Document:

EX-10.9

Exhibit
10.9 

AMENDED AND RESTATED EMPLOYMENT AGREEMENT 

     This
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this
“Agreement”) dated as of the 15th day of
July 2008, between Barr Laboratories, Inc., a Delaware corporation having its principal
executive offices at 225 Summit Avenue, Montvale, New Jersey 07645-1523 (the “Company”),
and Timothy B. Sawyer (the “Employee”).

WITNESSETH:

     WHEREAS, the Company and the Employee entered into an employment agreement dated as of May 12,
2004, which was amended and restated as of August 19, 2005 (as so amended and restated, the
“Prior Agreement”);

     WHEREAS, the Company and the Employee wish to amend and restate the Prior Agreement;

      WHEREAS,
the Company wishes to assure itself of the services of the Employee and provide an inducement for
the Employee to remain in its employ; and 

     
WHEREAS, the Employee is willing to remain in the employ
of the Company on the terms and conditions hereafter set forth.

     NOW, THEREFORE, the Company and the Employee hereby agree that, effective as of the date first
stated above, the Prior Agreement is amended and restated in its entirety to read as follows:

     1. Employment. The Company agrees to employ the Employee, and the Employee agrees to
serve in the employ of the Company, during the term of this Agreement on the terms and conditions
hereafter set forth.

     2. Term.
The term of this Agreement shall commence on July 15th, 2008 (the
“Commencement Date”) and shall terminate at 5 P.M. on December 31, 2009 unless sooner terminated in
accordance with the terms of this Agreement or extended as hereinafter provided. The term of this
Agreement shall be extended, without further action by the Company or the Employee, on the date
(the “Extension Effective Date”) that is six (6) months before December 31, 2009 and on the
date (also an “Extension Effective Date”) that is six (6) months before each subsequent
December 31, for successive periods of twelve (12) months each, unless the Company, BPI or an
Affiliate shall have given written notice to the Employee, or the Employee shall have given written
notice to the Company, in the manner set forth in paragraph 13(e) or (f) below, prior to the
Extension Effective Date in question, that the term of this Agreement that is in effect at the time
such written notice is given is not to be extended or further extended, as the case may be.

     3. Position and Responsibilities; Place of Performance.

          (a) Throughout the term of this Agreement, the Employee agrees to serve in the employ of the
Company, and the Company agrees to employ the Employee,
as its Executive Vice President, Global Generic Sales and Marketing, reporting to the Chief
Executive Officer of the Company (the “CEO”). As the Company’s Executive Vice President,
Global Generic Sales

 

 

and Marketing, the Employee shall have responsibility for the day-to-day conduct of, the Company’s
generic commercial sales and marketing activities in North America, and the sales and marketing of
all products outside of North America, maintaining relationships with Company customers, and
identifying and evaluating potential business development activities to complement generic business
strategies globally, and shall be responsible for managing and supervising all local functions
reporting directly to the Country Managers in local markets, subject to the authority of BPI’s
Board of Directors (the “Board”) and the CEO, and shall perform such other reasonable duties,
consistent with the position of Executive Vice President, Global Generic Sales and Marketing, as
may lawfully be assigned to the Employee by the Board or the CEO.

          (b) In connection with the Employee’s employment by the Company, the Employee shall be based
at the Company’s European headquarters in Zagreb, Croatia for the duration of his international
assignment, and thereafter, at the principal executive offices of the Company in the greater New
York City metropolitan area, including Montvale, New Jersey, and the Employee agrees to travel, to
the extent reasonably necessary to perform the Employee’s duties and obligations under this
Agreement, to Company facilities and other destinations elsewhere at the Company’s expense.

          (c) During the term of this Agreement, the Employee shall serve the Company on an exclusive
basis (it being understood that the Employee’s engaging in activities on behalf of BPI or an
Affiliate shall be deemed serving the Company for this purpose) and shall devote all the Employee’s
business time, attention, skill and efforts to the faithful performance of the Employee’s duties
hereunder; provided that the Employee may engage in community service and charitable activities or
such other activities as approved by the CEO, the CEO of BPI and the Board that do not materially
interfere with the performance of the Employee’s duties and responsibilities hereunder.

     4. Compensation. For all services rendered by the Employee in any capacity during the term of
this Agreement, and for the Employee’s undertakings with respect to confidential information,
non-solicitation and disparaging remarks set forth in Sections 6 and 7 below, the Employee shall be
entitled to the following:

          (a) a salary, payable in installments not less frequent than monthly, at the annual rate of
four hundred and seventy-five thousand dollars ($475,000), with such increases in such rate, if
any, as the Board or a committee of the Board may approve from time to time during the term of this
Agreement in accordance with the Company’s regular administrative practices applicable to senior
officers from time to time during the term of this Agreement (the Employee’s annual salary rate as
increased from time to time during the term of this Agreement being hereafter referred to as the
“Base Salary”);

          (b) participation in the Company’s annual executive incentive or bonus plan
as in effect from time to time, with the opportunity to receive, for each fiscal year of the
Company that begins or ends during the term of this Agreement, a target award of fifty percent
(50%) of the Base Salary earned during such year (or such higher amount as the Board or a committee
of the Board may determine, in its discretion, up to a maximum of the lesser of (i) one hundred
percent (100%) of Base Salary earned during such year or (ii) three percent (3%) of the Company’s
pre-tax and pre-bonus net operating income for such year), in accordance with the

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terms and conditions of such incentive or bonus plan, it being understood that any award for the
fiscal year of the Company in which the term of this Agreement terminates pursuant to the terms
hereof shall be prorated based on the portion of such fiscal year that coincides with the term of
this Agreement and shall be made at the same time as awards (if any) are made to other participants
with respect to such fiscal year. The Company will pay the Employee’s annual incentive bonus for
each year at the same time as annual incentive bonus payments for such year (if any) are made to
other participants with respect to such fiscal year, and in all events within the two and one half
(21/2) months following the end of the calendar year in which the bonus is earned. Annual incentive
bonuses are intended to qualify for the short-term deferral exception to Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”);

          (c) participation in the stock incentive plan applicable to Company officers as from time to
time in effect, subject to the terms and conditions of such plan;

          (d) the business and personal use of an automobile at Company expense including, without
limitation, payment or reimbursement of automobile insurance and maintenance expenses, or a cash
allowance in lieu thereof, in accordance with the Company’s automobile policy applicable to
similarly situated senior officers; and

          (e) participation in all health, welfare, savings and other employee benefit and fringe
benefit plans (including vacation pay plans or policies and life and disability insurance plans) in
which other senior officers of the Company participate during the term of this Agreement, subject
in all events to the terms and conditions of such plans as in effect from time to time. Nothing in
this paragraph (e) shall preclude the Company, BPI or an Affiliate from amending or terminating any
such plan at any time prior to a Change in Control or Potential Change in Control. The plans
covered by this paragraph (e) shall not include the annual incentive or stock incentive plans,
which are covered by paragraphs (b) and (c) above.

          (f) notwithstanding the foregoing, during the Employee’s international expatriate assignment,
Employee shall participate in all employee benefit and fringe benefit programs, including without
limitation, living allowances, car allowances, and tax equalization benefits, as applicable, as are
provided pursuant to the Company’s expatriate benefit program available to similarly situated
executives of the Company and shall have such benefits and additional terms and conditions of
employment during Employee’s international expatriate assignment as are set forth in Employee’s
Expatriate Agreement,
which is hereby incorporated by reference. Upon return to the United States, the provisions of
section (d) and (e) shall govern, and Employee shall participate in benefits available to similarly
situated U.S. executives.

     5. Termination of Employment.

          (a) Termination by the Company, BPI or an Affiliate without Good Cause or by the Employee
for Good Reason; Non-Renewal Termination.

     (i) If the Employee’s employment with the Company is terminated by the Company, BPI or an
Affiliate without Good Cause (except as an incident of assigning the rights to Employee’s services
to a Permitted Assignee in accordance with paragraph 13(d) below) when the Employee is willing and
able to continue performing service, or is terminated by the Employee for Good Reason, in either
case during the term of this

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Agreement and other than at the expiration of the term of this Agreement as the same may have been
extended in accordance with the provisions of Section 2 above (any such employment termination
being hereafter referred to as a “Compensable Termination”), the Company shall pay the Employee, in
accordance with normal payroll practices, the portion of the Employee’s Base Salary accrued through
the date of the Compensable Termination and any other amounts to which the Employee is entitled by
law or pursuant to the terms of any compensation or benefit plan or arrangement in which the
Employee participated prior to the Compensable Termination and, in addition, subject to all of the
provisions of this Section 5, Section 14 below, and further subject to compliance by the Employee
with the provisions of Sections 6 and 7 below, relating to confidential information,
non-solicitation and disparaging remarks, the Company shall, as liquidated damages or severance pay
or both (whichever characterization(s) will serve to validate the payments), and as additional
consideration for the Employee’s undertakings under Sections 6 and 7 below, pay the Employee the
following:

     (A) the Employee’s annual bonus for the fiscal year of the Company preceding the fiscal year of the
Company in which the Compensable Termination occurs, if unpaid at the time of the Compensable
Termination. Such annual bonus shall be paid at the same time as bonuses (if any) for such
preceding fiscal year are paid to other officers, and in all events within the first two and one
half (21/2) months of the fiscal year in which the Compensable Termination occurs. The amount of
such bonus shall be determined by the Board or a committee of the Board on a basis consistent with
the prior bonus determinations with respect to the Employee or, in the event a Change in Control or
Potential Change in Control (as defined in Section 11 below) occurred before the Compensable
Termination, consistent with the bonus determinations with respect to the Employee prior to the
Change in Control or Potential Change in Control. If the Board or a committee of the Board made no
bonus determinations with respect to the Employee before the Compensable Termination or, if
applicable, before the Change in Control or Potential Change in Control, the amount of such bonus
shall be determined on a basis consistent with the Board’s or Board committee’s bonus
determinations with respect to other Executive Vice Presidents before the Compensable Termination
or, if applicable,
before the Change in Control or Potential Change in Control; and

     (B) a prorated annual bonus for the fiscal year of the Company in which the Compensable Termination
occurs, payable at the same time as bonuses (if any) for such fiscal year are paid to other
officers, and in all events within the first two and one half (21/2) months of the fiscal year
following the fiscal year in which the Compensable Termination occurs. Such prorated annual bonus
shall be determined by multiplying the “Applicable Average Bonus” as defined below in this
subparagraph 5(a)(i)(B) by a fraction, the numerator of which shall be the number of days elapsed
in such fiscal year through (and including) the date on which the Compensable Termination occurs
and the denominator of which shall be the number three hundred sixty-five (365). For purposes of
this Agreement, the “Applicable Average Bonus” means the highest of (I) the average annual
bonus (including any portion of the bonus that is deferred) awarded to the Employee during the
three (3)-year period immediately preceding the

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Compensable Termination or, if the Employee was employed by the Company for less than
three (3) years before the Compensable Termination, during the period of the Employee’s
employment by the Company prior to the Compensable Termination (annualizing any bonus
awarded for less than a full year of employment), (II) the average annual bonus (including
any portion of the bonus that is deferred) awarded to the Employee during the three (3)
fiscal years of the Company that precede the fiscal year in which the Compensable
Termination occurs or during the portion of such three (3) fiscal years in which the
Employee was employed by the Company (annualizing any bonus awarded for less than a full
year of employment); provided that, if the Compensable Termination occurs after a Change
in Control or Potential Change in Control, the Applicable Average Bonus shall not be less
than the average annual bonus (including any portion of the bonus that is deferred)
awarded to the Employee during the three (3) years preceding the date on which the Change
in Control or Potential Change in Control occurred or during the portion of such three (3)
years in which the Employee was employed by the Company (annualizing any bonus awarded for
less than a full year of employment); or (III) the Employee’s target bonus (based on the
greatest of (i) the Employee’s target bonus percentage and Base Salary rate as specified
in Section 4 above, (ii) the Employee’s approved target bonus percentage and Base Salary
rate in effect on the date of the Compensable Termination, or (iii) the Employee’s
approved target bonus percentage and Base Salary rate in effect on the date of notice of
such Compensable Termination, whichever is greater); and

     (C) an amount of money (the “Severance Payment”) equal to two (2) times the
Employee’s “Annual Cash Compensation” as hereafter defined, unless the Severance Payment
is payable solely on account of the Employee’s resignation for Good Reason pursuant to
subparagraph 5(d)(v) below (relating to the Company, BPI or an Affiliate giving the
Employee notice of non-extension), in which case the Severance Payment shall be equal to
one and one-quarter (11/4) times the Employee’s “Annual Cash Compensation” as hereafter
defined. Except as otherwise provided hereafter in this subparagraph 5(a)(i)(C) and
Section 14,
seventy-five percent (75%) of the Severance Payment shall be paid in a lump sum within ten
(10) days after the date of the Compensable Termination. The twenty-five percent (25%)
balance of the Severance Payment shall be paid in six (6) equal monthly installments, one
(1) of which shall be paid at the end of each of the first six (6) months after the date
of the Compensable Termination, provided, in the case of each of such six (6)
installments, that the Employee has not accepted full-time or regular part-time employment
with or regularly served as a consultant to a for-profit pharmaceutical company prior to
the date for payment of such installment, it being understood and agreed that the
foregoing condition shall not be violated by the Employee’s serving as a member of a board
of directors of a for-profit pharmaceutical company or by his/her performing consulting
services on an ad hoc basis for such a company. If a Change in Control
occurs that is a “change in control event” within the meaning of Code Section 409A and
Treasury Regulation §1.409A-3(i)(5)(i) (or any similar or successor provisions) (either
before or after the Compensable Termination and in accordance with Treasury Regulation
§1.409A-3(c)), the Severance Payment (or, in the case of such a

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“change in control event” that occurs after the Compensable Termination, any portion
thereof that remains unpaid at the time such “change in control event” occurs) shall be
paid in a lump sum within ten (10) days after the Compensable Termination (or, in the case
of such a “change in control event” that occurs after the Compensable Termination, within
ten (10) days after the “change in control event” occurs), and the two (2) preceding
sentences of this subparagraph shall not apply. For twenty-four (24) months following a
Compensable Termination, the Company shall also provide the Employee (and, as applicable,
the Employee’s covered dependents), at Company expense, with continuation coverage under
the Company’s group health plan(s) covering similarly situated executives. For purposes of
this Section 5, the Employee’s “Annual Cash Compensation” shall mean the sum of (I)
the Employee’s highest Base Salary (i.e., one (1) year’s salary at its highest rate), plus
(II) the “Applicable Average Bonus” as defined in subparagraph 5(a)(i)(B) above.

     (ii) If the term of this Agreement as the same may have been extended in accordance with the
provisions of Section 2 above is not extended or further extended because the Company, BPI or an
Affiliate gives written notice of non-extension to the Employee as provided in Section 2 above, and
there is not Good Cause for termination of the Employee’s employment at the time of giving such
notice, and the Employee does not thereafter resign for Good Reason during the term of this
Agreement as permitted by paragraph 5(d)(v) below, and the Employee is willing and able to renew or
execute a new agreement providing terms and conditions substantially similar to those in this
Agreement and to continue providing such services, then the Company shall pay the Employee, subject
to fulfillment by the Employee of the Employee’s obligations under this Agreement during the
balance of the term and the Employee’s compliance with the provisions of Sections 6 and 7 below,
relating to confidential information, non-solicitation and disparaging remarks, as non-renewal
compensation, and as additional consideration for the Employee’s undertakings under this Agreement,
including Sections
6 and 7 below, an amount of money (the “Non-Renewal Payment”) equal to one and
one-quarter (11/4) times the Employee’s Annual Cash Compensation as defined in subparagraph
5(a)(i)(C) above, in addition to any other amounts to which the Employee may be entitled hereunder
(including without limitation the Employee’s annual bonus pursuant to paragraph 4(b) above for the
fiscal year of the Company in which the Employee’s employment terminates and any amounts to which
the Employee may be entitled under Section 8, 9 or 10 below) or by law or pursuant to the terms of
any compensation or benefit plan or arrangement in which the Employee participated before the
Employee’s employment terminated. Except as otherwise provided hereafter in this subparagraph
5(a)(ii), seventy-five percent (75%) of the Non-Renewal Payment shall be paid in a lump sum within
ten (10) days after the date on which the Employee’s employment terminates, subject to paragraph
5(f) and Section 14. The twenty-five percent (25%) balance of the Non-Renewal Payment shall be
paid in six (6) equal monthly installments one (1) of which shall be paid at the end of each of the
first six (6) months after the date on which the Employee’s employment terminates. If a Change in
Control occurs that is a “change in control event” within the meaning of Code Section 409A and
Treasury Regulation §1.409A-3(i)(5)(i) (or any similar or successor provisions) (either before or
after the Employee’s termination and in accordance with

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Treasury Regulation §1.409A-3(c)), the Non-Renewal Payment (or, in the case of such a
“change in control event” that occurs after the Employee’s termination, any portion thereof
that remains unpaid at the time such “change in control event” occurs) shall be paid in a
lump sum within ten (10) days after the date on which the Employee’s employment terminates
(or, in the case of such a “change in control event” that occurs after the Employee’s
termination, within ten (10) days after the “change in control event” occurs), and the two
(2) preceding sentences of this subparagraph shall not apply. For twenty-four (24) months
following the Employee’s termination, the Company shall also provide the Employee (and, as
applicable, the Employee’s covered dependents), at Company expense, with continuation
coverage under the Company’s group health plan(s) covering similarly situated executives.

     (iii) The foregoing provisions of (including any payments under) this paragraph 5(a)
shall be in lieu of any severance pay that may be payable under any plan or practice of the
Company, any other Subsidiary or Affiliate, or BPI (as such terms are defined in Section 11
below), or by law (including the WARN Act or any similar state or foreign law), but shall
be in addition to (and not in lieu of) any payments to which the Employee may be entitled
under Sections 8, 9 and 10 below. Subparagraphs 5(a)(i)(C) and 5(a)(ii) above are intended
to be mutually exclusive, and in no event shall such subparagraphs, either individually or
collectively, be construed to require the Company to pay an amount of money in excess of
two (2) times the Employee’s Annual Cash Compensation under such subparagraphs, either
individually or collectively, in addition to continuation coverage under the Company’s
group health plan(s) covering similarly situated executives provided by the Company to the
Employee (and, as applicable, the Employee’s covered dependents), at Company expense, for
twenty-four (24)
months.

     (iv) The Employee shall not be required to mitigate the amount of any payment or
benefit provided for in this Agreement (including but not limited to any payment provided
for above in this paragraph 5(a)) by seeking other employment or otherwise, nor shall any
compensation earned by the Employee in other employment or otherwise reduce the amount of
any payment or benefit provided for in this Agreement, except as provided in subparagraphs
5(a)(i)(C) and 5(a)(ii) above.

     (v) A Compensable Termination shall not include a termination of employment by reason
of the Employee’s death.

          (b) Termination by the Company, BPI or an Affiliate for Good Cause or by the Employee
without Good Reason. If, during the term of this Agreement, the Employee’s employment by the
Company is terminated by the Company, BPI or an Affiliate for Good Cause or by the Employee without
Good Reason, the Employee shall not be entitled to receive any compensation under Section 4 above
accruing after the date of such termination or any payment under paragraph 5(a) above. However, any
obligations of the Company under Sections 8, 9 and 10 shall not be affected by such termination of
employment. The provisions of this paragraph 5(b) shall be in addition to, and not in lieu of, any
other rights and remedies the Company may have at law or in equity or under any other provision of
this Agreement in respect of such termination of employment. However, if during the term of this
Agreement the Employee’s employment is terminated by the Employee without Good Reason and the
Employee gives the Company at least one hundred twenty (120) days’ advance notice of such
termination, then the

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Employee shall not have any obligation or liability under this Agreement on account of such
termination of employment, but the Employee’s obligations under Section 6 and 7 hereof shall not be
affected by such termination of employment.

          (c) Good Cause Defined. For purposes of this Agreement, the Company, BPI and the
Affiliates shall have “Good Cause” to terminate the Employee’s employment by the Company
during the term of this Agreement only if:

     (i) (A) the Employee fails to substantially perform the
Employee’s duties hereunder for any reason or to devote substantially all the Employee’s business
time exclusively to the affairs of the Company (including Company activities on behalf of the other
Affiliates or BPI), other than by reason of a medical condition that prevents the Employee from
substantially performing the Employee’s duties hereunder even with a reasonable accommodation by
the Company, and (B) such failure is not discontinued within a reasonable period of time, in no
event to exceed thirty (30) days, after the Employee receives written notice from the Company, BPI
or an Affiliate of such failure; or

     (ii) the Employee commits an act of dishonesty resulting or intended to result directly or
indirectly in gain or personal enrichment at the expense of the Company, BPI
or an Affiliate, or engages in conduct that constitutes a felony in the jurisdiction in which
the Employee engages in such conduct; or

     (iii) the Employee is grossly negligent or engages in willful misconduct or insubordination in
the performance of the Employee’s duties hereunder; or

     (iv) the Employee materially breaches the Employee’s obligations under Section 6 or paragraph
7(a) below, relating to confidential information and non-solicitation.

     In addition, the Employee’s employment shall be deemed to have terminated for Good Cause if,
after the Employee’s employment has terminated, facts and circumstances arising during the course
of the Employee’s employment are discovered that would have justified a termination for Good Cause
under subparagraphs 5(c)(ii) or (iv) above.

     Any foregoing provision of this paragraph 5(c) to the contrary notwithstanding, the Company,
BPI and the Affiliates shall not have “Good Cause” to terminate the Employee’s employment within
three (3) years after a Change in Control or Potential Change in Control (as such terms are defined
in Section 11 below) unless (A) the Employee’s act or omission is willful and has a material
adverse effect upon the Company, BPI or an Affiliate, (B) the Board gives the Employee (I) written
notice warning of its intention to terminate the Employee for Good Cause if the specified act or
omission alleged to constitute Good Cause is not discontinued and, if curable, cured, and (II) a
reasonable opportunity after receipt of such written notice, but in no event less than two (2)
weeks, to discontinue and, if curable, cure the conduct alleged to constitute Good Cause, and (C)
the Employee fails to discontinue and, if curable, cure the act or omission in question; provided
that clauses (B) and (C) of this sentence shall not apply with respect to conduct on the part of
the Employee that constitutes a felony in the jurisdiction in which the Employee engages in such
conduct, and, provided further, that this sentence shall not apply to

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conduct involving moral turpitude. For all purposes of this Agreement, no act, or failure to act,
on the Employee’s part shall be deemed “willful” unless done, or omitted to be done, by the
Employee intentionally and in bad faith (i.e., without reasonable belief that the Employee’s action
or omission was in furtherance of the interests of the Company, BPI or a Subsidiary or Affiliate).

