Document:

Exhibit 10.6

Employment Agreement

This Employment Agreement (the “Agreement”), entered into on January 12, 2006 and effective as of the Effective Date (as defined in Section 2(b)), is made by and between Hallmark Entertainment, LLC, a Delaware limited liability company which following its merger with HEI Acquisition, LLC shall be renamed RHI Entertainment, LLC (together with any successor thereto, the “Company”), and Robert Halmi, Jr. (the “Executive”).

RECITALS

A. The Company desires to assure itself of the services of the Executive by engaging the Executive to perform services under the terms hereof;

B. The Executive desires to provide services to the Company on the terms herein provided.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below the parties hereto agree as follows:

1. Certain Definitions

(a) “Annual Base Salary” shall have the meaning set forth in Section 3(a).

(b) “Board” shall mean the Board of Directors of the Company.

(c) The Company shall have “Cause” to terminate the Executive’s employment hereunder upon: (i) the Executive’s conviction of, or plea of nolo contendere to, any felony (or any other crime having a material adverse effect on the Company); (ii) the Executive’s unlawful use (including being under the influence) or possession of illegal drugs on the Company’s premises or while performing the Executive’s duties and responsibilities under this Agreement; or (iii) the Executive’s commission of an act of fraud, embezzlement, misappropriation, willful misconduct, or breach of fiduciary duty against the Company.

(d) “Company” shall, except as otherwise provided by Section 6(h), have the meaning set forth in the preamble hereto.

(e) “Date of Termination” shall mean (i) if the Executive’s employment is terminated by his death, the date of his death; (ii) if the Executive’s employment is terminated due to his Disability, the date determined pursuant to Section 4(a)(ii); or (iii) if the Executive’s employment is terminated pursuant to Section 4(a)(iii)-(v) either the date indicated in the Notice of Termination or the date specified by the Company pursuant to Section 4(b), whichever is earlier.

(f) “Disability” shall mean the Executive’s incapacity due to reasonably documented physical or mental illness that shall have prevented the Executive from performing his duties for the Company on a full-time basis for more than six consecutive months.

 

 

(g) “Effective Date” shall have the meaning set forth in Section 2(b).

(h) “Executive” shall have the meaning set forth in the preamble hereto.

(i) The Executive shall have “Good Reason” to resign his employment upon the occurrence (without the Executive’s prior written consent) of any of the following: (A) failure of the Company to make any payment under this Agreement; (B) the Company’s material breach of this Agreement; or (C) relocation of the Company’s principal office from the New York metropolitan area; provided, however, that the Executive may not resign his employment for Good Reason unless: (x) the Executive has provided the Company with at least 30 days prior written notice of his intent to resign for Good Reason (which notice must be provided within
three months following the occurrence of the event(s) purported to constitute Good Reason); and (y) the Company has not remedied the alleged violation(s) within the 30-day period.

(j) “HEI” shall mean HEI Acquisition, LLC, a Delaware limited liability company.

(k) “LLC Agreement” shall have the meaning set forth in Section 21.

(1) “Notice of Termination” shall have the meaning set forth in Section 4(b).

(m) “Section 409A” shall have the meaning set forth in Section 20.

(n) “Term” shall have the meaning set forth in Section 2(b). 

2. Employment

(a) In General. The Company shall employ the Executive and the Executive shall enter the employ of the Company, for the period set forth in Section 2(b), in the position set forth in Section 2(c), and upon the other terms and conditions herein provided.

(b) Term of Employment. The initial term of employment under this Agreement (the “Initial Term”) shall be for the period beginning on January ___, 2006 (the “Effective Date”) and ending on the third anniversary thereof, unless earlier terminated as provided in Section 4. The employment term hereunder shall automatically be extended for successive one-year periods (“Extension Terms” and, collectively with the Initial Term, the “Term”) unless either party
gives notice of non-extension to the other no later than 30 days prior to the expiration of the then-applicable Term.

(c) Position and Duties

(i) During the Term, the Executive: (A) shall serve as Chief Executive Officer of the Company, with responsibilities, duties and authority customary for such position, subject to direction by the Board, including, but not limited to, the authority to hire and terminate employees of the Company and its subsidiaries; provided, however, that the Executive acknowledges and agrees that he shall consult with the Board prior to hiring or terminating the employment of any Chief Financial Officer of the Company or Chief Operating Officer of the Company; (B) shall report directly to the Board; (C) shall devote substantially all his working

 

 

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time and efforts to the business and affairs of the Company and its subsidiaries; and (D) agrees to observe and comply with the Company’s rules and policies as adopted by the Board from time to time.

(ii) As of the Effective Date, HEI and its affiliates shall cause the Executive to be appointed or elected to the Board. During the Term, the Board shall propose the Executive for re-election to the Board and HEI and its affiliates shall vote in favor of such re-election. In addition, the Executive shall also serve as a director of any of the Company’s subsidiaries and/or in one or more executive offices of any entities owned by the Company.

3. Compensation and Related Matters

(a) Annual Base Salary. During the Term, the Executive shall receive a base salary (the “Annual Base Salary”) at a rate of $2,000,000 per annum, which amount shall be increased by 5% per annum on a cumulative basis on each anniversary of the Effective Date. The Annual Base Salary shall be payable in accordance with the customary payroll practices of the Company.

(b) Benefits. The Executive shall be entitled to participate in employee benefit plans, programs and arrangements of the Company now (or, to the extent determined by the Board, hereafter) in effect which are applicable to the senior officers of the Company.

