCRIPTION
AGREEMENT
THIS MEMBERSHIP
UNIT SUBSCRIPTION AGREEMENT (this “ Agreement ”)
is made and entered into as of June 23, 2008, by and among RHI
Entertainment, Inc., a Delaware corporation (“ RHI
Inc. ”), KRH Investments LLC, a Delaware limited
liability company (formerly RHI Entertainment Holdings, LLC,
“ KRH ”), and RHI Entertainment Holdings II,
LLC, a Delaware limited liability company (“ Holdings
II ”).
A. WHEREAS,
RHI Inc. is contemplating an offer and sale of its shares of common
stock, par value $ 0.01 per share (“ Shares ”),
to the public in an underwritten initial public offering (the
“ Initial Public Offering ”).
B. WHEREAS,
pursuant to that certain reorganization agreement, dated as of
September 14, 2007 (the “ Reorganization
Agreement ”), KRH, Holdings II and RHI Inc. have agreed
to effectuate the transactions described or referenced
therein.
C. WHEREAS,
immediately prior to or simultaneously with the consummation of the
transactions contemplated by this Agreement, RHI Inc. will become
the sole managing member of Holdings II and KRH will become the
non-managing member of Holdings II pursuant to that certain amended
and restated limited liability operating agreement of Holdings II,
as it may be amended, supplemented or otherwise modified from time
to time (the “ LLC Agreement ”).
D. WHEREAS,
Holdings II desires to issue Membership Units to RHI Inc. in
exchange for the proceeds received from RHI Inc.’s Initial
Public Offering.
E. WHEREAS,
Holdings II desires to issue Membership Units to KRH in exchange
for the contribution of its interests in RHI Entertainment LLC, a
Delaware limited liability company (the “ Contributed
Asset ”).
F. WHEREAS,
immediately after the Initial Closing (as defined herein), Holdings
II desires to make a cash distribution of $35.7 million (the
“ Cash Distribution ”) to KRH, which is intended
to return capital contributions by KRH used for the funding of
capitalized film production costs incurred within the two years
prior to payment of the Cash Distribution.
G. WHEREAS,
the parties hereto intend for the contribution of the Contributed
Asset by KRH and the proceeds received from RHI Inc.’s
Initial Public Offering in exchange for Membership Units to be
treated as contributions of property governed by Section 721(a) of
the Internal Revenue Code of 1986, as amended and the Cash
Distribution to be treated as a payment as described in Treasury
Regulations Section 1.707-4(d).
H. NOW,
THEREFORE, In consideration of the covenants and agreements
contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, RHI Inc.,
KRH and Holdings II agree as follows:
1.1 Certain
Definitions . For purposes of this Agreement, the following
terms shall have the meanings specified in this
Section 1.1:
“ Cash
Distribution ” has the meaning set forth in the
Recitals.
“
Contributed Asset ” has the meaning set forth in the
Recitals.
“
Encumbrance ” means, with respect to any specified
asset, any security interest, lien, mortgage, claim, charge,
pledge, restriction, option, reservation, equitable interest, deed
of trust, right of first refusal, easement, servitude or
encumbrance of any nature.
“
Holdings II ” has the meaning set forth in the
Preamble.
“ Initial
Closing ” means the closing of the transactions
contemplated in Sections 2.1, 2.2, 3.1 and 3.2.
“ Initial
Closing Date ” has the meaning set forth in
Section 2.3.
“ Initial
Public Offering ” has the meaning set forth in the
Recitals.
“ IPO
Proceeds ” means the proceeds received by RHI Inc. in
exchange for the issuance and sale of Shares in connection with the
Initial Public Offering, calculated by the price per share at which
Shares are sold to the public multiplied by the number of Shares
sold to the public, less underwriting discounts and commissions.
For the avoidance of doubt, IPO Proceeds shall not include the
Over-Allotment Proceeds.
“ KRH
” has the meaning set forth in the Preamble.
“ KRH
Units ” has the meaning set forth in
Section 3.1.
“ LLC
Agreement ” has the meaning set forth in the
Recitals.