          (d) Good Reason Defined. For purposes of this Agreement, the Employee shall have
“Good Reason” to terminate employment during the term of this Agreement only if:

     (i) the Company fails to pay or provide any amount or benefit that the Company is obligated to
pay or provide under Section 4 above or Section 8, 9, or 10 below and the failure is not remedied
within thirty (30) days after the Company receives written notice from the Employee of such
failure; or

     (ii) the Employee is assigned duties, responsibilities, or reporting relationships
not contemplated by Section 3 above without the Employee’s consent, or the Employee’s duties
or responsibilities or power or authority contemplated by Section 3 above are limited in any
respect materially detrimental to the Employee, and in either case the situation is not remedied
within thirty (30) days after the Company receives written notice from the Employee of the
situation; or

     (iii) the Employee is removed from, or not elected or reelected to, the office, title or
position of Executive Vice President, Global Generic Sales and Marketing of the Company, and the
Company, BPI and the Affiliates do not have Good Cause for doing so; or

     (iv) during the Employee’s international assignment, the Company, BPI or an Affiliate
relocates the Employee’s office outside of the Company’s European headquarters in Zagreb, Croatia
without the Employee’s written consent (given in a personal rather than representative capacity)
and the situation is not remedied within thirty (30) days after the Company receives written notice
from the Employee of the situation, or, following such international assignment, the Company, BPI
or an Affiliate relocates the Employee’s office outside of either the Company’s principal executive
offices or the greater New York City metropolitan area without the Employee’s written consent
(given in a personal rather than representative capacity) and the situation is not remedied within
thirty (30) days after the Company receives written notice from the Employee of the situation; or

     (v) the Company, BPI or an Affiliate gives the Employee written notice, in the manner set
forth in paragraph 13(f) below, prior to any Extension Effective Date, that the term of this
Agreement that is in effect at the time such written notice is given is not to be extended or
further extended, as the case may be; provided that the giving of such written notice to the
Employee shall constitute Good Reason only if and when the Employee shall have performed such of
the Employee’s duties and responsibilities for such period of time, in no event to exceed ninety
(90) days after the giving of such notice, as the CEO, another officer to whom the Employee reports
in accordance with paragraph 3(a) above, or the Board, may reasonably request in writing to
transition the Employee’s duties and responsibilities; or

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     (vi) a Change in Control occurs and as a result thereof either (A) equity securities
of BPI cease to be publicly-traded, or (B) the Employee is not elected or designated to
serve as the sole Executive Vice President, Global Generic Sales and Marketing of the
Company or its survivor in the Change in Control; or

     (vii) a Change in Control or Potential Change in Control occurs and (A) the dollar
value of the stock optioned to the Employee annually thereafter is less than the average
annual dollar value of the stock that was optioned to the Employee during the four (4)
years prior to the Change in Control or Potential Change in Control, or (B) the material
terms of such options (including without limitation vesting schedules) are less favorable
to the Employee than the material terms of the options that were granted to the Employee
during the four (4) years
prior to the Change in Control or Potential Change in Control, and in either case (A)
or (B) the situation is not remedied within thirty (30) days after the Company receives
written notice from the Employee of the situation. For purposes of (A) and (B) of this
subparagraph 5(d)(vii), if free-standing stock appreciation rights are granted to the
Employee, the stock subject to such rights shall be considered stock that is optioned to
the Employee, and if alternative stock appreciation rights (a/k/a tandem stock appreciation
rights) are granted to the Employee, the stock appreciation rights shall be considered
terms of the options to which they are alternative/tandem; or

     (viii) the Company or a Permitted Assignee attempts to assign any of its rights or
obligations under this Agreement other than in accordance with paragraph 13(d) below and
does not remedy the situation within thirty (30) days after the Company receives written
notice from the Employee of the situation; or

     (ix) the Company, BPI or any Subsidiary or Affiliate materially breaches the terms of
this Agreement.

     In no event shall the Employee’s continued employment after any of the foregoing constitute
the Employee’s consent to the act or omission in question, or a waiver of the Employee’s right to
terminate employment for Good Reason hereunder on account of such act or omission, except as
provided in the following sentence. With respect to any act, omission, or occurrence that is
alleged to occur after the Commencement Date and prior to a Change in Control or Potential Change
in Control, the Employee must provide the Company with written notice of any one (1) or more of the
conditions set forth in this definition of Good Reason within six (6) months of the initial
existence of the condition for such condition to constitute Good Reason. Such notice shall not
excuse the Employee from continuing to perform the duties and responsibilities assigned to the
Employee until such time as the Employee terminates employment. Notwithstanding the foregoing, this
notice requirement shall not apply to acts or omissions alleged to constitute Good Reason that
arise after a Change in Control or Potential Change in Control.

          (e) Disability

     (i) Notwithstanding any provision of this Agreement to the contrary, (A) if during the
term of this Agreement as the same may be extended from time to time pursuant to Section 2
above, a medical condition prevents the Employee, even with a reasonable accommodation by
the Company, from substantially performing the

- 10 -

 

Employee’s duties hereunder (it being understood that a transitory illness, such as a cold or flu,
that prevents the Employee from substantially performing the Employee’s duties hereunder during a
brief period is not such a medical condition), then until the date, if any, on which the Employee
recovers from such medical condition (the “Evaluation Period”), the Company may terminate
the Employee’s employment only pursuant to
subparagraph 5(e)(ii) below (a “Disability Termination”) or for willful misconduct
constituting Good Cause under paragraph 5(c) above, and (B) if any notice of nonextension of the
term of this Agreement was given before the Evaluation Period, or is given during the Evaluation
Period, whether by the Company, BPI or an Affiliate or the Employee, pursuant to Section 2 above,
and, but for this clause (B), the term of this Agreement would expire during the Evaluation Period
as a result of such notice of nonextension having been given, then the term of this Agreement will
automatically be extended without action by any party until the Employee recovers from such medical
condition. For purposes of this paragraph 5(e), the Employee will be deemed to recover from a
medical condition only if and when the Employee both (I) has been able to substantially perform the
Employee’s duties hereunder (either with or without a reasonable accommodation by the Company) for
more than six (6) months, consecutive or non-consecutive, within any period of twelve (12) or fewer
consecutive months commencing on or after the commencement of the Evaluation Period, and (II) is
not entitled to receive long-term disability (“LTD”) benefits under a LTD plan of BPI or a
Subsidiary.

     (ii) Except as otherwise provided in subparagraph 5(e)(i) above, during the Evaluation Period,
the Company may terminate the Employee’s employment only in the event of a “Disability,”
which for this purpose means that a medical condition either (A) has prevented the Employee, even
with a reasonable accommodation by the Company, from substantially performing the Employee’s duties
hereunder for six (6) months, consecutive or non-consecutive, in any period of twelve (12) or fewer
consecutive months, or (B) entitles the Employee to receive LTD benefits under a LTD plan of BPI or
any Subsidiary. The Company will give the Employee at least ten (10) days advance written notice
of a Disability Termination. Notwithstanding any provision of this Agreement to the contrary, a
Disability Termination will not be treated as a termination to which the provisions of paragraph
5(a) or 5(b) apply.

     (iii) In the event of a Disability Termination, the Company will pay or provide the Employee
with the following:

     (A) With respect to the period ending on the date of the Disability Termination, the Employee
will receive all of the compensation and benefits provided by Section 4 above. The amount of any
compensation payable to the Employee with respect to the period ending on the date of the
Disability Termination may be reduced by (I) any payments which the Employee receives with respect
to the same period because of short- or long-term disability under any disability plan of BPI or
any Subsidiary, and (II) any income (whether from Social Security, workers compensation or any
other source) that is deducted in computing the amount of such payments under any disability plan
of BPI or any Subsidiary;

- 11 -

 

     (B) An amount of money equal to the Severance Payment. Except as otherwise provided
hereafter in this subparagraph 5(e)(iii)(B) and Section 14, seventy-five percent (75%) of
the Severance Payment shall be paid in a lump sum within ten (10) days after the date of
the Disability Termination. The twenty-five
percent (25%) balance of the Severance Payment shall be paid in six (6) equal monthly
installments, one (1) of which shall be paid at the end of each of the first six (6) months
after the date of the Disability Termination. If a Change in Control occurs that is a
“change in control event” within the meaning of Code Section 409A and Treasury Regulation
§1.409A-3(i)(5)(i) (or any similar or successor provisions) (either before or after the
Disability Termination and in accordance with Treasury Regulation §1.409A-3(c)), the
Severance Payment (or, in the case of such a “change in control event” that occurs after
the Disability Termination, any portion thereof that remains unpaid at the time such
“change in control event” occurs) shall be paid in a lump sum within ten (10) days after
the Disability Termination (or, in the case of such a “change in control event” that occurs
after the Disability Termination, within ten (10) days after the “change in control event”
occurs), and the two (2) preceding sentences of this subparagraph shall not apply; and

     (C) During the period from the date of the Disability Termination until the first to
occur of (I) the date, if any, on which the Employee recovers from the disabling medical
condition, (II) the Employee’s attainment of age 65, and (III) the death of the Employee,
the Company will pay the Employee a monthly amount of money (the “Supplemental LTD
Payments”) equal to the excess, if any, of (aa) over (bb) where (aa) is 60% of one-twelfth
(1/12th) of the Employee’s Base Salary (as defined in paragraph 4(a) above)
immediately before the Disability Termination (i.e., 60% of the Employee’s monthly salary
at its highest rate), and (bb) is the sum of (1) the monthly LTD benefit (if any) which the
Employee receives with respect to the same month under a LTD plan of BPI or any Subsidiary,
plus (2) any income (whether from Social Security, workers compensation or any other
source) that is deducted in computing the amount of such monthly LTD benefit;
provided, however, that the Employee will be entitled to a Supplemental LTD
Payment for a given month only to the extent that the Employee’s cumulative Supplemental
LTD Payments (determined without regard to this proviso) through the end of that month
exceed the Severance Payment.

     The payments and benefits provided by the foregoing provisions of this subparagraph
5(e)(iii) are in addition to and not in lieu of any other amounts to which the Employee is
entitled by law or pursuant to the terms of any compensation or benefit plan or arrangement
in which the Employee participated prior to the Disability Termination, and any amounts
payable pursuant to Section 8, 9 or 10 below.

          (f) Release. Any and all amounts payable and benefits or additional rights provided
pursuant to this Agreement after Separation from Service beyond any accrued, vested amounts shall
only be payable if the Employee (i) signs after a Separation from Service a general release
prepared by the Company of all claims of the Employee occurring up to and including the date of
Separation from Service excluding claims under this Agreement, claims for

- 12 -

 

compensation and benefits that are vested as of such date, and claims for indemnification or
advancement of expenses related to the Employee’s service or status as an officer or employee (the
“Release”), (ii) delivers the signed Release to the Company within forty-five (45) calendar days of
presentation thereof by the Company to the Employee, which presentation shall be made no later than
ten (10) calendar days following the Employee’s Separation from Service, and (iii) does not revoke
the Release during the seven (7) calendar days following the date on which the Employee signs the
Release. Subject to the preceding sentence, any amounts that otherwise would be paid or provided
pursuant to this Agreement during the sixty-two (62) calendar days following the Employee’s
Separation from Service shall be paid or provided between the sixty-third (63rd) and seventy-fourth
(74th) calendar days following the Separation from Service.

          (g) Code Section 409A. All payments to be made pursuant to this Section 5 are subject
to Section 14 of this Agreement, including the Six Month Delay Rule, if applicable. To the extent
of any conflict between Section 14 and this Section 5, Section 14 will control. For purposes of
this Agreement, the Employee’s employment with the Company shall be deemed to be terminated when
the Employee has a “Separation from Service” within the meaning of Code Section 409A, and
references to termination of employment shall be deemed to refer to a Separation from Service. For
purposes of this Section 5, and in accordance with Treasury Regulation §1.409A-1(h)(1)(ii) (or any
similar or successor provisions), a termination of employment shall be deemed to occur, without
limitation, if the Company and the Employee reasonably anticipate that the level of bona fide
services the Employee will perform after a certain date (whether as an employee or as an
independent contractor) will permanently decrease to less than fifty percent (50%) of the average
level of bona fide services provided in the immediately preceding thirty-six (36) months.

     6. Confidential Information.

          (a) The Employee agrees not to disclose, either while in the employ of the Company, BPI, an
Affiliate or Subsidiary or at any time thereafter, to any person not employed by the Company, BPI
or an Affiliate, or not engaged to render services to the Company, BPI or an Affiliate, except with
the prior written consent of an authorized officer of the Company, BPI or an Affiliate or as
necessary or appropriate for the performance of the Employee’s duties hereunder, any confidential
information obtained by the Employee while in the employ of the Company, including, without
limitation, information relating to any of the inventions, processes, formulae, plans, devices,
compilations of information, research, methods of distribution, suppliers, customers, client
relationships, marketing strategies or trade secrets of the Company, another Subsidiary or
Affiliate, or BPI; provided, however, that this provision shall not preclude the Employee from use
or disclosure of information known generally to the public or of information not considered
confidential by persons engaged in the businesses conducted by the Company, another Subsidiary or
Affiliate, or BPI, or from disclosure required by law or court order. The Employee also agrees that
upon leaving the Company’s employ the Employee will not take with the Employee, without the prior
written consent of an authorized officer of the Company, BPI or an Affiliate, and the Employee will
surrender
to the Company, any record, list, drawing, blueprint, specification or other document or
property of the Company, another Subsidiary or Affiliate, or BPI, together with any copy or
reproduction thereof, mechanical or otherwise, which is of a confidential nature relating to the
Company, another Subsidiary or Affiliate, or BPI, or without limitation, relating to its or their
methods of distribution, suppliers,

- 13 -

 

customers, client relationships, marketing strategies or any description of any formulae or secret
processes, or which was obtained by the Employee or entrusted to the Employee during the course of
the Employee’s employment with the Company.

          (b) The Employee agrees that the Company retains all rights to any and all intellectual or
proprietary properties created by the Employee during the Employee’s employment with the Company,
an Affiliate or Subsidiary, or BPI, including but not limited to all concepts, discoveries and
inventions (whether or not patentable and whether or not reduced to practice); all copyrights
(including all copyrights covering notebooks, presentations, publications, advertising, promotional
and/or educational materials, labels, inserts and packaging materials); all trademarks, trade names
and other similar designations of origin; and all trade secrets, confidential information and
ideas, including but not limited to promotion and marketing plans, customer, supplier and other
lists (collectively “Intellectual Property”). To the extent that any right, title or
interest in or to any Intellectual Property vests in the Employee in a manner contrary to this
paragraph 6(b), the Employee agrees to, and hereby does, irrevocably assign to the Company any and
all such rights, titles, and interests in and to such Intellectual Property without the need for
any further action by the Company. The Employee agrees to assist the Company, its Affiliates and
Subsidiaries, or BPI, including following the Employee’s employment with the Company, an Affiliate
or Subsidiary, or BPI, in the transfer or assignment of such Intellectual Property.

     7. Restrictive Covenants

          (a) Non-Solicitation. Employee covenants and agrees that, during the Employee’s
employment by the Company and during the one (1)-year period immediately following the termination
of the Employee’s employment with the Company for any reason (including, without limitation, a
termination of employment by the Company, BPI or an Affiliate without Cause and a voluntary
termination of employment by the Employee, in either case whether during the term of this
Agreement, at the expiration of the term of this Agreement or at any time thereafter), the Employee
will not solicit or attempt to persuade any employee of the Company, any other Subsidiary or
Affiliate, or BPI (except the Employee’s personal secretary or administrative assistant), or any
other person who performs services for the Company, any other Subsidiary or Affiliate, or BPI at
the time the Employee’s employment terminates or at any time within one (1) year thereafter, to
terminate or reduce or refrain from engaging in his or her employment or other service relationship
with the Company, any other Subsidiary or Affiliate, or BPI; provided, however, that responding to
inquiries from any such employees or other persons that are not initiated by the Employee, and
subsequently hiring such employees or other persons following the termination of their employment
with the Company, the other Subsidiaries and Affiliates, or BPI, shall be permitted.

          (b) Specific Enforcement. Employee recognizes and agrees that, by reason of the
Employee’s knowledge, experience, skill and abilities, the Employee’s services are extraordinary
and unique, that the breach or attempted breach of any of the restrictions set forth above in this
Section 7 will result in immediate and irreparable injury for which the Company will not have an
adequate remedy at law, and that the Company shall be entitled to a decree of specific performance
of those restrictions and to a temporary and permanent injunction enjoining the breach thereof, and
to seek any and all other remedies to which the Company may be

- 14 -

 

entitled, including, without limitation, monetary damages, without posting bond or furnishing
security of any kind.

     (c) Restrictions Reasonable. Employee specifically and expressly represents and
warrants that (i) the Employee has reviewed and agreed to the restrictive covenants contained in
this Section 7 and their contemplated operation after receiving the advice of counsel of the
Employee’s choosing; (ii) the Employee believes, after receiving such advice, that the restrictive
covenants and their contemplated operation are fair and reasonable; (iii) the Employee will not
seek or attempt to seek to have the restrictive covenants declared invalid, and, after receiving
the advice of counsel, expressly waives any right to do so; and (iv) if the full breadth of any
restrictive covenant and/or its contemplated operation shall be held in any fashion to be too
broad, such covenant or its contemplated operation, as the case may be, shall be interpreted in a
manner as broadly in favor of the beneficiary of such covenant as is legally permissible. Employee
recognizes and agrees that the restrictions on the Employee’s activities contained in this Section
7 are required for the reasonable protection of the Company, BPI and their investments; and that
the restriction on the Employee’s activities set forth in paragraph 7(a) will not deprive the
Employee of the ability to earn a livelihood.

     (d) Non-Disparagement. Employee covenants and agrees that, during the one (1)-year
period immediately following the termination of the Employee’s employment with the Company for any
reason (including, without limitation, a termination of employment by the Company, BPI or an
Affiliate without Cause and a voluntary termination of employment by the Employee, in either case
whether during the term of this Agreement, at the expiration of the term of this Agreement or at
any time thereafter), the Employee will not make disparaging remarks about the Company, any other
Subsidiary or Affiliate, BPI, or any of their officers, directors or employees, unless required by
law or reasonably necessary to assert or defend the Employee’s position in a bona fide dispute
arising out of or relating to this Agreement or the breach thereof.

     (e) Effect on Termination Payments. The Employee recognizes and agrees that the
Company shall not be obligated to make any payments provided for in paragraph 5(a) or 5(e) above if
the Employee violates the provisions of Section 6 or paragraph 7(a) or 7(d) above during the one
(1)-year period immediately following the termination for any reason of the Employee’s employment
with the Company. In addition, the Employee
recognizes and agrees that, if the Employee violates such provisions, the Company may recoup
any payments the Company may have theretofore made pursuant to paragraph 5(a) or 5(e) above and any
payments the Company may thereafter make under paragraph 5(a) or 5(e). The foregoing provisions of
this paragraph 7(e) shall be in addition to and not by way of limitation of any other rights and
remedies the Company may have in respect of the violation in question.

     8. Indemnification. To the fullest extent permitted by applicable law, the Company
shall indemnify, defend and hold harmless the Employee from and against any and all claims,
demands, actions, causes of action, liabilities, losses, judgments, fines, costs and expenses
(including reasonable attorneys’ fees and settlement expenses) arising from or relating to the
Employee’s service or status as an officer, director, employee, agent or representative of the
Company, any other Subsidiary or Affiliate, or BPI or in any other capacity in which the Employee
serves or has served at the request of, or for the benefit of, the Company, another Subsidiary or
Affiliate, or BPI. The Company’s obligations under this Section 8 shall be in addition to, and not
in derogation of, any other rights the Employee may have against the

- 15 -

 

Company, any other Subsidiary or Affiliate or BPI to indemnification or advancement of expenses,
whether by statute, contract or otherwise.

     9. Certain Additional Payments by the Company.

          (a) Anything in this Agreement (other than the second sentence of this paragraph 9(a)) to the
contrary notwithstanding, in the event it shall be determined that any payment or distribution by
the Company, another Subsidiary or Affiliate, or BPI, to or for the benefit of the Employee
(whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required under this Section 9)
(a “Payment”), would be subject to the excise tax imposed by Code Section 4999 or any
interest or penalties are incurred by the Employee with respect to such excise tax (such excise
tax, together with any such interest and penalties, are hereinafter collectively referred to as the
“Excise Tax”), then the Employee shall be entitled to receive an additional payment (a
“Gross-Up Payment”) in an amount such that after payment by the Employee of all taxes and
any benefits that result from the deductibility by the Employee of such taxes (including, in each
case, any interest or penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed upon the Payments. However, if it shall be determined that none of the
Payments would be subject to the Excise Tax if the total Payments were reduced in the aggregate by
twenty five thousand dollars ($25,000) or less, then in that event the total Payments shall be
reduced by the smallest amount (in no event to exceed twenty-five thousand dollars ($25,000) in the
aggregate) necessary to ensure that none of the Payments will be subject to the Excise Tax. Cash
Payments shall be reduced first, and in the chronological order in which they are payable to or on
behalf of the Employee.

          (b) Subject to the provisions of paragraph 9(a) above and 9(c) below, all determinations
required to be made under this Section 9, including whether and when a Gross-Up Payment is required
and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, and whether Payments are to be reduced pursuant to the second sentence of paragraph
9(a) above, shall be made by Deloitte & Touche or such other certified public accounting firm as
may be designated by the Employee (the “Accounting Firm”) which shall provide detailed
supporting calculations both to the Company and the Employee within fifteen (15) business days of
the receipt of notice from the Employee that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor
for the individual, entity or group effecting the “change in ownership or effective control” or
“change in the ownership of a substantial portion of assets” (within the meaning of Code Section
280G(b)(2)(A)) that gives rise to the Excise Tax, or in the event that the Accounting Firm for any
reason is unable or unwilling to make the determinations required hereunder, the Employee shall
appoint another nationally recognized accounting firm to make the determinations required hereunder
(which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 9, shall be paid by the Company to the Employee within five
business (5) days of the receipt of the Accounting Firm’s determination. Any determination by the
Accounting Firm shall be binding upon the Company and the Employee. As a result of the uncertainty
in the application of Code

- 16 -

 

Section 4999 at the time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments that will not have been made by the Company should have been made
(an “Underpayment”), consistent with the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant to paragraph 9(c) and the Employee thereafter
is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of
the Underpayment that has occurred and any such Underpayment, along with any penalty and interest
imposed with respect to such Underpayment, shall be promptly paid by the Company to or for the
benefit of the Employee.

          (c) The Employee shall notify the Company in writing of any claim by the Internal Revenue
Service that, if successful, would require either the payment by the Company of the Gross-Up
Payment or the reduction of Payments pursuant to the second sentence of paragraph 9(a) above. Such
notification shall be given as soon as practicable but no later than ten (10) business days after
the Employee is informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The Employee shall not pay
such claim prior to the expiration of the thirty (30)-day period following the date on which the
Employee gives such notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies the Employee in
writing prior to the expiration of such period that it desires to contest such claim, the Employee
shall:

     (i) give the Company any information reasonably requested by the Company relating to such
claim,

     (ii) take such action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the Company,

     (iii) cooperate with the Company in good faith in order effectively to contest such claim, and

     (iv) permit the Company to participate in any proceedings relating to such claim;

     provided, however, that the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such contest and shall
indemnify and hold the Employee harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a result of such representation
and payment of costs and expenses. Without limitation on the foregoing provisions of this
paragraph 9(c), the Company shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and may, at its sole
option, either direct the Employee to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Employee agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial jurisdiction and in one (1) or more
appellate courts, as the Company shall determine, provided, however, that if the Company directs
the Employee to pay such claim and sue for a refund, the Company shall, if

- 17 -

 

permissible under Section 402 of the Sarbanes-Oxley Act of 2002, advance the amount of such payment
to the Employee on an interest-free basis or, if such an advance is not permissible thereunder, pay
the amount of such payment to the Employee as additional compensation, and shall indemnify and hold
the Employee harmless, on an after-tax basis, from any Excise Tax or income tax (including interest
or penalties with respect thereto) imposed with respect to such advance or additional compensation;
and further provided that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Employee with respect to which such contested amount is claimed to be
due is limited solely to such contested amount. Furthermore, the Company’s control of the contest
shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and
the Employee shall be entitled to settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.

          (d) If, after the receipt by the Employee of an amount advanced or paid by the Company
pursuant to paragraph 9(a) or 9(c), the Employee becomes entitled
to receive any refund with respect to such claim, the Employee shall (subject to the Company’s
complying with the requirements of paragraph 9(c)) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Employee of an amount advanced by the Company pursuant to paragraph 9(c),
a determination is made that the Employee shall not be entitled to any refund with respect to such
claim and the Company does not notify the Employee in writing of its intent to contest such denial
of refund prior to the expiration of thirty (30) days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.

          (e) Notwithstanding the foregoing provisions of this Section 9, the determination of the
amount necessary to indemnify the Employee shall be made taking into account all other payments
made to the Employee under any plans, agreements or arrangements aside from this Agreement that are
intended to indemnify the Employee with respect to excise taxes on “excess parachute payments.”
The Company shall reimburse any fees and expenses provided for under this Section 9 on or before
the last day of the Employee’s taxable year following the taxable year in which the fee or expense
was incurred, and in accordance with the other requirements of Code Section 409A and Treasury
Regulation §1.409A-3(i)(1)(v) (or any similar or successor provisions).