(c) Vacation. During the Term, the Executive shall be entitled to not less than six weeks paid vacation in accordance with the Company’s applicable policies and procedures.

(d) Expenses. The Company shall reimburse the Executive for all reasonable travel and other business expenses incurred by him in the performance of his duties to the Company in accordance with the Company’s applicable expense reimbursement policies and procedures and consistent with past practices as applied to the Executive.

(e) Profits Interest Award. As of the Effective Date, the Executive shall be awarded profits interests and other rights with respect thereto of the Company pursuant to the terms and conditions described on Exhibit A hereto.

(f) Discretionary Bonuses. The Board, in its sole discretion, may award the Executive additional annual or other bonuses during the Term.

4. Termination. The Executive’s employment hereunder may be terminated by the Company or the Executive, as applicable, without any breach of this Agreement only under the following circumstances:

(a) Circumstances

(i) Death. The Executive’s employment hereunder shall terminate upon his death.

(ii) Disability. If the Executive incurs a Disability, the Company may give the Executive written notice of its intention to terminate the Executive’s

 

 

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employment. In that event, the Executive’s employment with the Company shall terminate effective on the later of the 30th day after receipt of such notice by the Executive or the date specified in such notice, provided  that within the 30 days after such receipt, the Executive shall not have returned to full-time performance of his duties.

(iii) Termination for Cause. The Company may terminate the Executive’s employment for Cause.

(iv) Termination without Cause. The Company may terminate the Executive’s employment without Cause.

(v) Resignation with or without Good Reason. The Executive may resign his employment with or without Good Reason.

(b) Notice of Termination. Any termination of the Executive’s employment by the Company or by the Executive under this Section 4 (other than termination pursuant to paragraph (a)(i)) shall be communicated by a written notice to the other party hereto indicating (i) the specific termination provision in this Agreement relied upon, (ii) except with respect to a termination pursuant to Section 4(a)(iv), setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and (iii) specifying a Date of Termination which, if submitted by the Executive (or, in the case of a termination described in Section 4(a)(ii), by the Company), shall be at least 30 days following the date of such notice (a
“Notice of Termination”); provided, however, that a Notice of Termination delivered by the Company pursuant to Section 4(a)(ii) shall not be required to specify a Date of Termination, in which case the Date of Termination shall be determined pursuant to Section 4(a)(ii); and provided, farther, that in the event that the Executive delivers a Notice of Termination to the Company, the Company may, in its sole discretion, change the Date of Termination to any date that occurs during the period beginning on the date of Company’s receipt of such Notice of Termination and ending on the date specified in such Notice of Termination. A Notice of Termination submitted by the Company may provide for a Date of Termination on the date the Executive
receives the Notice of Termination, or any date within 180 days thereafter. The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of the Executive or the Company hereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

5. Company Obligations Upon Termination of Employment

(a) In General. Upon a termination of the Executive’s employment for any reason, the Executive (or the Executive’s estate) shall be entitled to receive the sum of the Executive’s Annual Base Salary through the Date of Termination not theretofore paid; any expenses owed to the Executive under Section 3(d); any accrued vacation pay owed to the Executive pursuant to Section 3(c); and any amount arising from the Executive’s participation in, or benefits under, any employee benefit plans, programs or arrangements under Section 3(b), which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements.

 

 

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(b) Termination without Cause or due to Resignation with or without Good Reason. If the Executive’s employment shall be terminated by the Company without Cause or by the Executive due to his resignation with or without Good Reason, but not by reason of the Executive’s death, Disability, or termination by the Company for Cause, then, in addition to the payments described in Section 5(a), the Company shall:

(i) Continue to pay to the Executive, in accordance with the Company’s regular payroll practice following the Date of Termination, the Executive’s Annual Base Salary until the earlier of (A) the second anniversary of the Date of Termination or (B) the date the Executive first violates any of the restrictive covenants set forth in Section 6; and

(ii) Continue coverage for the Executive and any eligible dependents under all Company group health benefit plans in which the Executive and any dependents were entitled to participate immediately prior to the Date of Termination, to the extent permitted thereunder and subject to any cost-sharing or similar provisions in effect thereunder as of the Date of Termination, until earlier of (A) the second anniversary of the Date of Termination or (B) the date the Executive first violates any of the restrictive covenants set forth in Section 6. As of the date that the Executive ceases to receive coverage under any group health plan pursuant to this Section 5(b)(ii), the Executive shall be eligible to elect to receive “COBRA” continuation coverage to the extent permitted by Section 601 et seq. of
the Executive Retirement Income Security Act of 1974, as amended. If such benefits cannot be provided under the Company’s group health benefit plans, such benefits will be provided on an individual basis to the Executive such that his after-tax costs will be no greater than the costs for such benefits under the Company’s plans.

(c) Termination due to Death or Disability. If the Executive’s employment with the Company is terminated by reason of his death or Disability, then the Executive or, as applicable, his estate or other legal representative, shall be entitled to receive the amounts described in Section 5(a), including any amount arising from the Executive’s participation in, or benefits under, any employee benefit plans, programs or arrangements described in Section 3(b) (including without limitation any disability or life insurance benefit plans, programs or arrangements), which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements.