“
Membership Units ” means the common membership units
of Holdings II as described in the LLC Agreement.
“
Optional Closing ” means the closing of the
transactions contemplated in Section 2.5.
“
Optional Closing Date ” has the meaning set forth in
Section 2.5(c).
“
Over-Allotment Option ” has the meaning set forth in
Section 2.5(a).
“
Over-Allotment Proceeds ” means the proceeds received
by RHI Inc. in connection with the Underwriters’ purchase of
Shares in connection with the Over-Allotment Option, calculated by
the price per share at which Shares are sold to the public
multiplied by the number of Shares sold to the public, less
underwriting discounts and commissions.
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“
Over-Allotment Units ” means the Membership Units, if
any, issued by Holdings II to RHI Inc. pursuant to
Section 2.5.
“
Prospectus ” means the final prospectus for the
Initial Public Offering contained in the registration statement
filed on Form S-1 with the Securities and Exchange
Commission.
“ RHI
Inc. ” has the meaning set forth in the
Preamble.
“ RHI
Inc. Consideration ” has the meaning set forth in
Section 2.2.
“ RHI
Inc. Units ” has the meaning set forth in
Section 2.1.
“
Shares ” has the meaning set forth in the
Recitals.
“ Total
Issued Units ” means the total number of KRH Units, RHI
Inc. Units, and, if any, Over-Allotment Units.
“
Transaction Documents ” mean the transactional and
organizational documents entered into contemporaneously with this
Agreement by either Holdings II, RHI Inc. or KRH, as applicable, in
connection with the Initial Public Offering.
“
Underwriting Agreement ” means the underwriting
agreement to be entered into among RHI Inc. and the managing
underwriters for the Initial Public Offering.
2.1
Transfer . Holdings II hereby agrees to issue to RHI Inc. on
the Initial Closing Date, and RHI Inc. hereby agrees to subscribe
to and accept on the Initial Closing Date, free and clear of all
Encumbrances, a number of Membership Units equal to the number of
Shares sold (excluding any Shares sold pursuant to the exercise of
the Over-Allotment Option) in the Initial Public Offering
(collectively, the “ RHI Inc. Units
”).
2.2
Consideration . The consideration for the RHI Inc. Units
shall be an amount equal to the IPO Proceeds (the “ RHI
Inc. Consideration ”), which shall be delivered to
Holdings II at the Initial Closing by wire transfer of immediately
available funds in accordance with Section 2.4.
2.3 Initial
Closing . The Initial Closing Date shall be held at the offices
of Latham & Watkins LLP, 885 Third Avenue, New York, NY 10022
at the time and date on which all the conditions set forth in
Section 7 have been satisfied or waived, or at such later time
and date as RHI Inc., Holdings II and KRH shall agree in writing
(such time and date, the “ Initial Closing Date
”).
2.4 Initial
Closing Deliverables.
(a) Holdings II
shall deliver, or cause to be delivered, the following documents to
RHI Inc. at the Initial Closing:
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(i) a certificate
or certificates representing the RHI Inc. Units being issued to RHI
Inc. identifying RHI Inc. as the registered holder thereof;
and
(ii) all other
customary documents, instruments or certificates as shall be
reasonably requested by RHI Inc. and as shall be consistent with
the terms of this Agreement; and
(b) RHI Inc. shall
deliver, or cause to be delivered, the following documents to
Holdings II at the Initial Closing:
(i) the RHI Inc.
Consideration by wire transfer of immediately available funds to an
account designated by Holdings II at least three business days
prior to the Initial Closing.
2.5 Issuance of
Additional Membership Units .
(a) Holdings II
hereby agrees to issue to RHI Inc., and RHI Inc. hereby agrees to
subscribe to and accept, free and clear of all Encumbrances, a
number of Membership Units equal to the number of Shares sold to
the Underwriters pursuant to the Underwriters’ option to
purchase additional Shares under the Underwriting Agreement (the
“ Over-Allotment Option ”) in exchange for RHI
Inc.’s contribution of the Over-Allotment Proceeds of such
Over-Allotment Option, which shall be delivered to Holdings II at
the Optional Closing by wire transfer of immediately available
funds in accordance with Section 2.5(c).