     10. Certain Enforcement Matters

     (a) If, after a Change in Control or Potential Change in Control, a dispute arises (i) with
respect to this Agreement or the breach thereof, or (ii) with respect to the Employee’s or the
Company’s rights or obligations under this Agreement, including but not limited to any such dispute
between the Employee and the Company, the Company shall pay or reimburse the Employee for all
reasonable costs and expenses (including court costs, arbitrators’ fees and reasonable attorneys’
fees and disbursements) the Employee incurs in connection with such dispute, including without
limitation costs and expenses the Employee incurs to obtain payment or otherwise enforce the
Employee’s rights under this Agreement, or to obtain payment of costs and expenses due under this
paragraph 10(a). In addition, the Company shall pay the Employee such additional amount (a
“Gross Up”) as will be sufficient, after the Employee pays the Employee’s tax liability
with respect to the Gross Up from the Gross Up, to pay all of the

- 18 -

 

Employee’s federal, state and local tax liability with respect to any costs and expenses that are
paid by the Company pursuant to this paragraph 10(a). The Company shall promptly pay or reimburse
the Employee for all such costs and expenses as the Employee incurs them, upon presentation of
reasonable documentation of such costs and expenses, and shall promptly pay the related Gross Up as
and when it pays or reimburses costs and expenses. The Employee shall not be obligated to repay any
such costs, expenses or Gross Up unless it is finally determined by the trier of fact in a
non-appealable judicial or arbitral decision or ruling (as applicable) that the Employee’s
principal positions with respect to the principal matter(s) in dispute were unreasonable and
pursued in bad faith.
The following provisions apply to any costs and expenses that are to be paid or reimbursed pursuant
to the preceding provisions of this paragraph 10(a) but that are not covered by the exclusion from
the term “deferral of compensation” that is set forth in Treasury Regulation §1.409A-1(b)(11) (or
any similar or successor provisions). Any such reasonable costs and expenses are hereafter referred
to as “Non-Excluded Expenses.” Non-Excluded Expenses may consist of court costs, arbitration costs,
arbitrators’ fees, attorneys’ fees and disbursements (including without limitation disbursements
for transportation, printing, document production, consultants and experts), and transportation,
hotel, food and other out-of-pocket expenses (such as telecommunications charges) the Employee
incurs in preparing for and attending depositions, hearings and meetings with attorneys and
witnesses and in preparing for and giving testimony. Non-Excluded Expenses will be paid or
reimbursed if they are incurred during the ten (10)-year period following a Change in Control.
Non-Excluded Expenses shall be paid or reimbursed on or before the last day of the year following
the year in which the expense was incurred, may not be liquidated or exchanged for another benefit,
and may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in
any other year.

     (b) Any payments to which the Employee may be entitled under this Agreement, including,
without limitation, under Section 5, 8, 9 or 10 hereof, shall be made forthwith on the applicable
date(s) for payment specified in this Agreement. If for any reason the amount of any payment due to
the Employee cannot be finally determined on that date, such amount shall be estimated on a good
faith basis by the Company and the estimated amount shall be paid no later than ten (10) days after
such date. As soon as practicable thereafter, the final determination of the amount due shall be
made and any adjustment requiring a payment to or from the Employee shall be made as promptly as
practicable.

     (c) Any controversy or claim arising, after a Change in Control or Potential Change in
Control, out of or related to this Agreement or the breach thereof, shall be settled by binding
arbitration in the City of New York, in accordance with the employment dispute arbitration rules of
the American Arbitration Association then in effect, and the arbitrator’s decision shall be binding
and final and judgment upon the award rendered may be entered in any court having jurisdiction
thereof, except that the Employee may elect to have any such controversy or claim settled by
judicial determination in lieu of arbitration by bringing a court action, if the Employee is the
plaintiff or, if the Employee is not the plaintiff, demanding such judicial determination within
the time to answer any complaint in any arbitration action that may be commenced.

     11. Change in Control

          (a) The term “Change in Control” as used in this Agreement means a change of control
of Barr Pharmaceuticals, Inc., a Delaware corporation (“BPI”), of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A

- 19 -

 

promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
whether or not BPI is then subject to such reporting requirement; provided that, whether or not any
of the following events would constitute a change of control of such a nature, a Change in Control
shall be deemed to occur for purposes of this Agreement if and when any of the following events
occur:

     (i) any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) (a
“Person”), other than—

     (A) BPI,

     (B) a Subsidiary,

     (C) a trustee or other fiduciary holding securities under an employee benefit plan of BPI or a
Subsidiary, or

     (D) an underwriter engaged in a distribution of BPI stock to the public with BPI’s written consent,

becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of Voting Securities that represent more than thirty percent (30%) of the combined
voting power of the then outstanding Voting Securities. However, if the Person in question is an
institutional investor whose investment in Voting Securities is purely passive when such Person
becomes such a more than thirty percent (30%) beneficial owner of Voting Securities, then such
event (i.e., such Person’s becoming a more than thirty percent (30%) beneficial owner of Voting
Securities) shall not be deemed to constitute a Change in Control under this subparagraph 11(a)(i)
for so long as (and only for so long as) such Person’s investment in Voting Securities remains
purely passive; or

     (ii) the stockholders of BPI approve a merger, consolidation, recapitalization or
reorganization of BPI or a Subsidiary, reverse split of any class of Voting Securities, or an
acquisition of securities or assets by BPI or a Subsidiary, or consummation of any such transaction
if stockholder approval is not obtained, other than (A) any such transaction in which the holders
of outstanding Voting Securities immediately prior to the transaction receive, with respect to such
Voting Securities (or, in the case of a transaction in which BPI is the surviving corporation or a
transaction involving a Subsidiary, retain), voting securities of the surviving or transferee
entity representing more than fifty percent (50%) of the total voting power outstanding immediately
after such transaction, with the voting power of each such continuing holder relative to other such
continuing holders not substantially altered in the transaction, or (B) any such transaction which
would result in BPI or a Related Party beneficially owning more than fifty percent (50%) of the
voting securities of the surviving entity outstanding immediately after such transaction; or

     (iii) the stockholders of BPI approve a plan of complete liquidation of BPI or an agreement for the
sale or disposition by BPI of all or substantially all of BPI’s assets other than any such
transaction which would result in a Related Party owning or acquiring more than fifty percent (50%)
of the assets owned by BPI immediately prior to the transaction; or

- 20 -

 

     (iv) the persons who were members of the Board immediately before a tender or exchange
offer for shares of Common Stock of BPI by any person other than BPI or a Related Party, or
before a merger or consolidation of BPI or a Subsidiary, or contested election of the
Board, or before any combination of such transactions, cease to constitute a majority of
the Board as a result of such transaction or transactions.

          (b) For purposes of this Agreement, including paragraph 11(a) above:

     (i) the term “Related Party” shall mean (A) a Subsidiary, (B) an employee or
group of employees of BPI or any Subsidiary, (C) a trustee or other fiduciary holding
securities under an employee benefit plan of BPI or any Subsidiary, or (D) a corporation or
other form of business entity owned directly or indirectly by the stockholders of BPI in
substantially the same proportion as their ownership of Voting Securities;

     (ii) the term “Subsidiary” means a corporation or other form of business
association of which shares (or other ownership interests) having more than fifty percent
(50%) of the voting power are, or in the future become, owned or controlled, directly or
indirectly, by BPI;

     (iii) the term “Affiliate” means a Person that directly, or indirectly through
one (1) or more intermediaries, controls, or is controlled by, or is under common control
with, BPI. For the purposes of the preceding sentence, the word “control” (by itself and
as used in the terms “controlling”, “controlled by” and “under common control with”) means
the possession, direct or indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise; and

     (iv) the term “Voting Securities” shall mean any securities of BPI that carry
the right to vote generally in the election of directors.

          (c) For purposes of this Agreement, a “Potential Change in Control” means that (i) BPI
or a Subsidiary enters into an agreement, the consummation of which would result in the occurrence
of a Change in Control; or (ii) the Board adopts a resolution to the effect that, for purposes of
this Agreement, a potential change in control has occurred.

          (d) A “Change in Control” as such term is used in this Agreement shall also be deemed
to occur if the Company as defined in this Agreement (including
paragraph 13(d) below) ceases to be an Affiliate.

     12. Severability; Survival

          (a) In the event that any provision of this Agreement shall be determined to be invalid or
unenforceable for any reason, the remaining provisions of this Agreement not so invalid or
unenforceable shall be unaffected thereby and shall remain in full force and effect to the fullest
extent permitted by law; and

          (b) Any provision of this Agreement that may be invalid for any reason
or unenforceable in any jurisdiction shall remain in effect and be enforceable in any jurisdiction
in which such provision shall be valid and enforceable.

- 21 -

 

          (c) The provisions of Sections 6, 7, 8, 9 and 10 and paragraphs 5(e), (f) and (g) of this
Agreement, and any other provision of this Agreement that is intended to apply, operate or have
effect after the expiration or termination of the term of this Agreement, or at a time when the
term of this Agreement may have expired or terminated, shall survive the expiration or termination
of the term of this Agreement for any reason.

     13. General Provisions

          (a) No right or interest to or in any payments to be made under this Agreement shall be
subject to anticipation, alienation, sale, assignment, encumbrance, pledge, charge or hypothecation
or to execution, attachment, levy or similar process, or assignment by operation of law. All
payments to be made by the Company hereunder shall be subject to the withholding of such amounts as
the Company may determine it is required to withhold under the laws or regulations of any
governmental authority, whether foreign, federal, state or local.

          (b) To the extent that the Employee acquires a right to receive payments from the Company
under this Agreement, such right shall be no greater than the right of an unsecured general
creditor of the Company. All payments to be made hereunder shall be paid from the general funds of
the Company and no special or separate fund shall be established and no segregation of assets shall
be made to assure payment of any amount hereunder.

          (c) This Agreement shall be governed by and construed and enforced in accordance with the laws
of the State of New York, without giving effect to the principles of conflicts of laws of that
State.

          (d) This Agreement shall be binding upon and inure to the benefit of the Company, its
successors and permitted assigns, and the Employee, the Employee’s heirs, devisees, distributees
and legal representatives. The Company may assign any or all of its rights and obligations under
this Agreement to any other Subsidiary or Affiliate or to BPI (collectively, “Permitted
Assignees”), and, if any rights or obligations are assigned pursuant to this sentence, the
assignee may thereafter assign any or all of such
rights and obligations to any other Permitted Assignee; provided that (i) the Employee’s title,
authority, duties and responsibilities, reporting level, reporting relationships and office
location immediately before any such assignment are not changed in any respect detrimental to the
Employee in connection with such assignment without the written consent of the Employee (given in a
personal capacity rather than a representative capacity), (ii) no such assignment shall relieve the
Company of any past, present or future payment or benefit obligations hereunder without the express
written consent of the Employee (also given in a personal capacity), and (iii) no assignment may be
made after a Change in Control or Potential Change in Control without the express written consent
of the Employee (also given in a personal capacity). In the event of an assignment in accordance
with this paragraph, the term “Company” as used in this Agreement shall be deemed to refer,
with respect to the period commencing on the effective date of such assignment, to the Permitted
Assignee to which such rights or obligations are assigned and, with respect to any obligations that
are assigned hereunder, to the Company and such Permitted Assignee jointly and severally. The
foregoing provisions of this paragraph are intended to enable the Company to assign its right to
employ the Employee under this Agreement to an Affiliate or BPI but only if (A) such assignment
does not change to the detriment of the Employee his title, authority, duties, responsibilities,
reporting level, reporting relationships, office location or compensation, (B)

- 22 -

 

such assignment does not result in any Affiliate or BPI replacing the Company as an obligor under
this Agreement, and (C) the Employee expressly consents in writing to any assignment that is to
occur after a Change in Control or Potential Change in Control. For the avoidance of doubt, as an
example, in the event of an assignment in accordance with this paragraph, from the effective date
of such assignment the term “Company” as used in subparagraphs 5(d)(ii) and (iii) above
(relating to Good Reason for a change in duties or in office, title or position) shall be deemed to
refer to such Permitted Assignee. Thus, the Employee would not have Good Reason under those
subparagraphs if as a result of the assignment the Employee were to cease to serve as the Executive
Vice President, Global Generic Sales and Marketing of the assignor, the Employee were appointed to
serve as the Executive Vice President, Global Generic Sales and Marketing of the Permitted
Assignee, and the Employee’s authority, duties and responsibilities, reporting level, reporting
relationships and office location were to continue to be those described in paragraph 3(a) above as
in effect immediately before the assignment. The term “BPI” as used in this Agreement
shall include any successor to BPI by merger or operation of law, and the term “Company” as
used in this Agreement shall include any successor to the Company by merger or operation of law.
The rights and obligations of the Employee hereunder are personal to the Employee and may not be
assigned by the Employee; provided that nothing herein shall prevent the Employee from assigning
the right to any amount that may be payable under this Agreement after the death of the Employee by
will or the laws of descent and distribution or to a beneficiary designated by the Employee with
the written consent of the Company, BPI or an Affiliate.

          (e) Any notice or other communication to the Company pursuant to any provision of this
Agreement shall be given in writing and will be deemed to have been delivered:

     (i) when delivered in person to the General Counsel of BPI; or

     (ii) one (1) week after it is deposited in the United States certified or registered mail, postage
prepaid, addressed to the General Counsel of BPI at 225 Summit Avenue, Montvale, New Jersey
07645-1523, or at such other address of which the Company may from time to time give the Employee
written notice in accordance with paragraph 13(f) below.

          (f) Any notice or other communication to the Employee pursuant to any provision of the
Agreement shall be given in writing and will be deemed to have been delivered:

     (i) when delivered to the Employee in person, or

     (ii) one (1) week after it is deposited in the United States certified or registered mail,
postage prepaid, addressed to the Employee at the Employee’s address as it appears on the records
of the Company or at such other address of which the Employee may from time to time give the
Company written notice in accordance with paragraph 13(e) above.

          (g) No provision of this Agreement may be amended, modified or waived unless such amendment,
modification or waiver shall be agreed to in a writing signed by the Employee and an authorized
officer of the Company.

          (h) This instrument contains the entire agreement of the parties relating to the subject
matter of this Agreement and supersedes and replaces all prior agreements and

- 23 -

 

understandings with respect to such subject matter (including any employment agreement between the
Employee and the Company, BPI or an Affiliate that was entered into before the date of this
Agreement), and the parties have made no agreements, representations or warranties relating to the
subject matter of this Agreement which are not set forth herein. If this Agreement supersedes an
employment agreement between the Employee and the Company, BPI or an Affiliate that was entered
into before the date of this Agreement and that, but for the preceding sentence, would remain in
effect after the date of this Agreement, then no provision of this Agreement shall cause an amount
to be paid in 2008 that otherwise would not have been paid in 2008 or postpone a payment beyond
2008 that otherwise would have been paid in 2008 in accordance with the transition rules under Code
Section 409A. Notwithstanding the foregoing, the terms of the expatriate agreement between the
Company and the Employee are hereby incorporated into this Agreement.

     14. Code Section 409A. This Agreement is intended to comply with Code Section 409A and
the interpretative guidance thereunder, including the exceptions for short-term deferrals,
separation pay arrangements, reimbursements, and in-kind distributions, and shall be administered
accordingly. The Agreement shall be construed and interpreted with such intent. Each payment under
Section 5 of this Agreement or any
Company or BPI benefit plan is intended to be treated as one (1) of a series of separate
payments for purposes of Code Section 409A and Treasury Regulation §1.409A-2(b)(2)(iii) (or any
similar or successor provisions). To the extent that payments under the Agreement are subject to
Code Section 409A and are on account of a Separation from Service and the Employee is a “Specified
Employee” (as defined below) as of the date of termination, distributions to the Employee may not
be made before the date that is six (6) months after the date of Separation from Service or, if
earlier, the date of the Employee’s death (the “Six Month Delay Rule”). Payments to which the
Employee would otherwise be entitled during the first six (6) months following the date of
termination (the “Six Month Delay”) will be accumulated and paid on the first day of the seventh
month following the date of termination (or the Employee’s death, if earlier).

          (a) During the Six-Month Delay, the Company will pay to the Employee the applicable payments
set forth in Section 5 above, to the extent any of the following exceptions to the Six-Month Delay
Rule apply:

     (i) the short-term deferral rule of Code Section 409A and Treasury Regulation §1.409A-1(b)(4)
(or any similar or successor provisions) (including with the treatment of each payment as one (1)
of a series of separate payments for purposes of Code Section 409A and Treasury Regulation
§1.409A-2(b)(2)(iii)) (or any similar or successor provisions),

     (ii) payments permitted under the separation pay exception of Code Section 409A and Treasury
Regulation §1.409A-1(b)(9)(iii) (or any similar or successor provisions), and

     (iii) payments permitted under the limited payments exception of Code Section 409A and Treasury
Regulation §1.409A-1(b)(9)(v)(D) (or any similar or successor provisions),

- 24 -

 

provided that the amount paid under this paragraph will count toward, and will not be in addition
to, the total payment amount required to be made to the Employee by the Company under Section 5
above on account of the Separation from Service and any applicable Company or BPI benefit plan. The
Employee’s right to the compensation and benefits provided under Section 5 above is to be treated
as a right to a series of separate payments under Treasury Regulation §1.409A-2(b)(2)(iii) (or any
similar or successor provisions).

          (b) For purposes of this Agreement, the term “Specified Employee” has the meaning given to
that term in Code Section 409A and Treasury Regulation §1.409A-1(i) (or any similar or successor
provisions). The Company’s “specified employee identification date” (as described in Treasury
Regulation §1.409A-1(i)(3) (or any similar or successor provisions)) will be December 31 of each
year, and the Company’s “specified employee effective date” (as described in Treasury Regulation
§1.409A-1(i)(4) (or any similar or successor provisions)) will be April 1 of each succeeding year.

          (c) Following a Change in Control, if any payment made pursuant to
this Agreement shall cause the Employee or the Employee’s beneficiaries to incur any penalty tax
under Code Section 409A (including any interest or penalties imposed with respect to such penalty)
(a “409A Tax”), the Employee or the Employee’s beneficiaries shall be entitled to receive
an additional payment (a “409A Gross-Up Payment”) in an amount such that, after payment by
the Employee of all taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and tax imposed upon the 409A Gross-Up Payment, the Employee retains an amount of
the 409A Gross-Up Payment equal to the 409A Tax imposed as a result of such payment.

          (d) If any payment made pursuant to paragraph 5(e) of this Agreement shall cause the Employee
or the Employee’s beneficiaries to incur a 409A Tax, the Employee or the Employee’s beneficiaries
shall be entitled to receive a 409A Gross-Up Payment in an amount such that, after payment by the
Employee of all taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and tax imposed upon the 409A Gross-Up Payment, the Employee retains an amount of
the 409A Gross-Up Payment equal to the 409A Tax imposed as a result of such payment.

     15. Consent to Certain Amendments. The Employee agrees that the Company may amend this
Agreement to the minimum extent necessary to satisfy the applicable provisions of Code Section 409A
and the Treasury Regulations or other guidance issued thereunder. The Company cannot guarantee
that the payments and benefits that may be paid or provided pursuant to this Agreement will satisfy
all applicable provisions of Code Section 409A.

[This space left intentionally blank.]

- 25 -

 

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

BARR
LABORATORIES, INC., 
a Delaware
corporation

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	/s/  Timothy
B. Sawyer
	 

	 	 	 	 	 	Timothy B. Sawyer
	By:
	 	/s/  Jane F. Greenman	 	 	 	 
	    Its:
	 	 Executive Vice President,

Global Human Resources	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	[SEAL]
	 	 	 	 	 	 
	Attest:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	/s/  Sheldon
Hirt	 	 	 	 
	Secretary	 	 	 	 

- 26 -EX-10.1

Exhibit 10.1

 

RHI ENTERTAINMENT HOLDINGS II, LLC

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY OPERATING AGREEMENT

DATED AS OF JUNE 23, 2008

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	ARTICLE 1 DEFINITIONS
	 	 	1	 
	1.1 Defined Terms
	 	 	1	 
	1.2 Other Definitional Provisions; Interpretation
	 	 	15	 
	 
	 	 	 	 
	ARTICLE 2 FORMATION
	 	 	16	 
	2.1 Formation; Qualification
	 	 	16	 
	2.2 Name
	 	 	16	 
	2.3 Term
	 	 	16	 
	2.4 Headquarters Office
	 	 	17	 
	2.5 Registered Agent and Office
	 	 	17	 
	2.6 Purposes
	 	 	17	 
	2.7 Powers
	 	 	17	 
	 
	 	 	 	 
	ARTICLE 3 MEMBERS AND INTERESTS
	 	 	17	 
	3.1 Members
	 	 	17	 
	3.2 Meeting of Members
	 	 	18	 
	3.3 Certain Duties and Obligations of the Members
	 	 	19	 
	3.4 Units
	 	 	20	 
	3.5 Authorization and Issuance of Additional Units
	 	 	21	 
	3.6 Business Opportunities; Non-Competition
	 	 	22	 
	 
	 	 	 	 
	ARTICLE 4 MANAGEMENT AND OPERATIONS
	 	 	22	 
	4.1 Manager
	 	 	22	 
	4.2 Management Authority
	 	 	22	 
	4.3 Limitations on the Business of the Manager; Approval Rights of KRH
	 	 	23	 
	4.4 Duties
	 	 	27	 
	4.5 Reliance by Third Parties
	 	 	27	 
	4.6 Resignation
	 	 	27	 
	4.7 Removal
	 	 	27	 
	4.8 Vacancies
	 	 	27	 
	4.9 Information Relating to the Company
	 	 	27	 
	4.10 Insurance
	 	 	27	 
	4.11 Transactions Between Company and Manager
	 	 	27	 
	4.12 Officers
	 	 	27	 
	4.13 Management Fee; Reimbursement of Expenses
	 	 	28	 
	4.14 Limitation of Liability; Exculpation
	 	 	28	 
	4.15 Indemnification
	 	 	29	 
	4.16 Title to Assets
	 	 	30	 
	 
	 	 	 	 
	ARTICLE 5 CAPITAL CONTRIBUTIONS; DISTRIBUTIONS
	 	 	30	 
	5.1 Capital Contributions
	 	 	30	 
	5.2 Loans from Members
	 	 	31	 

 

 

	 	 	 	 	 
	 	 	Page	 
	5.3 Loans from Third Parties
	 	 	31	 
	5.4 Distributions
	 	 	31	 
	5.5 Valuation
	 	 	32	 
	 
	 	 	 	 
	ARTICLE 6 BOOKS AND RECORDS; TAX; CAPITAL ACCOUNTS; ALLOCATIONS
	 	 	33	 
	6.1 General Accounting Matters
	 	 	33	 
	6.2 Certain Tax Matters
	 	 	34	 
	6.3 Allocations
	 	 	34	 
	6.4 Allocations of Net Income and Net Losses for Federal Income Tax Purposes
	 	 	36	 
	6.5 Elections
	 	 	36	 
	6.6 Tax Year
	 	 	37	 
	6.7 Withholding Requirements
	 	 	37	 
	6.8 Reports to Members
	 	 	37	 
	6.9 Auditors
	 	 	38	 
	6.10 Transfers During Year
	 	 	38	 
	6.11 Code Section 754 Election
	 	 	38	 
	 
	 	 	 	 
	ARTICLE 7 DISSOLUTION
	 	 	38	 
	7.1 Dissolution
	 	 	38	 
	7.2 Winding-Up
	 	 	39	 
	7.3 Final Distribution
	 	 	39	 
	 
	 	 	 	 
	ARTICLE 8 TRANSFER; SUBSTITUTION; ADJUSTMENTS
	 	 	40	 
	8.1 Restrictions on Transfer
	 	 	40	 
	8.2 Substituted Members
	 	 	41	 
	8.3 Effect of Void Transfers
	 	 	42	 
	 
	 	 	 	 
	ARTICLE 9 EXCHANGE RIGHT OF MEMBER
	 	 	42	 
	9.1 Exchange Right of a Member
	 	 	42	 
	9.2 Effect of Exercise of Exchange Right
	 	 	43	 
	 
	 	 	 	 
	ARTICLE 10 MISCELLANEOUS
	 	 	44	 
	10.1 Agreement to Cooperate; Further Assurances
	 	 	44	 
	10.2 Amendments
	 	 	44	 
	10.3 Confidentiality
	 	 	44	 
	10.4 Injunctive Relief
	 	 	45	 
	10.5 Successors, Assigns and Transferees
	 	 	45	 
	10.6 Notices
	 	 	45	 
	10.7 Integration
	 	 	46	 
	10.8 Severability
	 	 	46	 
	10.9 Counterparts
	 	 	46	 
	10.10 Governing Law; Submission to Jurisdiction
	 	 	46	 
	 
	 	 	 	 
	Exhibit A Members and Units
	 	 	1	 

ii

 

	 	 	 	 	 
	 	 	Page	 
	Exhibit B Form of Membership Unit Certificate
	 	 	1	 

iii

 

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY OPERATING AGREEMENT

OF

RHI ENTERTAINMENT HOLDINGS II, LLC

     This Amended and Restated Limited Liability Company Operating Agreement (this
“Agreement”) of RHI Entertainment Holdings II, LLC, a Delaware limited liability company
(the “Company”), is made and entered into as of June 23, 2008, by and among each of the
parties hereto and amends and restates in full that certain Limited Liability Company Agreement of
RHI Entertainment Holdings II, LLC, dated as of September 6, 2007.