6. Restrictive Covenants.

(a) Confidentiality. The Executive agrees that he will not during the Term or thereafter divulge to anyone (other than the Company or any persons designated by the Company) any knowledge or information of any type whatsoever of a confidential nature relating to the business of the Company, including, without limitation, all types of trade secrets, business strategies, marketing and distribution plans as well as ideas, proposals, plans, scripts, treatments and formats described in Section 6(b) below. The Executive further agrees that he will not disclose, publish or make use of any such knowledge or information of a confidential nature (other than in the performance of the Executive’s duties hereunder) without the prior written consent of the Company. This provision does not apply to information
which becomes available publicly without the fault of the Executive or information which the Executive is

 

 

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required to disclose in legal proceedings, provided the Executive gives advance notice to the Chairman of the Board and an opportunity to for the Company to resist such disclosure.

(b) Intellectual Property. During the Term, the Executive will disclose to the Company all ideas, proposals, plans, scripts, treatments, and formats invented or developed by the Executive which relate directly or indirectly to the business of the Company or any of its subsidiaries or affiliates including, without limitation, any ideas, proposals and plans which may be copyrightable, trademarkable, patentable or otherwise exploitable. The Executive agrees that all such ideas, proposals, plans, scripts, treatments, and formats are and will be the property of the Company. The Executive further agrees, at the Company’s request, to do whatever is necessary or desirable to secure for the Company the rights to said ideas, proposals, plans, scripts, treatments, and formats, whether by copyright,
trademark, patent or otherwise and to assign, transfer and convey the rights thereto to the Company.

(c) Name and Likeness. The Company shall have the right in perpetuity to use the Executive’s name, image, and likeness in connection with credits, advertising and publicity for product for which the Executive performs any development and/or production services, and during the Term otherwise in connection with the Company and its business.

(d) Competitive Business Restrictions. During the Term, the Executive shall not engage directly or indirectly, whether as an employee, independent contractor, consultant, partner, shareholder or otherwise, in a business or other endeavor which would or might interfere with any of his duties or obligations hereunder or which is competitive with or similar to the business of the Company or any of its subsidiaries or affiliates, including but not limited to any business related to the production, distribution or other exploitation of made for television movies or miniseries or the ownership, management, production, distribution or any other exploitation of any other audiovisual or theatrical materials. Notwithstanding the foregoing, the Executive shall have the right to own up to five percent (5%) of
the shares of any publicly traded company in the entertainment business.

(e) Non-Solicitation. The Executive further agrees that during the Term and for a period of two years thereafter, the Executive will not employ or attempt to employ or assist anyone else to employ any person who is, as of the Date of Termination, working as an officer, policymaker or in creative development (including without limitation executive employees) for or rendering services as such to the Company (e.g., this prohibition does not apply to anyone who is a short term employee engaged by the Company specifically to work on the development or production of a particular motion picture, television or other audiovisual property).

(f) Non-Compete. In consideration of: (i) the Company’s agreements herein, (ii) the acquisition for value by HEI of substantially all of the outstanding Membership Interests of the Company, which acquisition constitutes an acquisition of, among other things, the good will of the business of the Company, said good will having resulted almost entirely from the efforts of the Executive and his father and being dependent upon the continuance of such efforts, and the Executive agrees, in addition to any other obligation imposed by this Section 6, that he will not, during the period beginning on the Date of Termination and ending on the second anniversary thereof (the “Non-Compete Period”), engage directly or
indirectly, whether as an employee, independent contractor, consultant, partner, shareholder or otherwise, in a business or

 

 

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other
  endeavor which is competitive with or similar to any business of the Company
  (e.g. any business related to the production, distribution or other exploitation
  of made for television movies or miniseries or any other business then material
  to the Company) or any potential business which as of the Date of Termination
  has been submitted to the Board for consideration and is under active consideration
  by the Board (any such business or endeavor, a “Competitive
  Business”), anywhere in the world.
  (For the avoidance of doubt, the parties acknowledge and agree that any potential
  business of the Company that is under active consideration by the Board as of
  the Date of Termination but with respect to which the Board elects to suspend
  or postpone further consideration at any time after the Date of Termination
  shall not be considered a Competitive Business. In order to effectuate the forgoing,
  the Board shall notify the Executive of any election to suspend or postpone
  further consideration of any potential business in accordance with the notice
  provisions set forth in Section 10.) Notwithstanding the foregoing, at any time
  during the Non-Compete Period the Executive may request in writing to the Board
  that the Board consent to the Executive’s direct or indirect engagement
  in, ownership of equity interest in, or management or operation of (whether
  as a director, officer, employee, agent, representative, security holder, consultant
  or otherwise) any Competitive Business which derives less than 10% of its aggregate
  annual revenues from the production, distribution or other exploitation of made
  for television movies or miniseries, which request the Board shall consider
  in good faith based upon the Board’s determination of the potential impact
  of the Executive’s involvement in such Competitive Business on the Company
  and its stockholders. The Executive specifically acknowledges that he is a founder,
  creator and builder of the business of the Company; that he is of special, unique
  and extraordinary value to the Company because of, inter
  alia, his personal relationships with
  performers, producers, writers, directors, creative sources, and distributors;
  that if he were to leave the Company and compete with it, the Company’s
  value would be materially diminished; that HEI which acquired substantially
  all of the outstanding Membership Interests of the Company in reliance on the
  good will of the business arising from the performance by the Executive of his
  obligations hereunder would lose the benefit of that transaction; that HEI would
  not have made such acquisition of substantially all of the outstanding Membership
  Interests of the Company in the absence of this Agreement; that as a key executive
  of the Company, he has access to all confidential information, trade secrets,
  and the like, of the Company; that he has independent means of supporting himself
  and his family; and that in view of the foregoing, the restrictions imposed
  by this Section 6(f) are reasonably necessary to protect the Company against
  unfair competition by the Executive and are not unduly burdensome to the Executive.
  In addition, notwithstanding any provision of Section 6(d) or 6(f) to the contrary,
  the restrictions on the Executive under Section 6(d) and/or 6(f) shall terminate
  upon the 60th day following the Company’s filing for relief
  under Chapter 7 of the United States Bankruptcy Code (provided that such Chapter
  7 case is not converted into a Chapter 11 case under the United States Bankruptcy
  Code within the 60 day period following the Company’s Chapter 7 filing).
  The parties acknowledge and agree that if the Chapter 7 case described in the
  preceding sentence is timely converted into a Chapter 11 case but the Company
  is nevertheless liquidated rather than reorganized, then the restrictions on
  the Executive under Section 6(d) and/or 6(f) shall terminate upon the effective
  date of a liquidating plan of reorganization under Chapter 11. For the avoidance
  of doubt, in no event shall the Company’s filing for relief under Chapter
  7 of the United States Bankruptcy Code (whether or not converted into a Chapter
  11 case) cause the Non-Compete Period to extend beyond the second anniversary
  of the Date of Termination.