(b) RHI Inc. and
Holdings II both agree and acknowledge that Holdings II’s
obligations to issue any Over-Allotment Units in connection with
the Over-Allotment Option are contingent upon the
Underwriters’ exercise of their Over-Allotment Option. If the
Underwriters exercise their Over-Allotment Option, RHI Inc. will,
contemporaneously with the sale of Shares by RHI Inc. to the
Underwriters pursuant to the Over-Allotment Option, subscribe to a
number of Over-Allotment Units from Holdings II equal to the number
of Shares purchased by the Underwriters from RHI Inc. pursuant to
the Over-Allotment Option.
(c) The Optional
Closing shall be held at the offices of Latham & Watkins LLP,
885 Third Avenue, New York, NY 10022 at the time and date on which
all the conditions set forth in Section 7 have been satisfied
or waived, or at such later time and date as RHI Inc. and Holdings
II shall agree in writing (such time and date, the “
Optional Closing Date ”).
(d) Holdings II
shall deliver, or cause to be delivered, the following documents to
RHI Inc. at the Optional Closing:
(i) a certificate
or certificates representing the Over-Allotment Units being issued
and sold to RHI Inc. in connection with the Over-Allotment Option,
identifying RHI Inc. as the registered holder thereof;
and
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(ii) all other
customary documents, instruments or certificates as shall be
reasonably requested by RHI Inc. and as shall be consistent with
the terms of this Agreement.
(e) RHI Inc. shall
deliver, or cause to be delivered, the following documents to
Holdings II at such Optional Closing:
(i) the
Over-Allotment Proceeds by wire transfer of immediately available
funds to an account designated by Holdings II at least three
business days prior to such Optional Closing; and
(ii) a letter
evidencing the exercise of the Over-Allotment Option by the
Underwriters in a form reasonably satisfactory to Holdings
II.
2.6 Closing
Costs; Transfer Taxes and Fees . Holdings II shall be
responsible for the documentary and transfer taxes and any sales or
other similar taxes, if any, imposed on the issuance of the
Membership Units under this Agreement (including those Membership
Units issued and sold in connection with the Over-Allotment Option)
and any deficiency, interest or penalty asserted with respect
thereto.
3.
Contribution of Contributed Asset; Issuance of Membership Units;
Subsequent Cash Distribution.
3.1
Transfer . Subject to the terms and conditions of this
Agreement, Holdings II hereby agrees to issue to KRH on the Initial
Closing Date, and KRH hereby agrees to accept on the Initial
Closing Date, free and clear of all Encumbrances, 9,900,000
Membership Units (the “ KRH Units ”). KRH shall
contribute, convey, assign, transfer and deliver to Holdings II or
its designee free and clear of any Encumbrances, and Holdings II or
its designee does hereby acquire and accept from KRH, all of
KRH’s right, title and interest in the Contributed
Asset.
3.2 Initial
Closing . The Initial Closing shall be held on the Initial
Closing Date.
3.3 Initial
Closing Deliverables .
(a) Holdings II
shall deliver, or cause to be delivered, the following documents to
KRH at the Initial Closing:
(i) a certificate
or certificates representing the KRH Units being issued and sold to
KRH identifying KRH as the registered holder thereof;
and
(ii) all other
customary documents, instruments or certificates as shall be
reasonably requested by KRH and as shall be consistent with the
terms of this Agreement.
(b) KRH shall
deliver, or cause to be delivered, the following documents to
Holdings II at the Initial Closing:
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(i) all customary
documents, instruments or certificates as shall be reasonably
requested by Holdings II and as shall be consistent with the terms
of this Agreement.
3.4 Closing
Costs; Transfer Taxes and Fees . Holdings II shall be
responsible for the documentary and transfer taxes and any sales or
other similar taxes, if any, imposed on the issuance of the KRH
Units under this Agreement and any deficiency, interest or penalty
asserted with respect thereto.
3.5 Cash
Distribution . By executing and delivering this Agreement,
Holdings II agrees to make, and on the Initial Closing Date will
make, the Cash Distribution to KRH
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