RECITALS

     A. WHEREAS, On September 6, 2007, RHI Entertainment, Inc. (“RHI Inc.”), a Delaware
corporation, formed the Company. RHI Inc. became the sole Member and Manager of the Company.

     B. WHEREAS, On June 18, 2008, RHI Entertainment Holdings, LLC changed its name to KRH
Investments LLC (“KRH”).

     C. WHEREAS, The Company, RHI Inc. and KRH have entered into a Membership Unit Subscription
Agreement, dated as of June 23, 2008 (the “Subscription Agreement”), pursuant to which the
Company has agreed to issue Membership Units to RHI Inc. in exchange for the proceeds received from
RHI Inc.’s Initial Public Offering and to issue Membership Units to KRH in exchange for the
contribution of its interests in RHI Entertainment LLC, a Delaware limited liability company.

     D. WHEREAS, The respective board of directors of each of RHI Inc. and KRH have approved this
Agreement.

          NOW, THEREFORE, The Members hereby duly adopt this Agreement pursuant to and in accordance
with the Delaware Limited Liability Company Act (6 Del. C. § 18-101 et seq.), as amended from time
to time (the “LLC Act”), and hereby agree as follows:

ARTICLE 1

DEFINITIONS

     1.1 Defined Terms. The following terms shall have the following meanings in this
Agreement:

          “Additional Contribution Amount” has the meaning set forth in Section 3.4(d).

          “Additional Equity Issuance” means the issuance by RHI Inc. of any Equity Interests in
RHI Inc.

1

 

          “Adjusted Capital Account Balance” means, with respect to any Member, the balance in
such Member’s Capital Account after giving effect to the following adjustments: (a) debit to such
Capital Account of the items described in Section l.704-1(b)(2)(ii)(d)(4), (5) and (6) of the
Treasury Regulations, and (b) credit to such Capital Account, such Member’s share of Company
Minimum Gain or Member Non-recourse Debt Minimum Gain or of any amount which such Member would be
required to restore under this Agreement or otherwise. The foregoing definition of Adjusted
Capital Account Balance is intended to comply with the provisions of Section l.704-1(b)(2)(ii)(d)
of the Treasury Regulations and shall be interpreted consistently therewith.

          “Affiliate” means with respect to any Person, any other Person that directly or
indirectly, through one or more intermediaries, Controls, is Controlled by or is under common
Control with such Person. Notwithstanding the foregoing, (i) no Member shall be deemed an
Affiliate of the Company, (ii) the Company shall not be deemed an Affiliate of any Member, and
(iii) no partner or member of KRH, or any of such partner or member’s Affiliates (other than KRH
and its Subsidiaries) shall be deemed an Affiliate of any Member or the Company or of RHI Inc.

          “Amendment No. 1 to the Credit Agreement” means Amendment No. 1, dated as of October
12, 2007, to the Credit Agreement.

          “Amendment No. 2 to the Credit Agreement” means Amendment No. 2, dated as of May 29,
2008, to the Credit Agreement, or with Majority Member Vote, any other agreement that defines “Tax
Distribution”.

          “Agreement” has the meaning set forth in the preamble of this Agreement, as the same
may be amended, supplemented or otherwise modified from time to time.

          “Annual Business Plan” means the annual business plan which sets out the strategy and
action plans for the Company. This business plan may include any of the following: financial
performance and forecasts, an outline of changes to be made to the Company, potential changes to
the market, customers and competition, operating budgets, capital budgets, capital plan, objectives
and goals for the year (including the planned production slate for the year), key performance
indicators, issues or problems, any operational changes, and any changes to management and
personnel.

          “Applicable Tax Rate” means (i) 41% or (ii) if, in the good faith determination of the
Manager, the highest combined federal, state and local marginal rate applicable to corporate or
individual taxpayers residing in New York City, New York, taking into account the deductibility of
state and local income taxes for federal income tax purposes is increased, such appropriate higher
rate, as determined by the Manager.

          “Approved Plan” means the Equity Incentive Plan in effect on the date of this
Agreement.

          “Available Cash” means, at any given time, the amount of cash available for
distributions determined by the Manager at such time after taking into account amounts believed by
the Manager to be required to pay the operating and capital requirements of the business,

2

 

reserves of the business and after making adequate provision for Tax Distribution Amounts due
or anticipated to become due.

          “Beneficial Owner” or “beneficial owner” (including, with correlative meanings, the
terms “beneficial ownership” and “beneficially owns”) has the meaning attributed to it in Rules
13d-3 and 13d-5 under the Exchange Act, whether or not applicable, except that a Person shall be
deemed to have Beneficial Ownership of all Units or Shares that any such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage of time or is
exercisable only upon the occurrence of a subsequent condition; provided, further,
that the provisions of Section 4.3 of this Agreement will also apply in calculating the beneficial
ownership of Membership Units by KRH or a Permitted Transferee.

          “Board” or “Board of Directors” means the board of directors of the Manager,
or the equivalent governing body if the Manager does not have a board of directors.

          “Business Day” means a day other than a Saturday, Sunday, federal holiday or other day
on which commercial banks in New York, New York are authorized or required by law to close.

          “Capital Account” means the Capital Account maintained for each Member on the
Company’s books and records in accordance with the following provisions:

(1) To each Member’s Capital Account there shall be added (a) such Member’s Capital
Contributions, (b) such Member’s allocable share of Net Income and any items in the nature
of income or gain that are specially allocated to such Member pursuant to Article 6 or other
provisions of this Agreement and (c) the amount of any Company liabilities assumed by such
Member or which are secured by any property distributed to such Member.

(2) From each Member’s Capital Account there shall be subtracted (a) the amount of (i) cash
and (ii) the Gross Asset Value of any Company Assets (other than cash) distributed to such
Member (other than any payment of principal and/or interest to such Member pursuant to the
terms of a loan made by the Member to the Company) pursuant to any provision of this
Agreement, (b) such Member’s allocable share of Net Losses and any other items in the nature
of expenses or losses that are specially allocated to such Member pursuant to Article 6 or
other provisions of this Agreement and (c) liabilities of such Member assumed by the Company
or which are secured by any property contributed by such Member to the Company.

(3) In the event any Interest in the Company is Transferred in accordance with the terms of
this Agreement, the transferee shall succeed to the Capital Account of the transferor to the
extent it relates to the transferred Interest.

(4) In determining the amount of any liability for purposes of Paragraphs 1 and 2 of this
definition, there shall be taken into account Code Section 752(c) and any other applicable
provisions of the Code.

3

 

(5) The foregoing provisions and the other provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Sections 1.704-1(b) and 1.704-2
of the Treasury Regulations and shall be interpreted and applied in a manner consistent with
such sections of the Treasury Regulations. In the event that the Manager shall determine
that it is prudent to modify the manner in which the Capital Accounts, or any additions or
subtractions thereto, are computed in order to comply with such sections of the Treasury
Regulations, the Manager may make such modification; provided, however, that it is not
likely to have a material effect on the amounts distributable to any Member pursuant to
Article 7 hereof upon the dissolution of the Company. The Manager shall also make (a) any
adjustments that are necessary or appropriate to maintain equality between the Capital
Accounts of the Members and the amount of Company capital reflected on the Company’s balance
sheet, as computed for book purposes, in accordance with Section 1.704-1(b)(2)(iv)(q) of the
Treasury Regulations, and (b) any appropriate modifications in the event that unanticipated
events might otherwise cause this Agreement not to comply with Section 1.704-1(b) or 1.704-2
of the Treasury Regulations.

          “Capital Contribution” means the total amount of cash and the agreed fair market value
(net of all liabilities secured by such assets that the Company is considered to assume or take
subject to under Section 752 of the Code) of all other assets contributed to the Company by a
Member.

          “Cash Amount” means, with respect to any Membership Units subject to an Exchange
pursuant to Article 9 hereof,, an amount of cash equal to the Deemed Partnership Interest Value
attributable to such Membership Units.

          “Cash Equivalents” means any of the following denominated in U.S. Dollars:
(i) marketable direct obligations issued or unconditionally guaranteed by the government of the
United States or issued by any agency thereof and backed by the full faith and credit of the United
States maturing within one year from the date of acquisition thereof; (ii) marketable direct
obligations issued by any state of the United States or any political subdivision of any such state
or any public instrumentality thereof maturing within one year from the date of acquisition thereof
and, at the time of acquisition, having the highest rating obtainable from any of Standard & Poor’s
Corporation or any successor rating agency (“S&P”) or Moody’s Investors Service, Inc. or
any successor rating agency (“Moody’s”); (iii) commercial paper maturing not more than one
year from the date of issuance thereof and, at the time of acquisition, having the highest rating
obtainable from either S&P or Moody’s; (iv) time deposits, certificates of deposit or bankers’
acceptances, maturing not more than one year from the date of issuance thereof, of any commercial
bank or trust company having capital and surplus in excess of $500,000,000 and the commercial paper
of the holding company of which has the highest rating obtainable from either S&P or Moody’s; or
(v) investments in money market funds complying with the risk limiting conditions of Rule 2a-7 or
any successor rule of the Securities and Exchange Commission under the Investment Company Act of
1940, in each case provided in clauses (i), (ii), (iii) and (iv) above, maturing within one year
from the date of acquisition.

          “Certificate” has the meaning set forth in Section 2.1(a) of this Agreement.

4

 

          “Certificate of Incorporation” means that certain Amended and Restated Certificate of
Incorporation of RHI Inc., dated as of June 23, 2008.

          “Change of Control” means the occurrence of any of the following events (whether or
not approved by the Board of Directors of RHI Inc.):

     (i) any Person or Group is or becomes the Beneficial Owner (other than a
Permitted Holder), directly or indirectly, of RHI Inc.’s voting stock representing
50% or more of the total voting power of all outstanding voting stock of RHI Inc.;

     (ii) RHI Inc. consolidates with, or merges with or into, another entity or
Person, or RHI Inc. sells, assigns, conveys, transfers, leases or otherwise disposes
of all or substantially all of its assets to any Person or entity, other than any
such transaction where immediately after such transaction the shareholders of the
RHI Inc. immediately prior to such transaction, beneficially own or owns (as so
determined), directly or indirectly, voting stock representing a majority of the
total voting power of the outstanding voting stock of the surviving entity or
transferee Person;

     (iii) during any consecutive one-year period, the Continuing Directors cease
for any reason to constitute a majority of the board of directors of RHI Inc.; or

     (iv) the adoption of a plan of liquidation or dissolution of RHI Inc.

          “Code” means the Internal Revenue Code of 1986, as amended from time to time, or any
successor statute. Any reference herein to a specific provision of the Code shall mean, where
appropriate, the corresponding provision in any successor statute.

          “Company” has the meaning set forth in the preamble of this Agreement.

          “Company Assets” means all interests in real and personal property owned by the
Company from time to time (including the assets of all disregarded entities owned by the Company),
and shall include both tangible and intangible property (including cash).

          “Company Minimum Gain” has the meaning set forth in Sections 1.704-2(b)(2) and
1.704-2(d) of the Treasury Regulations for the phrase “partnership minimum gain.”

          “Confidential Information” has the meaning set forth in Section 10.3(a) of this
Agreement.

          “Continuing Director” means, as of any date of determination, any member of the Board
of Directors of the Company who was (1) a member of such Board of Directors on the date of the
completion of the Initial Public Offering, (ii) nominated for election or elected to such Board of
Directors with, or whose election to such Board of Directors was approved by the affirmative vote
of, a majority of Continuing Directors who were members of such Board of

5

 

Directors at the time of such nomination or election or (iii) nominated by KRH pursuant to the
Director Designation Agreement.

          “Control” (including the terms “Controlled by” and “under common Control with”), with
respect to the relationship between or among two or more Persons, means the possession, directly or
indirectly, of the power to direct or cause the direction of the affairs or management of a Person,
whether through the ownership of voting Equity Interests, as trustee or executor, by contract or
otherwise.

          “Credit Agreement” means the Credit, Security, Guaranty and Pledge Agreement, dated as
of January 12, 2006, as amended and restated as of April 13, 2007 and as amended by Amendment No. 1
thereto, dated as of October 12, 2007, as further amended by Amendment No. 2 thereto, dated as of
May 29, 2008, and as it may be thereafter amended, and, with Majority Member Vote, any replacement,
additional or supplemental credit facility, loan agreement, indenture or debt obligation.

          “Deemed Partnership Interest Value” means, as of any date, the Deemed Value of the
Membership Interests multiplied by the applicable Percentage Interest.

          “Deemed Value of the Membership Interests” means, as of any date, (i) the total number
of outstanding Membership Units beneficially owned by the Manager as of the close of business on
such date multiplied by the RHI Inc. Market Price determined as of such date of a Share, as
adjusted for stock dividends and distributions, stock splits and subdivisions, reverse stock splits
and combinations, distribution of warrants or options, distributions of evidences of indebtedness
and investments (ii) divided by the Percentage Interest of the Manager.

          “Depreciation” means, for each Fiscal Year or other period, an amount equal to the
federal income tax depreciation, amortization or other cost recovery deduction allowable with
respect to an asset for such year or other period, except that if the Gross Asset Value of an asset
differs from its adjusted basis for federal income tax purposes at the beginning of such year or
other period, Depreciation shall be an amount that bears the same ratio to such beginning Gross
Asset Value as the federal income tax depreciation, amortization or other cost recovery deduction
for such year or other period bears to such beginning adjusted tax basis; provided, however, that
if the federal income tax depreciation, amortization or other cost recovery deduction for such year
or other period is zero, Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the Manager.

          “Dilutive Issuance” means any Additional Equity Issuance by RHI Inc. other than (i)
an Additional Equity Issuance where the total cash consideration received per Share (or to be
received) by RHI Inc. upon issuance of Shares in such Additional Equity Issuance (or upon
conversion or exercise of securities, options, warrants or rights issued in such Additional Equity
Issuance) plus any applicable underwriters’ or brokers’ discount or commission is not less than the
RHI Inc. Market Price as of a date not more than 5 trading days prior to the date of the Additional
Equity Issuance, (ii) an underwritten offering not primarily directed to existing shareholders of
RHI Inc. or their Affiliates where the price was determined by an investment banking firm of
international repute, (iii) an Additional Equity Issuance resulting from the

6

 

exercise or conversion of securities, options, warrants or rights where the issuance of such
securities, options, warrants or rights constituted an earlier Additional Equity Issuance that was
not a Dilutive Issuance, (iv) any Additional Equity Issuance approved by KRH, or (v) any Additional
Equity Issuance pursuant to the Equity Incentive Plan.

          “Director Designation Agreement” means the Director Designation Agreement, dated as of
June 23, 2008, by and between RHI Inc. and KRH, as the same may be amended, supplemented or
otherwise modified from time to time.

          “Discount” has the meaning set forth in Section 4.13.

          “Economic Interest” means a Person’s right to share in the Net Income, Net Losses, or
similar items of, and to receive distributions from, the Company, but does not include any other
rights of a Member including, without limitation, the right to vote or to participate in the
management of the Company or, except as specifically provided in this Agreement or required under
the LLC Act, any right to information concerning the business and affairs of the Company.

          “Equity Incentive Plan” means the RHI Inc. 2008 Equity Incentive Plan, as the same may
be amended, supplemented, replaced, increased or otherwise modified from time to time.

          “Equity Interests” means, with respect to any Person, any and all shares, interests,
participations or other equivalents (however designated, whether voting or non-voting) of capital
stock, partnership interests (whether general or limited), limited liability company interests or
equivalent ownership interests in or issued by, or interests, participations or other equivalents
to share in the revenues or earnings of (except as provided in any service agreement that includes
a revenue sharing component entered into in the ordinary course of business), such Person or
securities convertible into, or exchangeable or exercisable for, such shares, interests,
participations or other equivalents and options, warrants or other rights to acquire such shares,
interests, participations or other equivalents; provided that discounts and rebates granted
in the ordinary course of business shall not in any event constitute an Equity Interest.

          “ERISA” means the Employee Retirement Income Security Act of 1974, as amended and the
rules and regulations promulgated thereunder, as the same may be amended from time to time.

          “Excess Non-recourse Liability” has the meaning set forth in Section 1.752-3(a)(3) of
the Treasury Regulations

          “Exchange” means the right to exchange Membership Units for Shares and/or cash
pursuant to Article 9 hereof.

          “Exchange Act” means the Securities and Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder, as the same may be amended from time to time.

          “Exchange Date” means the date on which an Exchange is effected.

7

 

          “Exchange Right” has the meaning set forth in Section 9.1(a) of this Agreement.

          “Exchanged Units” has the meaning set forth in Section 9.1(a) of this Agreement.

          “Exchanging Member” has the meaning set forth in Section 9.1(a) of this Agreement.

          “Exchange Date” has the meaning set forth in Section 9.1(a) of this Agreement.

          “Exchange Notice” has the meaning set forth in Section 9.1(a) of this Agreement.

          “Fiscal Period” means each fiscal quarter which shall consist of three Fiscal Months.

          “Fiscal Year” means the fiscal year of the Company ending on December 31st of each
year.

          “GAAP” means generally accepted accounting principles in the United States in effect
as of the relevant date on which GAAP is to be determined.

          “Governmental Authority” means any nation or government, any state or other political
subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.

          “Gross Asset Value” means, with respect to any asset of the Company, the asset’s
adjusted basis for federal income tax purposes, except as follows:

(1) The initial Gross Asset Value of any asset contributed by a Member to the Company shall
be the gross fair market value of such asset, as determined by the Manager and the
contributing Member.

(2) The Gross Asset Values of all Company Assets immediately prior to the occurrence of any
event described in Subparagraphs (a), (b), (c) or (d) of this Paragraph (2) shall be
adjusted to equal their respective gross fair market values, as determined by the Manager
using such reasonable method of valuation as it may adopt:

(a) the acquisition of an additional Interest in the Company by a new or existing
Member, if the Manager reasonably determines that such adjustment is necessary or
appropriate to reflect the relative Economic Interests of the Members in the
Company;

(b) the distribution by the Company to a Member of more than a de minimis amount of
Company Assets as consideration for an Interest in the Company, if the Manager
reasonably determines that such adjustment is necessary or appropriate to reflect
the relative Economic Interests of the Members in the Company;

8

 

(c) the liquidation of the Company within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Treasury Regulations; and

(d) at such other times as the Manager shall reasonably determine necessary or
advisable in order to comply with Sections 1.704-1(b) and 1.704-2 of the Treasury
Regulations.

(3) The Gross Asset Value of any Company Asset distributed to a Member shall be the gross
fair market value of such asset on the date of distribution as determined by the Manager.

(4) The Gross Asset Values of Company Assets shall be increased (or decreased) to reflect
any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code
Section 743(b), but only to the extent that such adjustments are taken into account in
determining Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Treasury
Regulations; provided, however, that Gross Asset Values shall not be adjusted pursuant to
this Paragraph (4) to the extent that the Manager reasonably determines that an adjustment
pursuant to Paragraph (2) above is necessary or appropriate in connection with a transaction
that would otherwise result in an adjustment pursuant to this Paragraph (4).

(5) If the Gross Asset Value of a Company Asset has been determined or adjusted pursuant to
Paragraph (1), (2) or (4) of this definition, such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such Company Asset for
purposes of computing Net Income and Net Losses.

          “Group” has the meaning set forth in Section 13(d)(3) and Rule 13d-5 of the Exchange
Act.

          “Indebtedness” means, with respect to any Person, at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments issued by such Person, (iii) all
obligations of such Person to pay the deferred purchase price for property or services, except
trade accounts payable arising in the ordinary course of business and consistent with past
practice, (iv) all reimbursement obligations of such Person in respect of letters of credit or
other similar instruments, (v) all Indebtedness of others secured by any lien, encumbrance or
mortgage on any asset of such Person, and (vi) all Indebtedness of others guaranteed (whether by
virtue of partnership arrangements, by agreement to keep well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain a minimum net worth, financial ratio or
similar requirements, or otherwise) by such Person.

          “Indemnitee” has the meaning set forth in Section 4.14(a) of this Agreement.

          “Independent Directors” means any director of RHI Inc. that, if the RHI Inc. common
stock is traded on the NASDAQ Global Market, satisfies the definition of an “independent director”
set forth in the applicable rules in the Marketplace Rules of the NASDAQ Global Market, Inc., as
such rules may be amended from time to time, or, if the RHI Inc.

9

 

common stock is then traded on a different exchange, such term shall mean any director of RHI
Inc. that satisfies the definition of independent director according to the rules of such exchange.

          “Initial Public Offering” means the initial public offering of the Shares of common
stock of RHI Inc. registered under the Securities Act of 1933, as amended.

          “Intellectual Property” means all U.S., state and foreign intellectual property,
including but not limited to all (i) (a) patents, inventions, discoveries, processes and designs;
(b) copyrights and works of authorship in any media; (c) trademarks, service marks, trade names,
trade dress and other source indicators and the goodwill of the business symbolized thereby;
(d) software; and (e) trade secrets and other confidential or proprietary documents, ideas, plans
and information; (ii) registrations, applications and recordings related thereto; (iii) rights to
obtain renewals, extensions, continuations or similar legal protections related thereto; and
(iv) rights to bring an action at law or in equity for the infringement or other impairment thereof

          “Interest” means a limited liability company interest in the Company as provided in
this Agreement and under the LLC Act and, in addition, any and all rights and benefits to which a
Member is entitled under this Agreement, together with all obligations of such Person to comply
with, and rights to benefit from, the terms and provisions of this Agreement.

          “Joint Venture Agreements” means, collectively, this Agreement, the Registration
Rights Agreement, the Director Designation Agreement, the Subscription Agreement and the Tax
Receivable Agreement.

          “Joint Venture Purposes” has the meaning set forth in Section 2.6(c) of this
Agreement.

          “KRH” means KRH Investments LLC (formerly RHI Entertainment Holdings, LLC), a Delaware
limited liability company, and a non-managing member of the Company.

          “KRH Approval” means the approval of KRH (which may be given or withheld in KRH’s sole
discretion).

          “KRH Approval Rights” has the meaning set forth in Section 4.3 of this Agreement.

          “Liabilities” has the meaning set forth in Section 4.15(a) of this Agreement.

          “Liquidator” has the meaning set forth in Section 7.2 of this Agreement.

          “LLC Act” has the meaning set forth in the Recitals.

          “Majority Member Vote” means the affirmative vote of the Members holding a majority of
the Membership Units in the Company plus the affirmative vote of KRH (only if KRH does not hold the
majority of Membership Units).

          “Manager” has the meaning set forth in Section 4.1 of this Agreement.

10

 

          “Member” means each Person that becomes a member, as contemplated in this Agreement,
of the Company in accordance with the provisions of this Agreement and has not ceased to be a
Member as provided in Section 3.1(d) of this Agreement, and each of such Member’s transferees, if
applicable.