 

 

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(g) Non-Disparagement. The Executive agrees not to disparage the Company, any of its products or practices, or any of its directors, officers, agents, representatives, stockholders or affiliates, either orally or in writing, at any time.

(h) Interpretation. In the event the terms of this Section 6 shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it will be interpreted to extend only over the maximum period of time for which it may be enforceable, over the maximum geographical area as to which it may be enforceable, or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action. As used in this Section 6, the term “Company” shall include the Company, its parent, related entities, and any of its
direct or indirect subsidiaries or affiliates.

7. Injunctive Relief. The Executive recognizes and acknowledges that a breach of the covenants contained in Section 6 will cause irreparable damage to Company and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, the Executive agrees that in the event of a breach of any of the covenants contained in Section 6, in addition to any other remedy which may be available at law or in equity, the Company will be entitled to specific performance and injunctive relief.

8. Assignment and Successors. The Company may assign its rights and obligations under this Agreement to any entity which is a successor to all or substantially all the assets of the Company, by merger or otherwise, and may assign or encumber this Agreement and its rights hereunder as security for indebtedness of the Company and its affiliates. The Executive may not assign his rights or obligations under this Agreement to any individual or entity. This Agreement shall be binding upon and inure to the benefit of the Company, the Executive and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable.

9.
  Governing Law.
  This Agreement shall be governed, construed, interpreted and enforced in accordance
  with the substantive laws of the State of New York, without reference to the
  principles of conflicts of law of New York or any other jurisdiction, and where
  applicable, the laws of the United States.

10. Notices. Any notice, request, claim, demand, document and other communication hereunder to any party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by telex, telecopy, or certified or registered mail, postage prepaid, to the following address (or at any other address as any party shall have specified by notice in writing to the other party):

 

 

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                        (a)
 	
                        If to the Company:
 

Hallmark Entertainment, LLC

1325 Avenue of the Americas

New York, NY 10019

Attn: General Counsel

Fax Number: (212) 977-3917

with a copy to:

HEI Acquisition, LLC

c/o Kelso & Company

320 Park Avenue

New York, NY 10022

Attn: James Connors, General Counsel

Fax Number: (212) 751-3939

and a copy to:

Latham & Watkins LLP

885 Third Avenue

New York, New York 10022-4802

Attn: Bradd L. Williamson

Fax Number: (212) 751-4864

	
                         
 	
                        (b)
 	
                        If to the Executive, at the address set forth on the signature page hereto.
 

with a copy to:

Frankfurt Kurnit Klein & Selz PC

488 Madison Avenue

New York, NY 10022

Attn: Thomas D. Selz

Fax Number: (347) 438-2115

11. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

12. Entire Agreement. The terms of this Agreement (together with any other agreements and instruments contemplated hereby or referred to herein) are intended by the parties to be the final expression of their agreement with respect to the employment of the Executive by the Company and may not be contradicted by evidence of any prior or contemporaneous agreement. This Agreement shall supersede all undertakings or agreements, whether written or oral, previously entered into by the Executive and the Company or any predecessor thereto or affiliate thereof (including without limitation that certain Employment Agreement between RHI Entertainment, Inc. and the Executive dated as of April 26, 1994, as

 

 

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amended) with respect to the employment of the Executive by the Company. The parties further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement.

13. Amendments; Waivers. This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by the Executive and the Chairman of the Board (or his delegate). By an instrument in writing similarly executed, the Executive or the Chairman of the Board (or his delegate) may waive compliance by the other party or parties with any provision of this Agreement that such other party was or is obligated to comply with or perform; provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure. No failure to exercise and no delay in exercising any right, remedy, or power hereunder preclude any other or further exercise
of any other right, remedy, or power provided herein or by law or in equity.

14. No Inconsistent Actions. The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement. Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement.

15. Construction. This Agreement shall be deemed drafted equally by both the parties. Its language shall be construed as a whole and according to its fair meaning. Any presumption or principle that the language is to be construed against any party shall not apply. The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation. Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary. Also, unless the context clearly indicates to the contrary, (a) the plural includes the singular and the singular includes the plural; (b) “or” is used both conjunctively and disjunctively; (c) “any,” “all,”
“each,” or “every” means “any and all,” and “each and every”; (d) “includes” and “including” are each “without limitation”; (e) “herein,” “hereof,” “hereunder” and other similar compounds of the word “here” refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (f) all pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the entities or persons referred to may require.

16. Enforcement. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a portion of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement, Furthermore, in lieu of such illegal, invalid or unenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be
possible and be legal, valid and enforceable.

 

 

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17. Withholding. The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreign withholding or other taxes or charges which the Company is required to withhold. The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.

18. Employee Acknowledgement. The Executive acknowledges that he has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based on his own judgment.

19. Survival. The expiration or termination of the Term shall not impair the rights or obligations of any party hereto, which shall have accrued prior to such expiration or termination.

20. Section 409A. The parties acknowledge and agree that, to the extent applicable, this Agreement shall be interpreted in accordance with, and the parties agree to use their best efforts to achieve timely compliance with, Section 409A of the Internal Revenue Code of 1986, as amended, and the Department of Treasury Regulations and other interpretive guidance issued thereunder (“Section 409A”), including without limitation any such regulations or other guidance that may be issued after the Effective Date. Notwithstanding any provision of this Agreement to the contrary, in the event that the Company determines that any amounts payable hereunder would otherwise be taxable to the Executive under Section
409A, the Company may adopt such limited amendments to this Agreement and appropriate policies and procedures, including amendments and policies with retroactive effect, that the Company reasonably determines are necessary or appropriate to comply with the requirements of Section 409A and thereby avoid the application of penalty taxes under such Section.

21. Relationship with LLC Agreement.

(a) Restricted Covenants. The provisions of Section 6 of this Agreement (including without limitation the defined terms used therein) represent the entire understanding of the parties with respect to the subject matter set forth in Section 6. For the avoidance of doubt, the parties acknowledge and agree that the provisions of Section 6 shall supersede any similar provisions contained in that certain Amended and Restated Limited Liability Company Agreement of HEI Acquisition, LLC (the “LLC Agreement”) with respect to the subject matter of Section 6.

(b) Forfeiture. For the avoidance of doubt, the parties acknowledge and agree that the forfeiture provisions governing the “Value Units” set forth in Exhibit A to this Agreement shall supersede Section 8.2 of the LLC Agreement.

[signature page follows]

 

 

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IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written.

 

	
                         
 	
                         
 	
                        COMPANY
 
	
                          
 	
                         
 	
      By: 
 	
                        
 /s/ Illegible
 
	
                         
 	
                         
 	
                        Its:
 	
                         
 
	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                        EXECUTIVE
 
	
                          
 	
                         
 	
                        

                        By: 
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                        Robert Halmi, Jr.
 
	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                        Residence Address:
 
	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                         
 

IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written.

 

	
                         
 	
                         
 	
                        COMPANY
 
	
                          
 	
                         
 	
                        

      By: 
 	
                        /s/ Peter von Gal   
 
	
                         
 	
                         
 	
                        Its:
 	
                         
 
	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                        EXECUTIVE
 
	
                          
 	
                         
 	
                        By: 
 	
                        
 /s/ Robert Halmi, Jr.
 
	
                         
 	
                         
 	
                         
 	
                        Robert Halmi, Jr.
 
	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                        Residence Address:
 
	
                         
 	
                         
 	
                         
 	
                        11 Oakleigh Court
 
	
                         
 	
                         
 	
                         
 	
                        Rowayton, CT 06853
 

Robert Halmi, Jr. – Employment Agreement

 

 

Exhibit A

[Profits Interest Award]

 

 

EXHIBIT A

Profits Interest Awards

Except as otherwise provided in this Exhibit A to the Executive’s Employment Agreement (the “Employment Agreement”), the Value Units awarded to the Executive shall be governed by the provisions of the Amended and Restated Limited Liability Company Agreement of RHI Holdings Entertainment, LLC (the “LLC Agreement”). Unless otherwise noted, any capitalized term used in this Exhibit A shall have the respective meaning assigned to such term in the LLC Agreement.

Allocation of Value Units

On the Effective Date, Halmi shall receive five-hundred (500) Value Units of the initial Value Units (the “Initial Halmi Units”) issued to the Management Members on the Effective Date (as defined in the Employment Agreement). The parties understand that in the future Halmi and Halmi Senior collectively may hold more than fifty percent (50%) of the Value Units in the Total Profits Interest Pool. For purposes of this Exhibit A, “Halmi Value Units” shall mean the Initial Halmi Units, together with the number (if any) of Senior Forfeited Units (as defined below) that are re-allocated to Halmi in accordance with this Exhibit A while Halmi is still an employee of the Company or any of its Subsidiaries and together with the number (if any) of Allocable Value Units (as defined below) that are allocated to Halmi in accordance with the Employment Agreement and the LLC Agreement.

For so long as Halmi is an employee of the Company or any of its Subsidiaries, the Company hereby grants Halmi the exclusive authority (in accordance with Section 8.1(a) of the LLC Agreement and in consultation with the Board (or the Compensation Committee)) to award any Allocable Value Units to any Management Member (including himself) or any Additional Member, as the case may be. For the avoidance of doubt, prior to any distributions under Section 10.1 of the LLC Agreement, Halmi shall have the right (in consultation with the Board (or the Compensation Committee)) to allocate, pursuant to Section 8.1(a) of the LLC Agreement, any Allocable Value Units to any Management Member (including himself) prior to such distribution and assuming that such allocation is made in full pursuant to Section 8.1(a) of the LLC Agreement, the Tier One Value Percentage shall equal twenty-five percent (25%), the
Tier Two Value Percentage shall equal thirty percent (30%) and the Tier Three Value Percentage shall equal thirty-five percent (35%), as applicable.