          “Member Information” has the meaning set forth in Section 10.3(c) of this Agreement.

          “Member Non-recourse Debt” has the meaning set forth in Section 1.704-2(b)(4) of the
Treasury Regulations for the phrase “partner nonrecourse debt.”

          “Member Non-recourse Debt Minimum Gain” means an amount, with respect to each Member
Non-recourse Debt, equal to the Company Minimum Gain that would result if such Member Non-recourse
Debt were treated as a Non-recourse Debt, determined in accordance with Section 1.704-2(i) of the
Treasury Regulations with respect to “partner minimum gain.”

          “Membership Unit” means a Unit having the rights described in this Agreement.

          “Membership Unit Purchase” has the meaning set forth in Section 3.4 of this Agreement.

          “Net Income” or “Net Losses” means, for each Fiscal Year or other period, an
amount equal to the Company’s taxable income or loss for such year or period determined in
accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction
required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:

(1) Any income of the Company that is exempt from federal income tax and not otherwise taken
into account in computing Net Income or Net Losses pursuant to this definition shall be
added to such taxable income or loss;

(2) Any expenditure of the Company described in Code Section 705(a)(2)(B) or treated as Code
Section 705(a)(2)(B) expenditures pursuant to Section 1.704-1(b)(2)(iv)(i) of the Treasury
Regulations, and not otherwise taken into account in computing Net Income or Net Losses
pursuant to this definition, shall be subtracted from such taxable income or loss;

(3) Gain or loss resulting from any disposition of Company Assets where such gain or loss is
recognized for federal income tax purposes shall be computed by reference to the Gross Asset
Value of the Company Assets disposed of, notwithstanding that the adjusted tax basis of such
Company Assets differs from its Gross Asset Value;

(4) In lieu of the depreciation, amortization and other cost recovery deductions taken into
account in computing such taxable income or loss, there shall be taken into account
Depreciation for such Fiscal Year or other period;

11

 

(5) To the extent an adjustment to the adjusted tax basis of any asset included in Company
Assets pursuant to Code Section 734(b) or Code Section 743(b) is required pursuant to
Section 1.704-1(b)(2)(iv)(m)(4) of the Treasury Regulations to be taken into account in
determining Capital Accounts as a result of a distribution other than in liquidation of a
Member’s Interest, the amount of such adjustment shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis
of the asset) from the disposition of the asset and shall be taken into account for the
purposes of computing Net Income and Net Losses;

(6) If the Gross Asset Value of any Company Asset is adjusted in accordance with Paragraph
(2) or (3) of the definition of Gross Asset Value, the amount of such adjustment shall be
taken into account in the Fiscal Year of such adjustment as gain or loss from the
disposition of such asset for purposes of computing Net Income or Net Losses; and

(7) Notwithstanding any other provision of this definition, any items of Company income,
gain, loss or deduction that are specially allocated pursuant to Article 6 hereof shall not
be taken into account in computing Net Income or Net Losses. The amount of the items of
Company income, gain, loss or deduction available to be specially allocated pursuant to
Article 6 hereof shall be determined pursuant to rules analogous to those set forth in this
definition.

          “Nominating Committee” means the nominating committee of the Board or any
committee of the Board authorized to perform the function of nominating directors for the
Board of RHI Inc.

          “Non-recourse Debt” means any Company liability to the extent that no Member or
related person bears the economic risk of loss for such liability under Section 1.752-2 of the
Treasury Regulations.

          “Option Notice” has the meaning set forth in Section 9.1(b) of this Agreement.

          “Options” means options, issued under the RHI Inc. 2008 Equity Incentive Plan, to
acquire Shares or other equity equivalents of RHI Inc.

          “Original Agreement” has the meaning set forth in the Recitals of this Agreement.

          “Outside Counsel” means a law firm selected by the Manager and reasonably acceptable
to KRH.

          “Over-Allotment Option” has the meaning set forth in Section 3.4(b) of this Agreement.

          “Percentage Interest” means, with respect to any Member at any time, the percentage
represented by a fraction, the numerator of which is the number of Membership Units owned by such
Member, and the denominator of which is the aggregate number of Membership

12

 

Units then outstanding,
as shall be adjusted in accordance with Sections 3.4(d), 3.5 and 9.1, and as otherwise provided in
this Agreement.

          “Permitted Transferee” means (i) in the case of any Member (other than RHI Inc.) and
any Permitted Transferee of any Member (other than RHI Inc.), an Affiliate of such Member or
Permitted Transferee, or (ii) in the case of KRH and any Permitted Transferee of KRH, a
non-Affiliate of KRH or Permitted Transferee if more than 50% of the non-Affiliate’s general voting
power is owned directly or indirectly through one or more entities that are the same entities that
own 50% or more of the general voting power of the Ultimate Parent of KRH or if the Ultimate Parent
of KRH, directly or indirectly through Subsidiaries, manages the affairs or investments of such
non-Affiliate. RHI Inc. shall not have any Permitted Transferees.

          “Person” means any individual, corporation, limited liability company, partnership,
trust, joint stock company, business trust, unincorporated association, joint venture, Governmental
Authority or other entity or organization of any nature whatsoever or any Group of two or more of
the foregoing.

          “Proprietary Information” means all Intellectual Property, including but not limited
to information of a technological or business nature, whether written or oral and if written,
however produced or reproduced, received by or otherwise disclosed to the receiving party from or
by the disclosing party that is marked proprietary or confidential or bears a marking of like
import, or that the disclosing party states is to be considered proprietary or confidential, or
that a reasonable person would consider proprietary or confidential under the circumstances of its
disclosure.

          “Recapitalization” has the meaning set forth in Section 3.4(d).

          “Registration Rights Agreement” means that certain registration rights agreement,
dated as of June 23, 2008, by and between KRH and RHI Inc.

          “Regulatory Allocations” has the meaning set forth in Section 6.4(c) of this
Agreement.

          “Retraction Notice” has the meaning set forth in Section 9.1(b) of this Agreement.

          “Regulation S-K” means Regulation S-K promulgated under the Exchange Act, as may be
amended from time to time, and including any amendments or successor provisions.

          “RHI Inc.” has the meaning set forth in the Recitals of this Agreement.

          “RHI Inc. Market Price” means with respect to Shares, the per share closing price of
the Shares on the applicable date (which shall be the trading day immediately prior to the Exchange
Date with respect to an Exchange) on the national securities exchange or interdealer

13

 

quotation
system on which such Shares are then traded or listed, as reported by the
Wall Street Journal; provided that if the closing price is not reported by the Wall Street Journal
for the applicable date, then the Market Value shall mean the closing price of the Shares on the
Business Day immediately preceding such date on the national securities exchange or interdealer
quotation system on which such Shares are then traded or listed, as reported by the Wall Street
Journal; provided further, that if the Shares are not then listed on a national securities exchange
or interdealer quotation system, “RHI Inc. Market Value” shall mean the fair market value of the
Shares, as determined by KRH in good faith.

          “Section 704(c) Property” means any asset of the Company if the Carrying Value of such
asset differs from its adjusted tax basis.

          “Shares” means the shares of common stock, par value $ 0.01 per share, of RHI Inc.

          “Subscription Agreement” has the meaning set forth in the Recitals of this Agreement.

          “Subsidiary” means, with respect to any Person, (i) a corporation a majority of whose
capital stock with the general voting power under ordinary circumstances to vote in the election of
directors of such corporation (irrespective of whether or not, at the time, any other class or
classes of securities shall have, or might have, voting power by reason of the happening of any
contingency) is at the time beneficially owned by such Person, by one or more Subsidiaries of such
Person or by such Person and one or more Subsidiaries thereof or (ii) any other Person (other than
a corporation), including a joint venture, a general or limited partnership or a limited liability
company, in which such Person, one or more Subsidiaries thereof or such Person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination thereof, beneficially
own at least a majority ownership interest entitled to vote in the election of directors, managers
or trustees thereof (or other Persons performing such functions) or act as a general partner or
managing member of such other Person.

          “Tax Distribution Amount” means, with respect to any period and with respect to any
Member, the product of (i) the Applicable Tax Rate, times (ii) the estimated or actual taxable
income of the Company, as determined for federal income tax purposes (and without regard for any
adjustments pursuant to Section 754 of the Code), allocable to such Member pursuant to this
Agreement for the period to which the Tax Distribution Amount relates, less prior losses of the
Company, as determined for federal income tax purposes, allocable to such Member pursuant to this
Agreement to the extent not previously taken into account in determining the Tax Distribution
Amount of such Member and to the extent utilizable by the Members, as determined by the Manager and
approved by KRH.

          “Tax Matters Member” has the meaning set forth in Section 6.2 of this Agreement.

          “Tax Receivable Agreement” means the Tax Receivable Agreement, dated as of June 23,
2008, by and among the Company, RHI Inc., and KRH, as the same may be amended, supplemented or
otherwise modified from time to time.

          “Total Membership Units Outstanding Immediately Prior To Issuance” means, with respect
to an Additional Equity Issuance, the total number of Membership Units outstanding immediately
prior to the Additional Equity Issuance, without giving effect to any issuances or adjustments
under Section 3.4(d) and without including any Membership Units that

14

 

are issuable upon conversion
or exercise of any securities, options, warrants or rights to acquire Membership Units.

          “Trading Day” means a day on which the principal United States securities exchange on
which RHI Inc. common stock is listed or admitted to trading, or the NASDAQ Global Market if RHI
Inc. common stock is not listed or admitted to trading on any such securities exchange, as
applicable, is open for the transaction of business (unless such trading shall have been suspended
for the entire day).

          “Transfer” (including the terms “Transferred” and “Transferring”)
means to sell, transfer, give, exchange, bequest, assign, pledge, encumber, hypothecate or
otherwise dispose of, either voluntarily or involuntarily (including upon the foreclosure under any
pledge or hypothecation that results in a change of title), any Equity Interests in the Company.

          “Transferring Member” has the meaning set forth in Section 8.1(a) of this Agreement.

          “Treasury Regulations” means the federal income tax regulations, including any
temporary regulations, promulgated under the Code, as such Treasury Regulations may be amended from
time to time. Any and all references herein to specific provisions of the Treasury Regulations
shall be deemed to refer to any corresponding successor provisions.

          “Ultimate Parent” means Kelso Interco VII, LLC, KEP VI AIV, LLC, any investment fund
managed by Kelso & Company L.P. or any affiliate of Kelso & Company L.P. or any of their respective
Subsidiaries or any successors thereto.

          “Underwriters” means registered brokers and dealers that have entered into
underwriting agreements with RHI Inc. and that subscribe for and purchase Units from RHI Inc., and
“Underwriter” means any one of them.

          “Underwriting Agreement” means that certain underwriting agreement, dated as of June
17, 2008, by and between RHI Inc. and the underwriters for the Initial Public Offering.

          “Unit” means a fractional share of the Interests of all Members issued in accordance
with the terms of this Agreement. The number of Units outstanding and the holders thereof shall be
set forth on Exhibit A, as such may be amended from time to time in accordance with this
Agreement.

          “Wholly Owned Subsidiary” of any Person means a Subsidiary which is 100% owned
directly or indirectly by such Person.

     1.2 Other Definitional Provisions; Interpretation.

          (a) The words “hereof,” “herein” and “hereunder” and words of similar import when used in this
Agreement will refer to this Agreement as a whole, including the Exhibits and Schedules attached
hereto, and not to any particular provision of this Agreement. Articles, section and subsection
references are to this Agreement unless otherwise specified.

15

 

          (b) The words “include” and “including” and words of similar import when used in this
Agreement shall be deemed to be followed by the words “without limitation”.

          (c) The titles and headings in this Agreement are included for convenience of reference only
and will not limit or otherwise affect the meaning or interpretation of this Agreement.

          (d) The meanings given to capitalized terms defined herein will be equally applicable to both
the singular and plural forms of such terms. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms.

ARTICLE 2

FORMATION

     2.1 Formation; Qualification.

          (a) A Certificate of Formation of the Company (the “Certificate”) has been executed by
an authorized person and was filed with the Secretary of State of the State of Delaware on
September 6, 2007, to form on such date the Company as a limited liability company pursuant to the
LLC Act. The rights, duties and liabilities of the Members shall be as provided in the LLC Act,
except as otherwise provided in this Agreement.

          (b) The Company shall be qualified or registered under foreign limited liability company
statutes or assumed or fictitious name statutes or similar laws in any jurisdiction in which the
Company owns property or transacts business to the extent, in the judgment of the Manager such
qualification or registration is necessary or advisable in order to protect the limited liability
of the Members or to permit the Company lawfully to own property or transact business. The Manager
shall, to the extent necessary in the judgment of the Manager, maintain the Company’s good standing
in each such jurisdiction.

          (c) The Manager and any Person to whom the Manager delegates authority under this Agreement
shall be an “authorized person” within the meaning of § 18-204(a) of the LLC Act, and shall have
the power and authority to execute, file and publish any certificates, notices, statements or other
documents (and any amendments or restatements thereof) necessary to permit the Company to conduct
business as a limited liability company in each jurisdiction where the Company elects to do
business.

     2.2 Name. The name of the limited liability company formed by the filing of the Certificate is “RHI
Entertainment Holdings II, LLC”. However, the business of the Company may be conducted upon
compliance with all applicable laws under any other name designated by the Manager.

     2.3 Term. The term of the Company has commenced as of the date of filing the Certificate and
will continue in perpetuity; provided that the Company may be dissolved in accordance with
the provisions of this Agreement or by the LLC Act.

16

 

     2.4 Headquarters Office. The Company’s headquarters office shall initially be located in New
York, New York. The Manager may determine to open, close or move any office at any time in its
absolute discretion.

     2.5 Registered Agent and Office. The address of the Company’s registered office in the State
of Delaware is Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, Delaware
19808 in the County of New Castle. The name of the Company’s registered agent at such address is
Corporation Service Company. The Manager may at any time designate another registered agent or
registered office or both.

     2.6 Purposes. The purpose of the Company is to:

          (a) hold the 100% ownership interest in RHI Entertainment LLC;

          (b) manage the business and operations of RHI Entertainment LLC and its Subsidiaries; and

          (c) engage in all activities and transactions in connection with, in support of or
furtherance of the foregoing purposes (collectively, the “Joint Venture Purposes”).

     2.7 Powers. The Company shall have the power and authority to take any and all actions
necessary, appropriate, desirable, advisable, incidental or convenient to, or for the furtherance
of, the Joint Venture Purposes, alone or with other Persons.

ARTICLE 3

MEMBERS AND INTERESTS

     3.1 Members.

          (a) Upon the execution of this Agreement, KRH shall be admitted to the Company as a Member in
addition to RHI Inc. Following the Membership Unit Purchase, RHI
Inc. and KRH shall be deemed to own the number of Membership Units specified in
Exhibit A opposite each of their names. If the Over-Allotment Option is exercised, the
number of Membership Units of RHI Inc. on Exhibit A shall be increased by the same number that is
the number of Shares sold in the Over-Allotment Option.

          (b) Exhibit A hereto contains the name, address, capital contributions, including the
fair market value of all capital contributions and number of Membership Units owned by each Member
as of the date hereof following the Membership Unit Purchase and, if exercised, the Over-Allotment
Option. The Company shall revise Exhibit A (i) from time to time to reflect the issuance,
conversion or Transfer of Units in accordance with the terms of this Agreement and other
modifications to or changes in the information set forth therein, and (ii) in accordance with
Sections 3.4(d), 3.5 and 9.1. Any amendment or revision to Exhibit A or to the Company’s
records as contemplated by this Agreement to reflect information regarding Members or under
Section 3.4(d), 3.5 or 9.1 shall be deemed to amend this Agreement, but shall not require the
approval of the Manager or any Member.

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          (c) One or more additional Persons may be admitted as a Member of the Company only upon (i) an
issuance of Units pursuant to Section 3.5 or a Transfer of Units pursuant to Article 8, and (ii)
the execution and delivery by such Person of a counterpart to this Agreement or other written
agreement, in a form satisfactory to the Manager, to be bound by all the terms and conditions of
this Agreement. Upon such execution, the Company shall amend Exhibit A and shall amend
this Agreement as the Manager may reasonably determine is necessary, to reflect the admission of
such Person as a Member and such other information of such Person as indicated in
Exhibit A. Unless admitted to the Company as a Member as provided in this Section 3.1 or
Section 8.2, no Person is, or will be considered to be, a Member.

          (d) Subject to the other provisions of this Section 3.1 and Section 8.2, each Person that
holds one or more Units in compliance with the terms of this Agreement shall be a Member. A Member
will cease to be a Member when such Person ceases to own any Units in the Company, in which case
Exhibit A shall be amended to reflect that such Person is no longer a Member.

          (e) Except as provided in the LLC Act, in no event shall any Member (or any former Member), by
reason of its status as a Member (or former Member), have any liability for (i) the debts, duties
or any other obligations of the Company, (ii) the repayment of any Capital Contribution of any
other Member or (iii) any act or omission of any other Member.

          (f) If KRH and one or more of its transferees (which have the rights and powers of KRH under
Section 8.2(c)) hold Membership Units in the Company at the same time, KRH and such transferees
shall designate one of them to act on behalf of all of them and vote all of their Membership Units
with respect to any matter requiring approval of KRH.

     3.2 Meeting of Members.

          (a) Annual Meeting. Subject to Section 3.2(g), an annual meeting of Members shall be
held on such date and at such time as (i) shall be designated from time to time
by the Manager, but no less often than once during each calendar year, and (ii) stated in the
notice of the meeting, at which meeting the Members entitled to vote shall transact such business
as may properly be brought before the meeting. At each annual meeting of the Members (i) the
Manager shall discuss the matters and affairs of the Company, and (ii) the Members shall address
such other matters as may be raised at the meeting by any Member or Manager.

          (b) Special Meetings. A special meeting of Members, for any purpose or purposes, may
be called by the Manager and shall be called by the Manager upon the receipt by the Manager of the
written request of any other Member. Such request shall state the purpose or purposes of the
proposed meeting.

          (c) Place and Conduct of Meetings. Meetings of the Members shall be held at such time
and place, either within or without the State of Delaware, as shall be designated from time to time
by the Manager and stated in the notice of the meeting or in a duly executed waiver of notice
thereof. All meetings shall be conducted by such Person as the Manager may appoint pursuant to
such rules for the conduct of the meeting as the Manager or such other Person deems

18

 

appropriate.
Such meetings may be held in person, by teleconference or by any other reasonable means, in each
case at the discretion of the Manager.

          (d) Notice of Meetings. Written notice of an annual meeting or special meeting
stating the place, date, and hour of the meeting and in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall be given not less than five calendar days nor
more than 30 calendar days before the date of the meeting to each Member entitled to vote at such
meeting, unless waived by each such Member.

          (e) Quorum. The presence of both (a) the holders of a majority of all the Membership
Units then issued and outstanding and entitled to vote thereat and (b) KRH, whether in person or
represented by a valid written proxy, shall constitute a quorum at all meetings of the Members for
the transaction of business. If, however, such quorum shall not be present or represented at any
meeting of the Members, the Members entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented.

          (f) Voting. Except as otherwise expressly provided for in this Agreement, all matters
submitted to the vote of the Company shall be decided by a majority vote of the directors of RHI
Inc. Such votes may be cast in person or by valid written proxy, but no proxy shall be voted after
three years from its date, unless such proxy provides for a longer period.

          (g) Action by Consent. Any consent required herein or action required to be taken at
any annual or special meeting, or any action which may be taken at any annual or special meeting,
may be taken without a meeting, without a vote, without prior written notice and with a consent or
consents in writing signed by Members who are holders of Membership Units having not less than the
minimum number of votes that would be necessary to authorize or take such action at a meeting at
which all Membership Units entitled to vote thereon were present and voted. Prompt notice of the
taking of the action without a meeting by less than unanimous written consent shall be given to
those Members who are holders of Membership Units and who
have not consented in writing; provided that the failure to give any such notice shall
not affect the validity of the action taken by such written consent.

     3.3 Certain Duties and Obligations of the Members. Except as otherwise provided in this
Agreement, the Company shall not be classified as anything other than a partnership for income tax
purposes and shall be a partnership only for income tax purposes and this Agreement shall not be
deemed to create a partnership, joint venture, agency or other relationship among the Members
creating fiduciary or quasi-fiduciary duties or similar duties and obligations or to subject the
Members to joint and several or vicarious liability or to impose any duty, obligation or liability
that would arise therefrom with respect to any or all of the Members or their Affiliates for any
other purposes. Except as otherwise provided in this Agreement, no Member shall have any authority
to act for, bind, commit or assume any obligation or responsibility on behalf of the Company, its
properties or any other Member. No Member, in its capacity as a Member under this Agreement, shall
be responsible or liable for any indebtedness or obligation of another Member. The Company shall
not be responsible or liable for any indebtedness or obligation of any Member, incurred either
before or after the execution and delivery of this Agreement by

19

 

such Member, except as to those
responsibilities, liabilities, indebtedness or obligations incurred pursuant to and as limited by
the terms of this Agreement and the LLC Act.

     3.4 Units.

          (a) Membership Unit Purchase. In connection with the execution of this Agreement: (i)
RHI Inc. is making its required Capital Contribution to the Company as set forth in the
Subscription Agreement and, in exchange for RHI Inc.’s Capital Contribution, the Company is issuing
a number of Membership Units to RHI Inc. equal to the number of Shares sold in the Initial Public
Offering; and (ii) KRH is making its required Capital Contribution to the Company as set forth in
the Subscription Agreement and, in exchange for KRH’s Capital Contribution, the Company is issuing
a number of Membership Units to KRH as set forth in the prospectus for the Initial Public Offering
(the Company’s issuance of Membership Units to RHI Inc, and KRH, collectively, the “Membership
Unit Purchase”).

          (b) Over-Allotment Option. Pursuant to the terms of the Subscription Agreement, the
Company has agreed to sell to RHI Inc. 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 proceeds of such Over-Allotment Option.

          (c) Membership Units. The Membership Units shall consist of equal whole, fractional
units into which Interests in the Company shall be divided. The Membership Units shall be entitled
to share in distributions and allocations as provided in Sections 5.4, 6.4 and 7.3, and as
otherwise provided in this Agreement.

          (d) Adjustments Upon RHI Inc. Issuing Additional Equity Interests. RHI Inc. agrees
with the Company and each other Member that RHI Inc. will not make any Additional
Equity Issuance unless either (x) KRH has consented to such issuance or (y) such issuance is
in compliance with this paragraph (d) and the provisions of this Agreement are complied with,
including without limitation, Sections 4.2(b) and 4.3(b) with respect to the issuance of additional
Membership Units pursuant to clause (ii) below. If RHI Inc. makes any Additional Equity Issuance,
then RHI Inc. and the Company shall undertake all actions with respect to the Membership Units,
such additional Equity Interests, the Exchange Right, the other terms of this Agreement, the
certificate of incorporation or the securities or instruments of RHI Inc. or as otherwise necessary
(such actions collectively in response to an issuance of additional Equity Interests in RHI Inc., a
“Recapitalization”), such that after giving effect to the Recapitalization, except with the
consent of KRH:

          (i) all of the proceeds of such Additional Equity Issuance shall be contributed to the Company
(the “Additional Contribution Amount”);

          (ii) subject to compliance with the other provisions of this Agreement with respect to the
issuance of Membership Units (including, without limitation, Sections 4.2(b) and 4.3(b)), the
Company shall issue to RHI Inc. (in consideration of the contribution, if any, set forth in clause
(i)) Interests in the Company that are economically equivalent to the securities issued in the
Additional Equity Issuance, as reasonably determined by the Manager (including,

20

 

without limitation,
as to priority in right to distributions or liquidations) but in no event shall RHI Inc. receive
Membership Units pursuant to this Section 3.4 in exchange for an Additional Contribution Amount
with a fair market value, as determined by the Manager and KRH in excess of such Additional
Contribution Amount, after the application of Section 4.13; and

          (e) Certificates; Transfer. Membership Units shall be evidenced by a certificate
issued by the Company to the holder thereof and substantially in the form of Exhibit B
attached hereto. Such certificates shall be entered in the books of the Company as they are
issued, and shall be signed by a duly designated officer of the Company and may be sealed with the
Company’s seal or a facsimile thereof. Upon any Transfer permitted under this Agreement (i) the
Transferring Member shall surrender to the Company a certificate or certificates representing at
least the number of Membership Units being Transferred, and (ii) the Company shall issue (x) to the
transferee a certificate for the number of Membership Units Transferred, and (y) to the
Transferring Member a certificate representing the remaining number of Membership Units equal to
the difference (if any) between the number of Membership Units evidenced by the certificate or
certificates surrendered pursuant to clause (i) and the number of Membership Units Transferred. No
Transfer of Membership Units shall be valid as against the Company except upon surrender to and
cancellation of the appropriate certificate or certificates, accompanied by an assignment or
Transfer by the Member, subject to any restrictions on Transfer contained in this Agreement. The
Company may issue a new certificate for Membership Units in place of any certificate or
certificates previously issued by it, alleged to have been lost or destroyed, upon the making of an
affidavit of that fact, and providing an indemnity in form and substance reasonably satisfactory to
the Manager, by the Person claiming the certificate or certificates to be lost or destroyed.