“Allocable Value Units” shall mean, collectively, (i) all Value Units (other than the Halmi Value Units that are forfeited in accordance with the terms of the Employment Agreement and the LLC Agreement) that have been forfeited by a Management Member pursuant to the terms of the LLC Agreement or any employment or services agreement between a Management Member and the Company or any of its Subsidiaries and (ii) all unallocated Value Units that have not been previously awarded or allocated pursuant to, and in accordance with, the LLC Agreement.

Halmi Senior Forfeited Value Units

Reference is hereby made to the employment agreement (the “Senior Agreement”) between the Company and Robert Halmi, Sr. (“Halmi Senior”), dated as of the date hereof. In the event that Halmi Senior is allocated any Value Units on or after the Effective Date (as defined in the Senior Agreement) and any such Value Units are forfeited by Halmi Senior (such Value Units that are forfeited, the “Senior Forfeited Units”) in accordance with the terms of the Senior Agreement and the LLC Agreement (the date of such forfeiture, the “Forfeiture Date”), then, so long as Halmi is

 

 

an employee of the Company or any of its Subsidiaries on the Forfeiture Date, all of such Forfeited Senior Units shall be automatically re-allocated to Halmi. From and after the time that Halmi receives the Senior Forfeited Units as a result of the foregoing provisions, such Senior Forfeited Units shall continue to be subject to the forfeiture provisions described below under the section “Treatment of Value Units upon Termination.”

If Halmi is not an employee of the Company or any of its Subsidiaries on the Forfeiture Date, then an Applicable Portion (as defined below) of the Forfeited Senior Units (if any) shall be automatically re-allocated to Halmi. “Applicable Portion” means (i) one-hundred percent (100%), if Halmi’s employment (x) was terminated without Cause, or (y) terminated as a result of (I) death or Disability (as defined in the Employment Agreement), or (II) Halmi’s resignation for Good Reason (as defined in the Employment Agreement), (ii) fifty percent (50%), if Halmi’s employment terminated as a result of Halmi’s resignation without Good Reason (as defined in the Employment Agreement) at anytime after the three year anniversary of the Effective Date (as defined in the Employment Agreement) or (iii) zero percent (0%), if (x) Halmi was terminated for Cause (as defined in the
Employment Agreement) or (y) Halmi’s employment terminated as a result of Halmi’s resignation without Good Reason (as defined in the Employment Agreement) at any time prior to the three year anniversary of the Effective Date (as defined in the Employment Agreement)..

Treatment of Value Units upon Termination

Notwithstanding anything to the contrary in the LLC Agreement:

	
                        (i)
 	
                        In the event Halmi’s employment is terminated for Cause (as defined in the Employment Agreement), the number of Halmi Value Units allocated to Halmi shall be reduced to zero without any payment required to be made in respect thereof.
 

	
                        (ii)
 	
                        If, at any time prior to the three year anniversary of the Effective Date (as defined in the Employment Agreement), Halmi’s employment terminates as a result of Halmi’s resignation without Good Reason (as defined in the Employment Agreement) then the number of Halmi Value Units allocated to Halmi shall be reduced to zero without any payment required to be made in respect thereof.
 

	
                        (iii)
 	
                        If, at anytime after the three year anniversary of the Effective Date (as defined in the Employment Agreement), Halmi’s employment terminates as a result of Halmi’s resignation without Good Reason (as defined in the Employment Agreement) then one-half of the Halmi Value Units allocated to Halmi shall be fully vested (but shall only be entitled to participate in distributions in accordance with the terms and conditions of Section 10.1 of the LLC Agreement) and shall no longer be subject to the forfeiture provisions of the Employment Agreement or the LLC Agreement.
 

	
                        (iv)
 	
                        If Halmi’s employment (x) is terminated without Cause, or (y) terminates as a result of (I) death or Disability (as defined in the Employment Agreement), or (II) Halmi’s resignation for Good Reason (as defined in the Employment Agreement), then all of the Halmi Value Units allocated to Halmi shall vest (but shall only be entitled to participate in distributions in accordance with the terms and conditions of Section 10.1 of the LLC Agreement) and shall no longer be subject to the forfeiture provisions of the Employment Agreement or the LLC Agreement.
 

 

 

Defined Terms Relating to Termination Events

Notwithstanding anything to the contrary in the LLC Agreement, the definitions of “Termination for Cause,” “Disability” and “Good Reason” contained in the LLC Agreement shall be replaced in their entirety with the definitions of “Cause,” “Disability” and “Good Reason,” in each case as applicable, that are contained in this Employment Agreement.

First Priority Distribution

In accordance with Section 10.1(b) of the LLC Agreement, Halmi shall be entitled to receive, as a first priority distribution before any other distributions are made by the Company under the LLC Agreement in respect of Value Units, an amount equal to $3.50 million.

Survival

The provisions of this Exhibit A shall survive the termination of the Employment Agreement.Exhibit 10.7

Employment Agreement

This Employment Agreement (the “Agreement”), entered into on January 12, 2006 and effective as of the Effective Date (as defined in Section 2(b)), is made by and between Hallmark Entertainment, LLC, a Delaware limited liability company which following its merger with HEI Acquisition, LLC shall be renamed RHI Entertainment, LLC (together with any successor thereto, the “Company”), and Peter von Gal (the “Executive”).

RECITALS

A. The Company desires to assure itself of the services of the Executive by engaging the Executive to perform services under the terms hereof.

B. The Executive desires to provide services to the Company on the terms herein provided.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below the parties hereto agree as follows:

1. Certain Definitions

(a) “Annual Base Salary” shall have the meaning set forth in Section 3(a).

(b) “Board” shall mean the Board of Directors of the Company.

(c) The Company shall have “Cause” to terminate the Executive’s employment hereunder upon: (i) the Executive’s conviction of, or plea of nolo contendere to, any felony (or any other crime having a material adverse effect on the Company); (ii) the Executive’s unlawful use (including being under the influence) or possession of illegal drugs on the Company’s premises or while performing the Executive’s duties and responsibilities under this Agreement; or (iii) the Executive’s commission of an act of fraud, embezzlement, misappropriation, willful misconduct, or breach of fiduciary duty against the Company.

(d) “Company” shall, except as otherwise provided by Section 6(h), have the meaning set forth in the preamble hereto.

(e) “Date of Termination” shall mean (i) if the Executive’s employment is terminated by his death, the date of his death; (ii) if the Executive’s employment is terminated due to his Disability, the date determined pursuant to Section 4(a)(ii); or (iii) if the Executive’s employment is terminated pursuant to Section 4(a)(iii)-(vi) either the date indicated in the Notice of Termination or the date specified by the Company pursuant to Section 4(b), whichever is earlier.

(f) “Disability” shall mean the Executive’s incapacity due to reasonably documented physical or mental illness that shall have prevented the Executive from performing his duties for the Company on a full-time basis for more than six months.

 

 

(g) “Effective Date” shall have the meaning set forth in Section 2(b).

(h) “Executive” shall have the meaning set forth in the preamble hereto.

(i) The Executive shall have “Good Reason” to resign his employment upon the occurrence (without the Executive’s prior written consent) of any of the following: (A) failure of the Company to make any payment under this Agreement; (B) the Company’s material breach of this Agreement; or (C) relocation of the Company’s principal office from the New York metropolitan area; provided, however, that the Executive may not resign his employment for Good Reason unless: (x) the Executive has provided the Company with at least 30 days prior written notice of his intent to resign for Good Reason (which notice must be provided within three months following the occurrence of the event(s) purported to constitute
Good Reason); and (y) the Company has not remedied the alleged violation(s) within the 30-day period.

(j) “HEI” shall mean HEI Acquisition, LLC, a Delaware limited liability company.

(k) “Notice of Termination” shall have the meaning set forth in Section 4(b).

(1) “Section 409A” shall have the meaning set forth in Section 20.

(m) “Term” shall have the meaning set forth in Section 2(b).

2. Employment

(a) In General. The Company shall employ the Executive and the Executive shall enter the employ of the Company, for the period set forth in Section 2(b), in the position set forth in Section 2(c), and upon the other terms and conditions herein provided.

(b) Term of Employment. The initial term of employment under this Agreement (the “Initial Term”) shall be for the period beginning on January ___, 2006 (the “Effective Date”) and ending on the third anniversary thereof, unless earlier terminated as provided in Section 4. The employment term hereunder shall automatically be extended for successive one-year periods (“Extension Terms” and, collectively with the Initial Term, the “Term”) unless either
party gives notice of non-extension to the other no later than 30 days prior to the expiration of the then-applicable Term.

(c) Position and Duties. During the Term, the Executive: (A) shall serve as Executive Vice President and Chief Operating Officer of the Company, with responsibilities, duties and authority customary for such position, subject to direction by the Chief Executive Officer and the Board; (B) shall report directly to the Chief Executive Officer; (C) shall devote substantially all his working time and efforts to the business and affairs of the Company and its subsidiaries; and (D) agrees to observe and comply with the Company’s rules and policies as adopted by the Board from time to time.

 

 

2

 

3. Compensation and Related Matters

(a) Annual Base Salary. During the Term, the Executive shall receive a base salary (the “Annual Base Salary”) at a rate of $1,250,000 per annum, which amount shall be increased by 5% per annum on a cumulative basis on each anniversary of the Effective Date. The Annual Base Salary shall be payable in accordance with the customary payroll practices of the Company.

(b) Benefits. The Executive shall be entitled to participate in employee benefit plans, programs and arrangements of the Company now (or, to the extent determined by the Board, hereafter) in effect which are applicable to the senior officers of the Company.

(c) Vacation. During the Term, the Executive shall be entitled to not less than four weeks paid vacation in accordance with the Company’s applicable policies and procedures.

(d) Expenses. The Company shall reimburse the Executive for all reasonable travel and other business expenses incurred by him in the performance of his duties to the Company in accordance with the Company’s applicable expense reimbursement policies and procedures and consistent with past practices as applied to the Executive.

(e) Profits Interest Award. As of the Effective Date, the Executive shall be awarded profits interests and other rights with respect thereto of the Company pursuant to the terms and conditions described on Exhibit A hereto.

(f) Discretionary Bonuses. The Board, in its sole discretion, may award the Executive additional annual or other bonuses during the Term.

4. Termination. The Executive’s employment hereunder may be terminated by the Company or the Executive, as applicable, without any breach of this Agreement only under the following circumstances:

(a) Circumstances

(i) Death, The Executive’s employment hereunder shall terminate upon his death.

(ii) Disability. If the Executive incurs a Disability, the Company may give the Executive written notice of its intention to terminate the Executive’s employment. In that event, the Executive’s employment with the Company shall terminate effective on the later of the 30th day after receipt of such notice by the Executive or the date specified in such notice, provided that within the 30 days after such receipt, the Executive shall not have returned to full-time performance of his duties.