     3.5 Authorization and Issuance of Additional Units.

          (a) In General. The Company shall only be permitted to issue additional Units or
other Equity Interests in the Company to the Persons and on the terms and conditions provided for
in Section 3.4 and this Section 3.5. Subject to the provisions of this Agreement, approval of the
Independent Directors of the Board is required before the Manager may cause the Company to issue
additional Membership Units authorized under this Agreement at such times and upon such terms as
the Manager shall determine. Subject to the approval of the Independent Directors of the Board,
the Manager shall amend this Agreement as necessary in connection with the issuance of additional
Membership Units and admission of additional Members under this Section 3.5.

          (b) Equity Compensation Issued by the Company. Upon the exercise of options for
Shares that the Company has issued or the vesting of shares for other types of equity compensation
(such as issuance of restricted or non-restricted stock, payment of bonuses in stock or settlement
of stock appreciation rights in stock), the Company will purchase from RHI Inc., at the RHI Inc.
Market Price as of a date that is the trading day immediately preceding the date of such exercise
or vesting, the number of Shares to be issued in connection with the exercise of such options or
vesting of shares for other types of equity compensation. RHI Inc. will contribute to the Company
all consideration received from the Company for such Shares and the Company will issue RHI Inc.
such number of Membership Units in the Company equal to the number of Shares purchased by the
Company.

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     3.6
Business Opportunities; Non-Competition  (i). Except as provided in this Agreement and
as may be otherwise provided in any written agreement with the Company to which a Member or its
Affiliates is a party, each Member (other than RHI Inc.) and their Affiliates may have other
business interests or may engage in other business ventures of any nature or description whatsoever
regardless of whether they compete with the business and purpose of the Company set forth in
Section 2.6.

ARTICLE 4

MANAGEMENT AND OPERATIONS

     4.1 Manager. The Company shall be managed by one manager (the “Manager”) that
initially shall be RHI Inc. The Manager may not be removed as a Manager except as provided in
Section 4.7. Any Manager that is properly removed pursuant to Section 4.7 shall be replaced in the
manner provided in Section 4.8.

     4.2 Management Authority.

          (a) Except as otherwise expressly provided for in this Agreement, the Manager shall have
authority on behalf of the Company to make all decisions with respect to the Company’s day-to-day
business affairs and decision-making of the Company without the approval of any non-managing
Members. As such, RHI Inc., in its capacity as Manager and
through its officers and Board of Directors, will be responsible for all operational and
administrative decisions of the Company. In connection with the implementation, consummation or
administration of any matter within the scope of the Manager’s authority, the Manager is
authorized, without the approval of the other Members, to execute and deliver on behalf of the
Company contracts, instruments, conveyances, checks, drafts and other documents of any kind or
character to the extent the Manager deems it necessary or desirable. The Manager may delegate to
officers, employees, agents or representatives of the Company or the Manager any or all of the
foregoing powers by written authorization identifying specifically or generally the powers
delegated or acts authorized.

          (b) Supermajority Vote of Board of Directors for Certain Matters. So long as KRH
beneficially owns at least 30% of the issued and outstanding Membership Units in the Company,
approval of at least 75% of the Board of Directors of RHI Inc. then in office will be required
before RHI Inc., in its capacity as Manager of the Company, may authorize the Company or any of its
Subsidiaries to take any of the following actions:

	 	(i)	 	except as provided in the Annual Business Plan,
acquire, dispose, lease or license assets by the Company or any
Subsidiary or enter into any contract or contracts to do the foregoing,
in a single transaction or in two or more transactions (related or
unrelated) in any consecutive twelve-month period with an aggregate value
(as determined in good faith by the Board) exceeding 20% of the fair
market value of the business of the Company and its Subsidiaries taken
together and operating as a going concern (as determined in good faith by
the Board);

22

 

	 	(ii)	 	merge, reorganize, recapitalize, reclassify,
consolidate, dissolve, liquidate or enter into a similar transaction;
	 
	 	(iii)	 	incur any funded indebtedness (including the
refinancing of any funded indebtedness) or repay before due any funded
indebtedness (other than a working capital revolving line of credit) with
a fixed term in either case, in a single transaction or in two or more
transactions (related or unrelated) in an aggregate amount in excess of
$50.0 million per year;
	 
	 	(iv)	 	authorize, issue, grant or sell additional
Membership Units in the Company (including, without limitation, pursuant
to Section 3.4(d)(ii)) or rights with respect to Membership Units, other
than under or pursuant to the Approved Plan;
	 
	 	(v)	 	enter into, modify or terminate certain contracts
not in the ordinary course of business of the type specified in Item
601(b)(10)(i) of Regulation S-K;
	 
	 	(vi)	 	except as specifically set forth in this Agreement
(including, without limitation, with respect to required tax
distributions pursuant to Section 5.4 (a) (i)), declare, set aside or pay
any redemption of, or
dividends with respect to, membership interests, payable in cash, property
or otherwise; and
	 
	 	(vii)	 	approve any actions relating to the Company that
could reasonably be expected to have a material adverse tax effect on
KRH.

     4.3 Limitations on the Business of the Manager; Approval Rights of KRH.

          (a) Except to the extent necessary with maintaining its status as not being an “investment
company” within the meaning of the Investment Company Act of 1940 (based upon written advice to the
Manager from Outside Counsel), the Manager shall not, without KRH Approval, directly or
indirectly, enter into or conduct any business other than (i) in connection with the ownership,
acquisition or disposition of Units as a Member, (ii) the management of the business of the Company
as provided herein, (iii) RHI Inc.’s operation as a public reporting company with a class of
securities registered under the Exchange Act, and (iv) such other activities that are in connection
with or incidental to the foregoing or in connection with or in support of Joint Venture Purposes.
For the purposes of clarification, the provision by the Manager of guarantees, credit support or
entering into other obligations or agreements in support of obligations or operations of the
Company or any Subsidiary of the Company shall be deemed for purposes of this Section 4.3 to be “in
connection with or incidental” to the management of the business of the Company and “in connection
with or in support of Joint Venture Purposes”.

          (b) So long as KRH holds at least five percent of the Membership Units in the Company (such
ownership threshold shall be calculated in accordance with Section 4.2(e)), the Manager shall not
take, or cause the Company or any of its Subsidiaries to take, action with respect to the matters
provided for in this Section 4.3(b) without KRH Approval (“KRH Approval Rights”) if (i) an
individual designated by KRH pursuant to a Director Designation Agreement is not nominated or
appointed to the board of directors of RHI Inc. under

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circumstances constituting a breach of the
Director Designation Agreement, or (ii) such designee (or if the designee is not elected in
circumstances under which KRH can designate a successor, such successor designee) is not elected to
the board of directors of RHI Inc. after being designated in accordance with the Director
Designation Agreement. Upon the occurrence of a condition giving rise to KRH Approval Rights, KRH
Approval Rights shall continue until the earlier of (x) the date on which the conditions that gave
rise to KRH Approval Rights no longer exist, or (y) the delivery of written notice waiving KRH
Approval Rights by KRH. KRH may waive KRH Approval Rights with respect to a particular matter by
delivering written notice to the Company and KRH. Any waiver by KRH of its KRH Approval Rights
shall only serve as a waiver with respect to the specific conditions that gave rise to KRH Approval
Rights being waived and shall not constitute a waiver with respect to any other rights under this
Agreement and any KRH Approval Rights that KRH may have in the future as a result of the existence
of a condition giving rise to KRH Approval Rights subsequent to such waiver. The matters provided
for in this Section 4.3(b) are not intended to modify the Manager’s responsibilities for managing
the day-to-day business and affairs of the Company. Subject to the foregoing and notwithstanding
anything to the contrary in this Agreement, the Company shall not take, cause to be taken, or agree
to take or authorize any of the following actions without KRH Approval:

               (i) approving the Annual Business Plan or any amendment or modification of the Annual Business
Plan for the Company and its Subsidiaries;

               (ii) incurring indebtedness greater than $50.0 million in any one or series of transactions by
the Company or its Subsidiaries or entering into or consummating any other financing transaction
that is not previously approved and provided for in the Annual Business Plan;

               (iii) entering into or consummating any agreements or arrangements involving annual payments
by the Company or its Subsidiaries (including the fair market value of any barter) in excess of
$1.0 million, except as provided for in the Annual Business Plan, or any material modification of
any such agreements or arrangements;

               (iv) greenlighting or authorizing production of any made-for-television movie, mini-series or
series with an individual production cost greater than $2.0 million for any made-for-television
movie, $8.0 million for any mini-series or $15.0 million for any episodic series , where either
such production was not in the budget or where such production does not have at least 100% of the
production costs covered by initial license sales at the time production begins, or the termination
of any such production provided for in the Annual Business Plan;

               (v) entering into or consummating any agreements or arrangements (including license fees) by
the Company or its Subsidiaries involving total receipts (including the value of any barter) in
excess of $5.0 million, or any material modification of any such agreements or arrangements;

               (vi) declaring, setting aside or paying any redemption of, dividends on, or the making of any
other distributions in respect of, any of its Membership Units or other equity interests in the
Company, as the case may be, payable in cash, stock, property or otherwise, or any reorganization
or recapitalization or split, combination or reclassification or

24

 

similar transaction of any of its
units, limited liability company interests or capital stock, as the case may be;

               (vii) amending any provision of this Agreement to authorize, or to issue, any additional
Membership Units (including, without limitation, pursuant to Section 3.4(d)(ii)) or classes or
units or other equity interests and the designations, preferences and relative, participating or
other rights, powers or duties thereof; provided, however, that KRH’s approval shall not be
required in connection with: (1) the grant of options or restricted equity awards under any
Approved Plan; (2) an amendment that increases the size of an Approved Plan of Membership Units or
other equity interests available under such plan by no more than 10%; or (3) the issuance of
Membership Units or other equity interests of the Company pursuant to convertible securities or
option awards, either approved by KRH or issued prior to any approval rights set forth in this
section;

               (viii) hiring or terminating the employment of the chief executive officer, chief financial
officer or any executive officer of the Company or its Subsidiaries or the entering into, amendment
or termination of any employment, severance, change of control or
other contract with any employee who has a written employment agreement with the Company or
its Subsidiaries;

               (ix) entering into any agreement with respect to or the taking of any material steps to
facilitate a transaction that constitutes a Change of Control of the Company or a proposal for such
a transaction;

               (x) entering into any agreement, or the modification or termination of any agreement, by the
Company or any of its Subsidiaries with, or for the benefit of, any shareholder of the managing
member who beneficially owns five percent or more of the common stock of the managing member or any
affiliate of such a shareholder;

               (xi) changing the purpose of the Company, or the entering into of any materially different
line of business or substantially changing the strategic business plan of the Company or its
Subsidiaries, except as contemplated by the Annual Business Plan;

               (xii) leasing (as lessor), licensing (as licensor) or other transfer of assets (including
securities) or intellectual property by the Company or its Subsidiaries: (i) having a fair market
value or for consideration exceeding $5.0 million, taken as a whole; or (ii) to which the revenue
or the profits attributable exceed $5.0 million, taken as a whole, in any one transaction or series
of related transactions, in each case, determined using the most recent quarterly consolidated
financial statements of the Company;

               (xiii) entering into any agreement with respect to or consummating any acquisition by the
Company or its Subsidiaries of any business or assets having a fair market value in excess of $5.0
million taken as a whole, in any one transaction or series of related transactions, whether by
purchase and sale, merger, consolidation, restructuring, recapitalization or otherwise;

25

 

               (xiv) entering into, modifying or terminating any agreement for the Company or its
Subsidiaries to provide any services to any person that requires capital expenditures or payments
in excess of $1.0 million in the aggregate;

               (xv) settling claims or suits in which the Company or its Subsidiaries is a party for an
amount that exceeds the relevant provision in the budget by more than $1.0 million (including any
related litigation expenses) or where equitable or injunctive relief is included as part of such
settlement or entering into any consent decree or similar binding order with any governmental
agency;

               (xvi) dissolving of the Company or any of its Subsidiaries, adopting a plan of liquidation of
the Company or any of its Subsidiaries or effecting any action by the Company or any of its
Subsidiaries to commence any suit, case, proceeding or other action: (i) under any existing or
future law of any jurisdiction relating to bankruptcy, insolvency, reorganization or relief of
debtors seeking to have an order for relief entered with respect to the Company or any of its
Subsidiaries, or seeking to adjudicate the Company or any of its Subsidiaries as bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment winding up, liquidation, dissolution,
composition or other relief with respect to the Company or any of its Subsidiaries; or (ii) seeking
appointment of a receiver, trustee, custodian or other
similar official for the Company or any of its Subsidiaries, or for all or any material
portion of the assets of the Company or any of its Subsidiaries, or making a general assignment for
the benefit of the creditors of the Company or any of its Subsidiaries; and

               (xvii) approving any significant tax matter involving the Company or its Subsidiaries.

          (c) Except for the matters expressly provided for in this Agreement, KRH Approval rights shall
not affect the Manager’s right to conduct the Company’s business under this Agreement.

          (d) RHI Inc. may not make any Additional Equity Issuance that is a Dilutive Issuance without a
Majority Member Vote.

          (e) For purposes of calculating the Beneficial Ownership of Membership Units by KRH with
respect to the supermajority vote of the RHI Inc. Board under Section 4.2 and KRH’s approval rights
enumerated under this Section 4.3, the following shall apply: (i) Shares held by KRH or a Permitted
Transferee issued upon an Exchange of Membership Units will be counted, without duplication, as
being Membership Units beneficially owned by KRH and as if the Membership Units had not been
exchanged, so long as KRH or a Permitted Transferee continues to hold such Shares; (ii) Shares held
by KRH or a Permitted Transferee issued as a stock dividend, stock split, recapitalization,
anti-dilution adjustment or acquired through a rights offering to shareholders and/or Members, to
the extent acquired in respect of Shares described in clause (i) above or this clause (ii) shall be
counted, without duplication, as being Membership Units Beneficially Owned by KRH as if such Shares
were received in an Exchange and KRH or the Permitted Transferee held the non-Exchanged Membership
Units; and (iii) Membership Units Beneficially Owned by Permitted Transferees of KRH will be
counted as being beneficially owned by KRH.

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     4.4 Duties. The Manager shall carry out its duties in good faith, in a manner that it believes
to be in the best interests of the Company and each of its Members and shall act as a fiduciary to
the other Members in respect of the Company’s business. The Manager shall devote such time to the
business and affairs of the Company as it may determine, in its reasonable discretion, is necessary
for the efficient carrying on of the Company’s business.

     4.5 Reliance by Third Parties. No third party dealing with the Company shall be required to
ascertain whether the Manager is acting in accordance with the provisions of this Agreement. All
third parties may rely on a document executed by the Manager as binding the Company. The foregoing
provisions shall not apply to third parties who are Affiliates of the Manager. If the Manager acts
without authority it shall be liable to the Members for any damages arising out of its unauthorized
actions.

     4.6 Resignation. The Manager may resign at any time by giving written notice to the Members. Unless otherwise
specified in the notice, the resignation shall take effect upon receipt thereof by the Members, and
the acceptance of the resignation shall not be necessary to make it effective.

     4.7 Removal. The Manager may not be removed without the consent of the Manager.

     4.8 Vacancies. If the Manager resigns or is removed in accordance with this Article 4, then
the position of Manager shall be filled by Majority Member Vote.

     4.9 Information Relating to the Company. In addition to the matters set forth in Section 6.8,
upon request, the Manager shall supply to a Member (i) any information required to be available to
the Members under the LLC Act, and (ii) any other information requested by such Member regarding
the Company or its activities, provided that obtaining the information described in this
clause (ii) is not unduly burdensome to the Manager. During ordinary business hours, each Member
and its authorized representative shall have access to all books, records and materials in the
Company’s offices regarding the Company or its activities.

     4.10 Insurance. The Company shall maintain or cause to be maintained in force at all times, for
the protection of the Company and the Members to the extent of their insurable interests, such
insurance as the Manager believes is warranted for the operations being conducted.

     4.11 Transactions Between Company and Manager. The Manager may cause the Company to contract
and deal with any Affiliate of the Manager, provided such contracts and dealings are on terms
comparable to and competitive with those available to the Company from others dealing at arm’s
length or are approved by a Majority Member Vote. The Members hereby approve the Membership Unit
Subscription Agreement, the Director Designation Agreement, the Registration Rights Agreement and
the Tax Receivable Agreement.

     4.12 Officers.

          (a) The Manager may, from time to time, designate one or more Persons to fill one or more
officer positions of the Company. Any officers so designated shall have such

27

 

titles and authority
and perform such duties as the Manager may, from time to time, delegate to them. If the title
given to a particular officer is one commonly used for officers of a business corporation, the
assignment of such title shall constitute the delegation to such officer of the authority and
duties that are normally associated with that office, subject to any specific delegation of
authority and duties made to such officer, or restrictions placed thereon, by the Manager. Each
officer shall hold office until his or her successor is duly designated, until his or her death or
until he or she resigns or is removed in the manner hereinafter provided. Any number of offices
may be held by the same Person. The salaries or other compensation, if any, of the officers of the
Company shall be fixed from time to time by the Manager.

          (b) Any officer of the Company may resign at any time by giving written notice thereof to the
Manager. Any officer may be removed, either with or without cause, by the Manager whenever in its
judgment the best interests of the Company will be served thereby; provided,
however, that such removal shall be without prejudice to the contract rights, if any, of
the Person so removed. Designation of an officer shall not, by itself, create contract rights.

     4.13 Management Fee; Reimbursement of Expenses. The Manager shall not be entitled to
compensation for performance of its duties hereunder unless such compensation has been approved by
a Majority Member Vote. The Manager shall be reimbursed by the Company for any reasonable
out-of-pocket expenses incurred on behalf of the Company, including all expenses and costs
associated with the Initial Public Offering. In the case of Shares sold to underwriters in
connection with the Initial Public Offering (or any subsequent public offering) at a price lower
than the price for which such Shares are sold in the Initial Public Offering (or such subsequent
public offering), as applicable (such difference, the “Discount”), the Company shall
reimburse the Manager for such Discount by treating such Discount as an Additional Contribution
Amount made by the Manager to the Company and increasing the Manager’s Capital Account by such
Discount.

     4.14 Limitation of Liability; Exculpation.

          (a) No Manager, Member or officer of the Company, nor any of their respective Subsidiaries or
Affiliates (including any stockholder of RHI Inc. that would be deemed an Affiliate but for the
exception set forth in the definition of Affiliate herein, or any of such stockholder’s Affiliates)
nor any of their respective direct or indirect officers, directors, trustees, members, partners,
equity holders, employees or agents, nor any of their heirs, executors, successors and assigns
(individually, an “Indemnitee”), shall be
liable to the Company or any Member for any act
or omission by such Indemnitee in connection with the conduct of affairs of the Company or
otherwise incurred in connection with the Company or this Agreement or the matters contemplated
herein, in each case unless such act or omission was the result of gross negligence or willful
misconduct or constitutes a breach of, or a failure to comply with, any agreement between (x) such
Indemnitee and (y) the Company or its Subsidiaries and Affiliates (including, without limitation,
this Agreement).

          (b) Notwithstanding any other provision of this Agreement or otherwise applicable provision of
law or equity, whenever in this Agreement a Member (other than RHI Inc.) is permitted or required
to make a decision (i) in its “sole discretion” or “discretion,” with “complete discretion” or
under a grant of similar authority or latitude, such Member shall be

28

 

entitled to consider only such
interests and factors as it desires, including its own interests, and shall, to the fullest extent
permitted by applicable law, have no duty or obligation to give any consideration to any interest
of or factors affecting the Company or the other Members, or (ii) in its “good faith” or under
another expressed standard, such Member shall act under such express standard and shall not be
subject to any other or different standards.

          (c) Any Manager, Member, Liquidator or officer of the Company may consult with legal counsel
and accountants selected by it at its expense or with legal counsel and accountants for the Company
at the Company’s expense. Each Manager, Member, Liquidator and officer of the Company shall be
fully protected in relying in good faith upon the records of the Company and upon information,
opinions, reports, or statements presented by another Manager, Member, Liquidator or officer, or
employee of the Company, or committees of the Company, Manager or Members, or by any other Person
(including, without limitation, legal counsel and public accountants) as to matters that the
Manager, Member, Liquidator or officer reasonably believes are within such other Person’s
professional or expert competence, including information, opinions, reports or statements as to the
value and amount of the assets, liabilities, Net Income or Net Losses of the Company, or the value
and amount of assets or reserves or contracts, agreements or other undertakings that would be
sufficient to pay claims and obligations of the Company or to make reasonable provision to pay such
claims and obligations, or any other facts pertinent to the existence and amount of assets from
which distributions to Members or creditors might properly be paid.

     4.15 Indemnification.

          (a) Indemnification Rights. The Company shall indemnify and hold harmless each
Indemnitee from and against any and all losses, claims, demands, costs, damages, liabilities,
expenses of any nature (including attorneys’ fees and disbursements), judgments, fines, settlements
(whether on an individual or joint and several basis) and other amounts arising from any and all
claims, demands, actions, suits or proceedings, whether civil, criminal, administrative, arbitral
or investigative, in which the Indemnitee was involved or may be involved, or threatened to be
involved, as a party or otherwise, arising out of or in connection with the business of the
Company, this Agreement, any Person’s status as a Manager, Member or officer of the Company or any
action taken by any Manager, Member or officer of the Company or under this Agreement or otherwise
on behalf of the Company (collectively, “Liabilities”), regardless of whether the
Indemnitee continues to be a Manager, Member or officer of the Company, or an Affiliate, officer,
director, employee, trustee, member or partner or agent of a Manager, Member or officer of the
Company, to the fullest extent permitted by the LLC Act and all other applicable laws;
provided that an Indemnitee shall be entitled to indemnification hereunder only to the
extent that such Indemnitee’s conduct did not result from gross negligence or willful misconduct
and, if the Indemnitee is or was the Manager, the conduct did not breach this Agreement. The
termination of any proceeding by settlement, judgment, order, conviction,
or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption
that such Indemnitee’s conduct resulted from gross negligence or willful misconduct.

          (b) Expenses. Expenses incurred by an Indemnitee in defending against any Liability
or potential Liability subject to this Section 4.15 shall, from time to time, be advanced by the
Company prior to the final disposition of such Liability upon receipt by the Company of

29

 

an
undertaking reasonably acceptable in form and substance to the Manager by or on behalf of the
Indemnitee to repay such amount if it shall be determined that such Person is not entitled to be
indemnified as authorized in this Section 4.15.

          (c) Indemnification Rights Non-Exclusive; Rights of Indemnified Parties. The
indemnification provided by this Section 4.15 shall be in addition to any other rights to which
those indemnified may be entitled under any agreement, by a Majority Member Vote, as a matter of
law or equity, or otherwise. Such indemnification shall continue with respect to an Indemnitee
even though it has ceased to serve in any particular capacity and shall inure to the benefit of its
heirs, executors, successors, assigns and other legal representatives.

          (d) Assets of the Company. Any indemnification under this Section 4.15 shall be
satisfied solely out of the assets of the Company, and no Member shall be subject to personal
liability or required to fund or cause to be funded any obligation by reason of these
indemnification provisions.

          (e) Other Liability Insurance. The Company may purchase and maintain insurance, at
the Company’s expense, on behalf of such Persons as the Manager shall reasonably determine, against
any liability that may be asserted against, or any expense that may be incurred by, such Person in
connection with the activities of the Company and its Subsidiaries or Affiliates regardless of
whether the Company would have the obligation to indemnify such Person against such liability under
the provisions of this Agreement.

     4.16 Title to Assets. Unless specifically licensed or leased to the Company, title to the
assets of the Company, whether real, personal or mixed and whether tangible or intangible, shall be
deemed to be owned by the Company as an entity, and no Members, individually or collectively, shall
have any ownership interest in such assets (other than licensed or leased assets) or any portion
thereof.

ARTICLE 5

CAPITAL CONTRIBUTIONS; DISTRIBUTIONS

     5.1 Capital Contributions.

          (a) KRH will make its required Capital Contributions to the Company as set forth in the
Subscription Agreement and RHI Inc. will make its required Capital Contribution to the Company as
set forth in the Subscription Agreement. Except as provided in Sections 3.4(d)
and 3.5(b) or otherwise expressly provided for in this Agreement, no Member shall be required
to make any other capital contribution to, or provide credit support for, the Company.

          (b) Except as provided in Article 9 and Section 5.4 of this Agreement, no Member shall be
entitled to withdraw, or demand the return of, any part its Capital Contributions or Capital
Account. No Member shall be entitled to interest on or with respect to any Capital Contribution or
Capital Account.

          (c) Except as otherwise provided in this Agreement, no Person shall have any preemptive,
preferential or similar right to subscribe for or to acquire any Units.

30

 

     5.2 Loans from Members. Loans by Members to the Company shall not be considered contributions
to the capital of the Company hereunder. If any Member shall advance funds to the Company in
excess of the amounts required to be contributed to the capital of the Company, the making of such
advances shall not result in any increase in the amount of the Capital Account of such Member and
shall be payable or collectible in accordance with the terms and conditions upon which advances are
made; provided that the terms of any such loan shall not be less favorable to the Company,
taken as a whole, than would be available to the Company from unrelated lenders and such loan shall
be approved by the Manager (or a Majority Member Vote in the event the Manager is making the loan
to the Company). Such Loans made by the Manager shall be unsecured and bear interest at the same
rate as the lowest rate of the Company’s (or its Subsidiaries) revolving credit facilities.

     5.3 Loans from Third Parties. The Company may incur Indebtedness, or enter into other similar
credit, guarantee, financing or refinancing arrangements for any purpose with any Person upon such
terms as the Manager determines appropriate; provided that the Company shall not incur any
Indebtedness that is recourse to any Member, except to the extent otherwise agreed to in writing by
the applicable Member in its sole discretion.

     5.4 Distributions. All distributions made by the Company, if any, shall be made in accordance
with this Section 5.4.

          (a) Nonliquidating Distributions. The Manager will cause the Company to make
distributions in the following manner:

               (i) At least quarterly (and, in any event on or before the applicable quarterly federal filing
date for estimated federal income taxes), the Company shall distribute, to the extent there is cash
available, to the Members, pro rata in accordance with their Percentage Interests, an amount so
that each Member receives at least its Tax Distribution Amount with respect to such quarter by wire
transfer in immediately available funds; provided that if, in the event that the income tax
liability of the Company (or any of its Members with respect to taxes attributable to the income of
the Company) is increased pursuant to an audit or challenge by a taxing authority (including if a
voluntary payment is made to limit the accrual of interest on audit
issues) or the filing of an amended tax return, the Manager shall increase the Tax
Distribution Amount, by an amount sufficient to satisfy for each Member such tax liability
increase, for the quarter during which (a) a settlement with respect to such matters is entered
into with the taxing authority, (b) a decision of a court having jurisdiction with respect to such
matters becomes final, (c) the applicable Member(s) make a voluntary tax payment to such taxing
authority or (d) the amended tax return is filed; provided, however, that so long
as there are any amounts outstanding under the Credit Agreement, in the event that there is a
conflict between the provisions of this Section 5.4(a)(i) and the terms of the Credit Agreement
with respect to the amount or the timing of the distributions required to be made under this
Section 5.4(a)(i), the amount of the distribution required to be made under this Section 5.4(a)(i)
shall be no greater than the maximum amount permitted as a “Tax Distribution” as defined in
Amendment No. 2 to the Credit Agreement for the relevant period under the Credit Agreement and the
timing of such payment shall be as set forth in Amendment No. 2 to the Credit Agreement. For the
avoidance of doubt, all distributions made pursuant to this Section 5.4(a) shall be made pro rata
in accordance with Percentage Interests.

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               (ii) The Manager, in its sole discretion, from time to time, may (but shall not be required
to) declare and make additional distributions of Available Cash among all the Members, pro rata in
accordance with their Percentage Interests.

          (b) Liquidating Distributions. All distributions made in connection with the sale,
exchange or other disposition of all or substantially all of the Company’s assets, or with respect
to the winding up and liquidation of the Company, shall be made among the Members as provided in
Article 7 hereof.

          (c) Sole Discretion of the Manager. Except as specified in Sections 4.3, 5.4(a),
5.4(b) or 7.3, (i) the Company shall have no obligation to distribute any cash or other property of
the Company to the Members, (ii) the Manager shall have sole discretion in determining whether to
distribute any cash or other property of the Company, when available, and in determining the
timing, kind and amount of any and all distributions, and (iii) no Member is entitled to receive
any distribution unless and until declared by the Manager.

          (d) Distributions in Kind. No Member has any right to demand or receive property
other than cash. However, the Manager may, in its sole discretion, elect to make distributions,
entirely or in part, in property of the Company other than cash. Property distributed in kind
shall be deemed to have been sold for their valuation determined in accordance with Section 5.5.

          (e) Limitations on Distributions. Notwithstanding anything in this Agreement to the
contrary, no distribution shall be made in violation of the LLC Act.

          (f) Exculpation. The Members hereby consent and agree that, except as expressly
provided herein or required by applicable law and except for distributions not made in compliance
with this Agreement, no Member shall have an obligation to return cash or other property paid or
distributed to such Member by the Company, whether such obligation would have arisen under
§ 18-502(b) of the LLC Act or otherwise.

          (g) Manager to Cause Funds to be Available for Tax Distribution. The Manager shall
use its best efforts to operate the business and affairs of the Company and its Subsidiaries in
such manner as to cause the Company to have available the funds necessary to make the distributions
under Section 5.4(a)(i) in the amounts and at the times required under Section 5.4(a)(i), subject,
however, in all cases, to compliance with the terms of the Credit Agreement and other third party
contractual obligations.

     5.5 Valuation. All valuation determinations to be made under this Agreement (unless otherwise
expressly provided for in this Agreement, including without limitation, in the definitions of
“Deemed Partnership Interest Value” or “Deemed Value of the Membership Interests”) shall be made
pursuant to the terms of this Section, which determinations shall be conclusive and binding on the
Company, all Members, former Members, their successors, assigns, legal representatives and any
other Person, except for computational errors or fraud, and to the fullest extent permitted by law,
no such Person shall have the right to an accounting or an appraisal of the assets of the Company
or any successor thereto except for computational errors or fraud. Valuations shall be determined
by a reasonable method of valuation determined by the

32

 

Manager, which may include an independent
appraisal, a reasonable estimate by the Manager or some other reasonable method of valuation; and
provided, further, that with respect to any valuation of the Company, RHI Inc. or
any Subsidiary thereof, that such valuation shall be based upon (i) to the extent applicable, the
RHI Market Price if the Shares are publicly traded, and (ii) no discount shall be taken in respect
of a minority interest or due to the illiquidity of any Membership Unit. Distributions of
property in kind shall be valued at fair market value; provided that any valuation under
this Section shall be determined by an independent appraiser selected by the Manager if so
requested by KRH.

ARTICLE 6

BOOKS AND RECORDS; TAX; CAPITAL ACCOUNTS; ALLOCATIONS

     6.1 General Accounting Matters.

          (a) Allocations of Net Income or Net Losses pursuant to Section 6.4 shall be made at the end
of each Fiscal Period, at such times as the Carrying Value of Company assets is adjusted pursuant
to the definition thereof and at such other times as required by this Agreement.

          (b) Each Member shall be supplied with the information of the Company necessary to enable such
Member to prepare in a timely manner (and in any event within 120 days after the end of the Company
Fiscal Year) its federal, state and local income tax returns and such other financial or other
statements and reports that the Manager deems appropriate.

          (c) The Manager shall keep or cause to be kept books and records pertaining to the Company’s
business showing all of its assets and liabilities, receipts and disbursements, Net Income and Net
Losses, Members’ Capital Accounts and all transactions entered into by the Company. Such books and
records of the Company shall be kept at the office of the Company
 and the Members and their representatives shall at all reasonable times have free access
thereto for the purpose of inspecting or copying the same.

          (d) The Company’s books of account shall be kept on an accrual basis or as otherwise provided
by the Manager and otherwise in accordance with GAAP, except that for income tax purposes such
books shall be kept in accordance with applicable tax accounting principles.

          (e) The Company shall, and shall cause each of its Subsidiaries to, (i) maintain accurate
books and records reflecting its assets and liabilities and maintain proper and adequate “internal
control over financial reporting” (as such term is defined in Rules 13a-15(f) and 15d-15(f)
promulgated under the Exchange Act, and as such rules may be amended and supplemented from time to
time); and (ii) deliver to any Member, immediately upon request, certifications and statements with
respect to the Company and its
Subsidiaries satisfying the requirements of Rule 13a-l4(a) or
15d-14(a) under the Exchange Act, and 18 U.S.C. § 1350 (Section 906 of the Sarbanes-Oxley Act of
2002).

          (f) Subject to the confidentiality provisions of this Agreement, the Company will permit
representatives of a Member and its Affiliates, at their expense, to obtain all books and accounts,
documents and other information in the possession of the Company and its

33

 

Subsidiaries, if any, as
may reasonably be requested in order to enable such Member to monitor its investment in the Company
and to exercise its rights under this Agreement and, to the extent applicable, to provide such
other access and information as may be reasonably required to enable such Member to account for the
investment in the Company and otherwise comply with the requirements of applicable laws, generally
accepted accounting principles and requirements of any Governmental Authority.

     6.2 Certain Tax Matters. The “tax matters partner” for purposes of Section 6231(a)(7) of the
Code shall be RHI Inc. (the “Tax Matters Member”). The Tax Matters Member shall have all
the rights, duties, powers and obligations provided for in Sections 6221 through 6232 of the Code
with respect to the Company. The Tax Matters Member shall inform each other Member of all
significant matters that may come to its attention in its capacity as such by giving notice thereof
within ten days after becoming aware thereof and, within such time, shall forward to each other
Member copies of all significant written communications it may receive in such capacity. KRH shall
be entitled to participate in any tax proceeding relating to the Company and the Tax Matters Member
shall not settle any such proceeding without KRH’s consent not to be unreasonably withheld. This
provision is not intended to authorize the Tax Matters Member to take any action left to the
determination of an individual Member under Sections 6222 through 6231 of the Code.

     6.3 Allocations.

          (a) General. Except as provided in Section 6.3(b) and as otherwise provided in this
Agreement, Net Income and Net Losses, and, to the extent necessary, individual items of Company
income, gain, loss and deduction, shall be allocated to the Members in such amounts,
to the maximum extent possible, to make the Adjusted Capital Account Balances of the Members
(after the application of this Section 6.3(a)) to be in proportion to the Members’ Percentage
Interests.

          (b) Special Allocations.

               (i) Qualified Income Offset. If any Member receives an unexpected adjustment,
allocation, or distribution described in Sections l.704-l(b)(2)(ii)(d)(4-6) of the Treasury
Regulations in any Fiscal Year or other period which would cause such Member to have a deficit
Adjusted Capital Account Balance as of the end of such Fiscal Year or other period, items of
Company income and gain (consisting of a pro rata portion of each item of Company income, including
gross income and gain) shall be specifically allocated to such Member in an amount and manner
sufficient to eliminate, to the extent required by the Treasury Regulations, the deficit in such
Member’s Adjusted Capital Account Balance as quickly as possible. This Section 6.3(b)(i) is
intended to comply with the qualified income offset provision in Section l.704-l(b)(2)(ii)(d) of
the Treasury Regulations and shall be interpreted consistently therewith.

               (ii) Gross Income Allocation. If any Member would otherwise have a deficit Adjusted
Capital Account Balance as of the last day of any Fiscal Year or other period, individual items of
income and gain of the Company shall be specifically allocated to such

34

 

Member (in the manner
specified in Section 6.3(b)(i)) so as to eliminate such deficit as quickly as possible.

               (iii) Company Minimum Gain Chargeback. If there is a net decrease in Company Minimum
Gain during a Company taxable year, then each Member shall be allocated items of Company income and
gain for such taxable year (and, if necessary, for subsequent years) in an amount equal to such
Member’s share of the net decrease in Company Minimum Gain, determined in accordance with Section
1.704-2(g)(2) of the Treasury Regulations. This Section 6.3(b)(iii) is intended to comply with the
minimum gain chargeback requirement of Sections 1.704-2(f) of the Treasury Regulations and shall be
interpreted consistently therewith.

               (iv) Member Non-recourse Debt Minimum Gain Chargeback. If there is a net decrease in
Member Non-recourse Debt Minimum Gain during a Fiscal Year or other period, then each Member shall
be allocated items of Company gross income or gain equal to such Member’s share of such net
decrease, except to the extent such allocation would not be required under Sections l.704-2(i)(4)
or 1.704-2(j)(2) of the Treasury Regulations. The amounts referred to in this Section 6.43(b)(iv)
and the items to be so allocated shall be determined in accordance with Section 1.704-2 of the
Treasury Regulations. This Section 6.3(b)(iv) is intended to comply with the minimum gain
chargeback requirement contained in Section 1.704-2(i)(4) of the Treasury Regulations and shall be
interpreted consistently therewith.

               (v) Limitations on Net Loss Allocations. With respect to any Member, notwithstanding
the provisions of Section 6.4(a), the amount of Net Losses for any Fiscal Year or other period that
would otherwise be allocated to a Member under Section 6.4(a) shall not cause or increase a deficit
Adjusted Capital Account Balance. Any Net Losses in excess of the limitation set forth in this
Section 6.3(b)(v) shall be allocated among the Members, pro rata, to
the extent each, respectively, is liable or exposed with respect to any debt or other
obligations of the Company.

               (vi) Member Non-recourse Deductions. Member nonrecourse deductions (as described in
Section 1.704-2(i) of the Treasury Regulations) for any Fiscal Year or other period shall be
specifically allocated to the Members who bear the economic risk of loss with respect to Member
Non-recourse Debt to which such partner nonrecourse deductions are attributable in accordance with
Section 1.704-2(i)(1) of the Treasury Regulations.

               (vii) Non-recourse Deductions. Non-recourse deductions (as described in Section
1.704-2(b) of the Treasury Regulations) for any Fiscal Year or other period shall be allocated to
the Members in accordance with their relative Percentage Interests.

               (viii) Excess Non-recourse Liabilities. If the built-in gain in Company assets
subject to Non-recourse Debts exceeds the gain described in Section 1.752-3(a)(2) of the Treasury
Regulations, the Excess Non-recourse Liabilities shall be allocated (i) first, to KRH up to the
amount of built-in gain that is allocable to KRH on Section 704(c) Property, other than built-in
gain already taken into account under
Sections 1.752-3(a)(1) and (2), (ii) second, among the
Members other than KRH up the amount of built in gain that is allocable to such other Members on
Section 704(c) Property, other than built-in gain already taken into account under

35

 

Sections
1.752-3(a)(1) and (2) and (iii) last, any remaining Excess Non-recourse Liabilities shall be
allocated among the Members in accordance with their relative Percentage Interests.

               (ix) Ordering Rules. Anything contained in this Agreement to the contrary
notwithstanding, allocations for any Fiscal Period or other period of nonrecourse deductions (as
described in Section 1.704-2(b) of the Treasury Regulations) or partner nonrecourse deductions (as
described in Section 1.704-2(i) of the Treasury Regulations), or of items required to be allocated
pursuant to the minimum gain chargeback requirements contained in Sections 6.3(b)(iii) and
6.3(b)(iv), shall be made before any other allocations hereunder.

          (c) Curative Provisions. The allocations set forth in Sections 6.3(b)(i)-(viii) (the
“Regulatory Allocations”) are intended to comply with certain requirements of Sections
1.704-1(b) and 1.704-2 of the Treasury Regulations. The Regulatory Allocations may not be
consistent with the manner in which the Members intend to allocate Net Income and Net Losses or
make Company contributions. Accordingly, notwithstanding the other provisions of this Agreement,
but subject to the Regulatory Allocations, Members shall reallocate items of income, gain,
deductions and loss among the Members so as to eliminate the effect of the Regulatory Allocations
and thereby cause the respective Capital Accounts of the Members to be in the amounts (or as close
thereto as possible) they would have been if Net Income and Net Losses (and such other items of
income, gain, deduction and loss) had been allocated without reference to the Regulatory
Allocations. In general, the Members anticipate that this will be accomplished by specially
allocating other Net Income and Net Losses (and such other items of income, gain, deduction and
loss) among the Members so that the net amount of the Regulatory Allocations and such special
allocations to each such Member is zero. In addition, if in any Fiscal Year or other period there
is a decrease in Company Minimum Gain, or in Member Non-recourse Debt Minimum Gain, and application
of the minimum gain chargeback requirements set forth in this Section 6.4 would cause a distortion
in the economic arrangement among the Members, the
Members may, if they do not expect that the Company will have sufficient other income to
correct such distortion, request the Internal Revenue Service to waive either or both of such
minimum gain chargeback requirements. If such request is granted, this Agreement shall be applied
in such instance as if it did not contain such minimum gain chargeback requirements.

     6.4 Allocations of Net Income and Net Losses for Federal Income Tax Purposes. The Company’s
ordinary income and losses and capital gains and losses as determined for federal income tax
purposes (and each item of income, gain, loss or deduction entering into the computation thereof)
shall be allocated to the Members in the same proportions as the corresponding “book” items are
allocated pursuant to Section 6.4 of this Agreement. Notwithstanding the foregoing sentence,
federal income tax items relating to any Section 704(c) Property shall be allocated among the
Members in accordance with Section 704(c) of the Code and Treasury Regulations Section
1.704-1(b)(2)(iv)(g) to take into account the difference between the fair market value and the tax
basis of such Section 704(c) Property using any method approved by the Manager and prescribed under
Treasury Regulations corresponding to Section 704(c) of the Code. Items described in this
Section 6.4 shall neither be credited nor charged to the Members’ Capital Accounts.

     6.5 Elections. Except as otherwise expressly provided herein, all elections required or
permitted to be made by the Company under the Code or other applicable tax law, and all

36

 

decisions
with respect to the calculation of its taxable income or tax loss under the Code or other
applicable tax law, shall be made in such manner as may be reasonably determined by the Manager;
provided that the Company shall make the election to amortize organizational expenses
pursuant to Section 709 of the Code and the regulations promulgated thereunder provided,
further, that the Company shall not file any election pursuant to Section 301.7701-3(c) of
the Treasury Regulations to be treated as an entity other than a partnership.

     6.6 Tax Year. The taxable year of the Company shall be the same as its Fiscal Year.

     6.7 Withholding Requirements. Notwithstanding any provision herein to the contrary, the
Manager is authorized to take any and all actions that it determines to be necessary or appropriate
to ensure that the Company satisfies any and all withholding and tax payment obligations under
Sections 1441, 1445, 1446 or any other provision of the Code or other applicable law. Without
limiting the generality of the foregoing, the Manager may withhold from distributions the amount
that it determines is required to be withheld from the amount otherwise distributable to any Member
pursuant to Article 5; provided, however, that such amount shall be deemed to have
been distributed to such Member for purposes of applying Article 5 and this Article 6. The Manager
will not withhold any amounts from cash or other property distributable to any Member to satisfy
any withholding and tax payment obligations to the extent that such Member demonstrates to the
Manager’s satisfaction that such Member is not subject to such withholding and tax payment
obligation. In the event that the Manager withholds or pays tax in respect of any Member for any
period in
excess of the amount of cash or other property otherwise distributable to such Member for such
period (or there is a determination by any taxing authority that the Company should have withheld
or paid any tax for any period in excess of the tax, if any, that it actually withheld or paid for
such period), such excess amount (or such additional amount) shall be treated as a recourse loan to
such Member that shall bear interest at the rate of ten percent per annum and be payable on demand.

     6.8 Reports to Members.

          (a) If requested by KRH, the books of account and records of the Company shall be audited as
of the end of each Fiscal Year by the Company’s independent public accountants.

          (b) Within 45 calendar days after the end of each Fiscal Period of each Fiscal Year of the
Company (or if the Company or the Manager files reports under the Exchange Act, such earlier date
as the quarterly report for such Fiscal Period would be due under the Exchange Act), the Company
shall send to each Person who was a Member during such period an unaudited report setting forth the
following as of the end of such Fiscal Period:

               (i) unless such Fiscal Period is the last Fiscal Period of the Fiscal Year, an unaudited
balance sheet as of the end of such period;

               (ii) unless such Fiscal Period is the last Fiscal Period of the Fiscal Year, an unaudited
income statement of the Company for such period;

               (iii) a statement of each Member’s Capital Account;

37

 

               (iv) a summary of the Company’s activities during such period; and

               (v) a cash flow statement.

          (c) Within 100 calendar days after the end of each Fiscal Year of the Company (or the next
Business Day if the 100th calendar day is not a Business Day), the Company shall send to
each Person who was a Member during such period an audited report setting forth the following as of
the end of such Fiscal Year:

               (i) an audited balance sheet as of the end of such Fiscal Year;

               (ii) an audited income statement of the Company for such Fiscal Year;

               (iii) a statement of each Member’s Capital Account; and

               (iv) a cash flow statement.

          (d) The Company shall provide each Member with monthly reports containing the monthly
information that is provided to senior management.

          (e) With reasonable promptness, the Manager will deliver such other information available to
the Manager, including financial statements and computations, as any Member may from time to time
reasonably request in order to comply with regulatory requirements, including reporting
requirements, to which such Member is subject.

     6.9 Auditors. The auditors of the Company shall be KPMG LLP, unless otherwise
determined by the audit committee of the Board of Directors of the Manager.

     6.10 Transfers During Year. In order to avoid an interim closing of the Company’s
books, the allocation of Net Income and Net Losses under this Article 6 between a Member who
Transfers part or all of its Interest in the Company during the Company’s Fiscal Year and such
Member’s transferee, or to a Member whose Percentage Interest varies during the course of the
Company’s Fiscal Year, may be determined pursuant to any method chosen by the Manager.

     6.11 Code Section 754 Election. The Company shall make the election provided for under Code
Section 754 for the first Fiscal Year during which there is an Exchange pursuant to Section 9.1 or
earlier, if determined to be in the best interest of the Company and its Members by RHI Inc. and
such election shall not be revoked.

ARTICLE 7

DISSOLUTION

     7.1 Dissolution.

          (a) The Company shall be dissolved and subsequently terminated upon the occurrence of the
first of the following events:

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               (i) the unanimous decision of the Members that then hold Membership Units to dissolve the
Company;

               (ii) the entry of a decree of judicial dissolution of the Company pursuant to § 18-802 of the
LLC Act; or

               (iii) the termination of the legal existence of the last remaining Member or the occurrence of
any other event that causes the last remaining Member to cease to be a Member of the Company,
unless the Company is continued without dissolution pursuant to Section 7.1(b).

          (b) Upon the occurrence of any event that causes the last remaining Member of the Company to
cease to be a Member of the Company (other than upon continuation of the Company without
dissolution upon an assignment by the Member of all of its Interest in the Company and the
admission of the transferee as a Member pursuant to Section 8.2), to the fullest extent permitted
by law, the personal representative of such Member is hereby authorized to, and shall, within 90
days after the occurrence of the event that terminated the continued membership of such Member in
the Company, agree in writing (i) to continue the Company and (ii) to the admission of the personal
representative or its nominee or designee, as the case may be, as a substitute Member of the
Company, effective as of the occurrence of the event that terminated the continued membership of
such Member in the Company.

          (c) Notwithstanding any other provision of this Agreement, the bankruptcy (as defined in §§
18-101(1) and 18-304 of the LLC Act) of a Member shall not cause the Member to cease to be a Member
of the Company and upon the occurrence of such an event, the Company shall continue without
dissolution.

     7.2 Winding-Up. When the Company is dissolved, the business and property of the Company shall
be wound up in an orderly manner by the Manager or by a liquidating trustee as may be appointed by
the Manager (the Manager or such liquidating trustee, as the case may be, the
“Liquidator”). If the Members are unable to agree with respect to the distribution of any
Company assets, then the Liquidator shall use its reasonable best efforts to reduce to cash and
Cash Equivalents such assets of the Company as the Liquidator shall deem it advisable to sell,
subject to obtaining fair market value for such assets and any tax or other legal considerations.
No Member shall take any action (with respect to the Company) that is inconsistent with, or not
necessary to or appropriate for, the winding up of the Company’s business and affairs.

     7.3 Final Distribution.

          (a) As soon as reasonable following the event that caused the dissolution of the Company, the
assets of the Company shall be applied in the following manner and order:

               (i) to pay the expenses of the winding-up, liquidation and dissolution of the Company;

               (ii) to pay all creditors of the Company, other than the Members, either by actual payment or
by making a reasonable provision therefor, in the manner, and in the order of priority set forth in
§ 18-804 of the LLC Act;

39

 

               (iii) to pay, in accordance with the provisions of this Agreement, on a pro rata basis, the
debts payable to all creditors of the Company that are Members, either by actual payment or by
making a reasonable provision therefor; and

               (iv) to distribute the remaining assets to the Members in proportion to the positive balances
in the Members’ respective Capital Accounts, determined after taking into
account all Capital Account adjustments for the Company taxable year during which such
dissolution occurs (other than those made as a result of the distributions set forth in this
Section 7.3(a)(iii)), by the end of the taxable year in which such dissolution occurs or, if later,
within 90 days after the date of the dissolution.

          (b) If any Member has a deficit balance in its Capital Account in excess of any unpaid Capital
Contributions (if any), such Member shall have no obligation to make any Capital Contribution to
the Company with respect to such deficit, and such deficit shall not be considered a debt owed to
the Company or to any other Person for any purpose whatsoever.

          (c) Each Member shall look solely to the assets of the Company for the amounts distributable
to it hereunder and shall have no right or power to demand or receive property therefor from any
other Member.

          (d) The Company shall terminate when (i) all of the assets of the Company, after payment of or
due provision for all debts, liabilities and obligations of the Company shall have been distributed
to the Member in the manner provided for in this Agreement, and (ii) the Certificate shall have
been canceled in the manner required by the LLC Act.

ARTICLE 8

TRANSFER; SUBSTITUTION; ADJUSTMENTS

     8.1 Restrictions on Transfer.

          (a) Notwithstanding anything to the contrary herein contained, each Member may, subject to
Section 8.1(b), Transfer any or all of its Membership Units; provided, however,
that: (i) RHI Inc. shall not have the right to transfer any of its Membership Units; (ii) any
transferee of Membership Units must assume, by operation of law or written agreement, all of the
obligations of the transferring Member with respect to the transferred Membership Units, even if
the transferee is not admitted as a Member of the Company; and (iii) with respect to a transfer of
Membership Units by KRH, such transferee shall not have the rights and powers of KRH to designate
nominees to Manager’s Board of Directors (pursuant to the Director Designation Agreement), unless
the transferee is a Permitted Transferee. It is a condition to any Transfer by a Member (the
“Transferring Member”) otherwise permitted hereunder that the transferee (i) agrees to
become a party to, and be bound by the terms of, this Agreement to the same extent as the
Transferring Member, and (ii) assumes by operation of law or express agreement all of the
obligations of the Transferring Member under this Agreement or to which such Transferring Member is
a party with respect to such Transferred Units or other Equity Interests in the Company.
Notwithstanding the foregoing, any transferee of any Transferred Units or other Equity Interests in
the Company shall be subject to any and all ownership

40

 

limitations contained in this Agreement or
any other agreement with the Company to which such Transferring Member is a party. Any transferee,
whether or not admitted as a Member, shall take subject to the obligations of the transferor
hereunder.

          (b) In addition to any other restrictions on Transfer herein contained, including, without
limitation, the provisions of this Article 8, any purported Transfer or assignment of a Unit or
other Equity Interests in the Company by any Member made in the following events shall be void
ab initio:

               (i) to any Person who lacks the legal right, power or capacity to own Units;

               (ii) if such Transfer would cause the Company to become, with respect to any employee benefit
plan subject to Title I of ERISA, a “party-in-interest” (as defined in Section 3(14) of ERISA) or a
“disqualified person” (as defined in Section 4975(c) of the Code);

               (iii) if such Transfer would, in the opinion of counsel to the Company, cause any portion of
the assets of the Company to constitute assets of any employee benefit plan pursuant to Department
of Labor Regulations Section 2510.3-101;

               (iv) if such Transfer requires the registration of such Units pursuant to any applicable
federal, state or foreign securities laws or would otherwise violate any federal, state or foreign
securities laws or regulations applicable to the Company or the Units;

               (v) unless waived by the Manager after consulting with tax counsel, if such Transfer would
result in the Company being unable to satisfy at least one of the “lack of actual trading” safe
harbor of Section 1.7704-1(j) of the Treasury Regulations or the “private placement” safe harbor of
Section 1.7704-1(h) of the Treasury Regulations;

               (vi) if such Transfer subjects the Company to be regulated under the Investment Company Act of
1940, the Investment Advisors Act of 1940 or ERISA, each as amended;

               (vii) if such Transfer may cause the Company to cease to be classified as a partnership for
U.S. federal or state income tax purposes;

               (viii) if such Transfer violates any applicable laws; or

               (ix) if the Company does not receive written instruments (including without limitation, copies
of any instruments of Transfer and such assignee’s consent to be bound by this Agreement as an
assignee) that are in a form satisfactory to the Manager (in its sole and absolute discretion).

     8.2 Substituted Members.

          (a) No Member shall have the right to substitute a transferee as a Member in his or her place
with respect to any Units or other Equity Interests in the Company so Transferred (including any
transferee permitted by Section 8.1) unless (i) such Transfer is made

41

 

in compliance with the terms
of this Agreement and any other agreements with the Company or other Members to which such
transferor Member is a party and (ii) such transferee assumes, by
written instrument satisfactory to the Company pursuant to Section 8.l(b)(ix) above, all the
rights and powers and is subject to all the restrictions and liabilities that were applicable to
the transferor by virtue of the transferor’s ownership of the Units or other Equity Interests in
the Company being Transferred.

          (b) Except as provided in Section 8.2(c) and otherwise in this Agreement, a transferee who has
been admitted as a Member in accordance with Section 8.2(a) shall have all the rights and powers
and be subject to all the restrictions and liabilities of a Member under this Agreement holding the
same Units or other Equity Interests in the Company. The admission of any transferee as a Member
shall be subject to the provisions of Section 3.1.

          (c) In the event of a Transfer by KRH, the transferee shall not have the rights and powers of
KRH under this Agreement unless the transferee is a Permitted Transferee of KRH prior to and
following the Transfer.

     8.3 Effect of Void Transfers. No Transfer of any Units owned by a Member in violation hereof
shall be made or recorded on the books of the Company, and any such purported Transfer shall be
void and of no effect.

ARTICLE 9

EXCHANGE RIGHT OF MEMBER

     9.1 Exchange Right of a Member.

          (a) Subject to compliance with the conditions to exchange set forth in this Article 9,
beginning on December 23, 2008, each Member (other than RHI Inc.) shall be entitled to exchange any
or all of its Membership Units (the “Exchange Right”) for the consideration set forth in
(b) and cause RHI Inc. to purchase such units for such consideration. A Member desiring to
exercise its Exchange Right (the “Exchanging Member”) shall exercise such right by giving
written notice (the “Exchange Notice”) to RHI Inc. The Exchange Notice shall specify the
number of Membership Units (the “Exchanged Units”) that the Exchanging Member intends to
have RHI Inc. acquire for the consideration set forth in Section 9.1(b) and a date, which is not
less than seven (7) Business Days nor more than 10 Business Days after delivery of the Exchange
Notice, on which exercise of the Exchange Right shall be completed (the “Exchange Date”).
Unless the Exchanging Member has timely delivered a Retraction Notice as provided in Section
9.1(b), on the Exchange Date (to be effective immediately prior to the close of business on the
Exchange Date) (i) the Exchanging Member shall transfer and surrender the Exchanged Units to RHI
Inc., free and clear of all liens and encumbrances, and (ii) RHI Inc. shall transfer to the
Exchanging Member the consideration to which the Exchanging Member is entitled under
Section 9.1(b).

          (b) In exercising its Exchange Right, an Exchanging Member, at RHI Inc.’s option, shall be
entitled to receive from RHI Inc. the Cash Amount, Shares with an aggregate RHI Market Price equal
to the Cash Amount or a combination of cash and Shares with an

42

 

aggregate RHI Inc. Market Price equal to the Cash Amount less cash to be received in the Exchange.
Within three (3) Business Days of delivery of the Exchange Notice, RHI Inc. shall give written
notice (the “Option Notice”) to the Exchanging Member of its intended settlement method;
provided that if RHI Inc. does not timely deliver an Option Notice, RHI Inc. shall be
deemed to have elected to pay the consideration entirely in Shares. If RHI Inc. elects to pay any
amount of the consideration in cash, the Exchanging Member may retract its Exchange Notice by
giving written notice (the “Retraction Notice”) to the Company (with a copy to RHI Inc.)
within two (2) Business Days of delivery of the Option Notice. The timely delivery of a Retraction
Notice shall terminate all of the Exchanging Member’s, Company’s and RHI Inc.’s rights and
obligations under this Section 9.1 arising from the Exchange Notice.

          (d) The number of Shares and the cash that an Exchanging Member is entitled to receive under
Section 9.1(b) shall not be adjusted on account of any distributions previously made with respect
to the Exchanged Units or dividends previously paid with respect to RHI Inc. common stock;
provided, however, that if a Exchanging Member causes RHI Inc. to exchange
Exchanged Units and the Exchange Date occurs subsequent to the record date for any distribution
with respect to the Exchanged Units but prior to payment of such distribution, the Exchanging
Member shall be entitled to receive such distribution with respect to the Exchanged Units on the
date that it is made notwithstanding that the Exchanging Member transferred and surrendered the
Exchanged Units to RHI Inc. prior to such date.

          (e) Upon consummation of a closing of an Exchange contemplated by this Section 9.1, each
Membership Unit transferred to RHI Inc. at such closing shall thereafter be registered in the name
of RHI Inc. as a Membership Unit, and the Manager shall modify the register and Exhibit A to
reflect such transfer. In the event that, as a result of an Exchange, KRH shall hold zero
Membership Units, KRH shall cease to be a Member of the Company for any purpose under this
Agreement or the Act.

          (f) The parties shall report an Exchange consummated pursuant to this Section 9.1 as a taxable
sale of Membership Units by KRH (or such other Exchanging Member) to RHI Inc. and no party shall
take a contrary position on any tax return. At the time of an Exchange, the consideration paid for
the Exchanged Units shall be allocated among the assets of the Company (and any subsidiary of the
Company that is a flow-thru or disregarded entity for U.S. federal income tax purposes) in
accordance with Sections 755 and 743(b) of the Code and the Treasury Regulations promulgated
thereunder, as reasonably determined by the Manager.

     9.2 Effect of Exercise of Exchange Right. This Agreement shall continue notwithstanding
the exercise of an Exchanging Member’s Exchange Right and all governance or other rights set forth
herein shall be exercised by the remaining Members and the Exchanging Member (to the extent of such
Exchanging Member’s remaining Interest in the Company). No exercise of an Exchanging Member’s
Exchange Right shall relieve such Exchanging Member of any prior breach of this Agreement.

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ARTICLE 10

MISCELLANEOUS

     10.1 Agreement to Cooperate; Further Assurances. In case at any time any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper officers and
Managers of the Company and each Member and their respective Affiliates shall execute such further
documents (including assignments, acknowledgments and consents and other instruments of Transfer)
and shall take such further action as shall be necessary or desirable to effect such Transfer and
to otherwise carry out the purposes of this Agreement, in each case to the extent not inconsistent
with applicable law.

     10.2 Amendments. Except as otherwise expressly provided in this Agreement (including as
provided in Sections 4.3(b)(vi) and 4.3(b)(xix)), amendments to this Agreement shall require a
Majority Member Vote. Amendments to specified provisions require the additional consent of the
Independent Directors of the Board of RHI Inc., as Manager. No amendment that would materially
impair the voting power or economic rights of any Membership Units in relation to any other
outstanding class of units may be made without the consent of a majority of the affected units. No
amendment that would materially impair the voting power or economic rights of any member in
relation to the other members may be made without the consent of the affected member.

     10.3 Confidentiality. For a period of three years after the earlier of (x) the dissolution
of the Company and the termination of this Agreement or (y) the date upon which such Member ceases
to be a Member of the Company:

          (a) (i) Each Member shall use and cause its Affiliates to use the same degree of care it uses
to safeguard its own Confidential Information (as defined below) and to cause its and its
Affiliates’ directors, officers, employees, agents and representatives to keep confidential all
Confidential Information, including but not limited to Intellectual Property and other Proprietary
Information of the other Members and the Company, and

               (ii) Each Member shall hold and shall cause its Affiliates to hold and shall cause its and its
Affiliates’ directors, officers, employees, agents and representatives to hold in confidence,
unless compelled to disclose by judicial or administrative process or, in the opinion of counsel,
by the requirements of law, all documents and information concerning any other party hereto
furnished it by such other party or its representatives in connection with the transactions
contemplated by this Agreement (together with the information referred to in clause (i) above, the
“Confidential Information”), except to the extent that any such information can be shown to
have been (A) previously known by the party to which it is
furnished lawfully and without breaching or having breached an obligation of such party or the
disclosing party to keep such documents and information confidential, (B) in the public domain
through no fault of the disclosing party, or (C) independently developed by the disclosing party
without using or having used the Confidential Information.

          (b) Each Member agrees that the Confidential Information of the Company shall only be
disclosed in secrecy and confidence, and is to be maintained by them in secrecy and

44

 

confidence
subject to the terms hereof. Each Member shall (i) not, directly or indirectly, use the
Confidential Information of the Company, except as necessary in the ordinary course of the
Company’s business, or disclose the Confidential Information of the Company to any third party and
(ii) inform all of its employees to whom the Confidential Information of the Company is entrusted
or exposed of the requirements of this Section and of their obligations relating thereto.

          (c) The Company shall preserve the confidentiality of all Confidential Information supplied by
the Members and their Affiliates (“Member Information”) to the same extent that a Member
must preserve the confidentiality of Confidential Information pursuant to Sections 10.3(a) and (b).

          (d) Member Information shall not be supplied by the Company or its Subsidiaries to any Person
who is not an employee of the Company or the Manager, including any employee of a Member who is not
an employee of the Company or the Manager. Notwithstanding the foregoing, Member Information may
be disclosed to authorized third-party contractors of the Company if the Company determines that
such disclosure is reasonably necessary to further the business of the Company, and if such
contractor executes a non-disclosure agreement preventing such contractor from disclosing such
Member Information for the benefit of each provider of Member Information in a form reasonably
acceptable to KRH. Member Information disclosed by any Member to the Company or the Manager shall
not be shared with any other Member that is not the Manager without the disclosing Member’s written
consent.

     10.4 Injunctive Relief. The Company and each Member acknowledge and agree that a violation
of any of the terms of this Agreement will cause the other Members and the Company, as the case may
be, irreparable injury for which an adequate remedy at law is not available. Accordingly, it is
agreed that each of the Members and the Company will be entitled to an injunction, restraining
order or other equitable relief to prevent breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof in any court of competent jurisdiction, in
addition to any other remedy to which they may be entitled at law or, equity. Nothing stated
herein shall limit any other remedies provided under this Agreement or available to the parties at
law or in equity.

     10.5 Successors, Assigns and Transferees. The provisions of this Agreement will be binding
upon and will inure to the benefit of the parties hereto and their respective successors and
Permitted Transferees, and nothing in this Agreement, express or implied, is intended to or shall
confer upon any other Person, including but not limited to any creditor of the Company or its
Subsidiaries, any right, benefit, or remedy of any nature by reason of this Agreement. An
assignment of the rights, interests or obligations hereunder, including but not limited to an
assignment by operation of law, shall be null and void unless a provision of this Agreement
specifically provides otherwise or the Company gives its prior written consent therefor.

     10.6 Notices. All notices, demands or other communications to be given under or by reason
of this Agreement shall be in writing and shall be delivered by hand or sent by facsimile,
electronic mail or nationally recognized overnight delivery service and shall be deemed given when
received if delivered on a Business Day during normal business hours of the recipient or, if not so
delivered, on the next Business Day following receipt. Notices to the Company or any

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Member shall
be delivered to the Company or such Member as set forth in Exhibit A, as it may be revised
from time to time. Any party to this Agreement may change its address or fax number for notices,
demands and other communications under this Agreement by giving notice of such change to the other
parties hereto in accordance with this Section 10.6.

     10.7 Integration. This Agreement, together with the other Joint Venture Agreements and the
documents referred to herein or therein, or delivered pursuant hereto or thereto, contain the
exclusive entire and final understanding of the parties with respect to the subject matter hereof
and thereof. There are no agreements, representations, warranties, covenants or undertakings with
respect to the subject matter hereof and thereof other than those expressly set forth herein and
therein. Except as expressly set forth herein, this Agreement together with the other Joint
Venture Agreements supersede all other prior agreements, discussions, negotiations, communications
and understandings between the parties with respect to such subject matter hereof and thereof. No
party has relied on any statement, representation, warranty, or promise not expressly contained in
this Agreement or another Joint Venture Agreement in connection with this transaction.

     10.8 Severability. If one or more of the provisions, paragraphs, words, clauses, phrases
or sentences contained herein, or the application thereof in any circumstances, is held invalid,
illegal or unenforceable in any respect for any reason, then such provision, paragraph, word,
clause, phrase or sentence shall be deemed restated to reflect the original intention of the
parties as nearly as possible in accordance with applicable law and the remainder of this
Agreement. The legality and enforceability of any such provision, paragraph, word, clause, phrase
or sentence in every other respect and of the remaining provisions, paragraphs, words, clauses,
phrases or sentences hereof will not be in any way impaired, it being intended that all
obligations, rights, powers and privileges of the Company and the Members will be enforceable to
the fullest extent permitted by law. Upon such determination of invalidity, illegality or
unenforceability, the Company and the Members shall negotiate in good faith to amend this Agreement
to effect the original intent of the Members.

     10.9 Counterparts. This Agreement may be executed in one or more counterparts and by
different parties on separate counterparts, each of which will be deemed an original, but all of
which will constitute one and the same instrument. The parties agree that this Agreement shall be
legally binding upon the electronic transmission, including by facsimile or email, by each party of
a signed signature page hereof to the other party.

     10.10 Governing Law; Submission to Jurisdiction.

          (a) This Agreement is to be construed in accordance with and governed by the internal laws of
the State of Delaware without giving effect to any choice of law rule that would cause the
application of the laws of any jurisdiction other than the internal laws of the State of Delaware
to the rights and duties of the parties.

          (b) Each party hereto agrees that any legal action or other legal proceeding relating to this
Agreement or the enforcement of any provision of this Agreement shall be brought or otherwise
commenced exclusively in any state or federal court located in Delaware or in New York, New York.
Subject to the preceding sentence, each party thereto:

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               (i) expressly and irrevocably consents and submits to the jurisdiction of each state and
federal court located in Delaware or New York, New York (and each appellate court located in
Delaware or the State of New York) in connection with any such legal proceeding, including to
enforce any settlement, order or award;

               (ii) consents to service of process in any such proceeding in any manner permitted by the
applicable laws of Delaware or the State of New York, and agrees that service of process by
registered or certified mail, return receipt requested, at its address specified pursuant to
Section 10.6 is reasonably calculated to give actual notice, to the extent permitted by applicable
law;

               (iii) agrees that each state and federal court located in Delaware or New York, New York shall
be deemed to be a convenient forum;

               (iv) waives and agrees not to assert (by way of motion, as a defense or otherwise), in any
such legal proceeding commenced in any state or federal court located in Delaware or New York, New
York, any claim that such party is not subject personally to the jurisdiction of such court, that
such legal proceeding has been brought in an inconvenient forum, that the venue of such proceeding
is improper or that this Agreement or the subject matter hereof or thereof may not be enforced in
or by such court; and

               (v) agrees to the entry of an order to enforce any resolution, settlement, order or award made
pursuant to this Section by the state and federal courts located in Delaware or New York, New York
and in connection therewith hereby waives, and agrees not to assert by way of motion, as a defense,
or otherwise, any claim that such resolution, settlement, order or award is inconsistent with or
violative of the laws or public policy of the laws of Delaware or the State of New York or any
other jurisdiction.

          (c) In the event of any action or other proceeding relating to this Agreement or the
enforcement of any provision of this Agreement, the prevailing party (as determined by the court)
shall be entitled to payment by the non-prevailing party of all costs and expenses (including
reasonable attorneys’ fees) incurred by the prevailing party, including any costs and expenses
incurred in connection with any challenge to the jurisdiction or the convenience or propriety of
venue of proceedings before any state or federal court located in Delaware or New York, New York.

[Signature Page to Follow]

47

 

     IN WITNESS WHEREOF, each of the undersigned has executed this Agreement or caused this
Agreement to be executed on its behalf as of the date first written above.

	 	 	 	 	 
	 	KRH INVESTMENTS LLC

 	 
	 	By:  	/s/ Henry S. Hoberman
 	 
	 	 	Name:  	Henry S. Hoberman 	 
	 	 	Title:  	Executive Vice President 

General Counsel & Secretary	 
	 

	 	 	 	 	 
	 	RHI ENTERTAINMENT, INC.

 	 
	 	By:  	/s/ Henry S. Hoberman
 	 
	 	 	Name:  	Henry S. Hoberman 	 
	 	 	Title:  	Executive Vice President 

General Counsel & Secretary	 
	 

Signature page — LLC Agreement

 

 

Exhibit A

Members and Units

	 	 	 
	Names and Addresses	 	Membership Units
	KRH Investments LLC

	 	9,900,000 
	c/o Kelso & Company,

	 	Membership Units
	320 Park Avenue, 24th Floor,
	 	 
	New York, NY 10022 
	 	 
	 
	 	 
	Attention: General Counsel
	 	 
	Fax: (212) 223-2379 
	 	 
	 
	 	 
	with a copy to:
	 	 
	Latham & Watkins LLP
	 	 
	885 Third Avenue
	 	 
	New York, NY 10019 
	 	 
	Attention: Raymond Y. Lin, Esq
	 	 
	Fax: (212) 751-4864 
	 	 
	 
	 	 
	RHI Entertainment, Inc.

	 	13,500,100 
	1325 Avenue of the Americas, 21st Floor

	 	Membership Units
	New York, NY 10019 
	 	 
	 
	 	 
	Attention: General Counsel
	 	 
	Fax: (212) 977-3917 
	 	 
	 
	 	 
	with a copy to:
	 	 
	Latham & Watkins LLP
	 	 
	885 Third Avenue
	 	 
	New York, NY 10019 
	 	 
	Attention: Raymond Y. Lin, Esq
	 	 
	Fax: (212) 751-4864 
	 	 
	 
	Totals:                                           

	 	23,400,100 
	 

	 	Membership Units

A-1

 

Exhibit B

Form of Membership Unit Certificate

B-1

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