(iii) Termination by the Company for Cause. The Company may terminate the Executive’s employment for Cause.

(iv) Termination by the Company without Cause. The Company may terminate the Executive’s employment without Cause.

 

 

3

 

(v) Resignation by the Executive for Good Reason. The Executive may resign his employment with the Company for Good Reason.

(vi) Resignation by the Executive without Good Reason. The Executive may resign his employment with the Company without Good Reason.

(b) Notice of Termination. Any termination of the Executive’s employment by the Company or by the Executive under this Section 4 (other than termination pursuant to paragraph (a)(i)) shall be communicated by a written notice to the other party hereto indicating (i) the specific termination provision in this Agreement relied upon, (ii) except with respect to a termination pursuant to Section 4(a)(iv) or 4(a)(vi), setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and (iii) specifying a Date of Termination which, if submitted by the Executive (or, in the case of a termination described in Section 4(a)(ii), by the Company), shall be at least 30 days following the date of such
notice (a “Notice of Termination”); provided, however, that a Notice of Termination delivered by the Company pursuant to Section 4(a)(ii) shall not be required to specify a Date of Termination, in which case the Date of Termination shall be determined pursuant to Section 4(a)(ii); and provided, further, that in the event that the Executive delivers a Notice of Termination to the Company, the Company may, in its sole discretion, change the Date of Termination to any date that occurs during the period beginning on the date of Company’s receipt of such Notice of Termination and ending on the date specified in such Notice of Termination. A Notice of Termination submitted by the Company may provide for a Date of Termination on the date
the Executive receives the Notice of Termination, or any date within 45 days thereafter. The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of the Executive or the Company hereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

5. Company Obligations Upon Termination of Employment

(a) In General. Upon a termination of me Executive’s employment for any reason, the Executive (or the Executive’s estate) shall be entitled to receive the sum of the Executive’s Annual Base Salary through the Date of Termination not theretofore paid; any expenses owed to the Executive under Section 3(d); any accrued vacation pay owed to the Executive pursuant to Section 3(c); and any amount arising from the Executive’s participation in, or benefits under, any employee benefit plans, programs or arrangements under Section 3(b), which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements.

(b) Termination without Cause or due to Resignation for Good Reason. If the Executive’s employment shall be terminated by the Company without Cause or by the Executive for Good Reason (but not by reason of the Executive’s death, Disability, termination by the Company for Cause or termination by the Executive without Good Reason), then, in addition to the payments described in Section 5(a), the Company shall:

 

 

4

 

(i) Continue to pay to the Executive, in accordance with the Company’s regular payroll practice following the Date of Termination, the Executive’s Annual Base Salary until the earlier of (A) the second anniversary of the Date of Termination or (B) the date the Executive first violates any of the restrictive covenants set forth in Section 6; and

(ii) Continue coverage for the Executive and any eligible dependents under all Company group health benefit plans in which the Executive and any dependents were entitled to participate immediately prior to the Date of Termination, to the extent permitted thereunder and subject to any cost-sharing or similar provisions in effect thereunder as of the Date of Termination, until earlier of (A) the second anniversary of the Date of Termination or (B) the date the Executive first violates any of the restrictive covenants set forth in Section 6. As of the date that the Executive ceases to receive coverage under any group health plan pursuant to this Section 5(b)(ii), the Executive shall be eligible to elect to receive “COBRA” continuation coverage to the extent permitted by Section 601 et seq. of
the Executive Retirement Income Security Act of 1974, as amended. If such benefits cannot be provided under the Company’s group health benefit plans, such benefits will be provided on an individual basis to the Executive such that his after-tax costs will be no greater than the costs for such benefits under the Company’s plans.

(c) Termination due to Death or Disability. If the Executive’s employment with the Company is terminated by reason of his death or Disability, then the Executive or, as applicable, his estate or other legal representative, shall be entitled to receive the amounts described in Section 5(a), including any amount arising from the Executive’s participation in, or benefits under, any employee benefit plans, programs or arrangements described in Section 3(b) (including without limitation any disability or life insurance benefit plans, programs or arrangements), which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements.

6. Restrictive Covenants.

(a) Confidentiality. The Executive agrees that he will not during the Term or thereafter divulge to anyone (other than the Company or any persons designated by the Company) any knowledge or information of any type whatsoever of a confidential nature relating to the business of the Company, including, without limitation, all types of trade secrets, business strategies, marketing and distribution plans as well as ideas, proposals, plans, scripts, treatments and formats described in Section 6(b) below. The Executive further agrees that he will not disclose, publish or make use of any such knowledge or information of a confidential nature (other than in the performance of the Executive’s duties hereunder) without the prior written consent of the Company. This provision does not apply to information
which becomes available publicly without the fault of the Executive or information which the Executive is required to disclose in legal proceedings, provided the Executive gives advance written notice to the Board and an opportunity to for the Company to resist such disclosure.

(b) Intellectual Property. During the Term, the Executive will disclose to the Company all ideas, proposals, plans, scripts, treatments, and formats invented or developed by the Executive which relate directly or indirectly to the business of the Company or any of its subsidiaries or affiliates including, without limitation, any ideas, proposals and plans which may

 

 

5

 

be copyrightable, tradernarkable, patentable or otherwise exploitable. The Executive agrees that all such ideas, proposals, plans, scripts, treatments, and formats are and will be the property of the Company. The Executive further agrees, at the Company’s request, to do whatever is necessary or desirable to secure for the Company the rights to said ideas, proposals, plans, scripts, treatments, and formats, whether by copyright, trademark, patent or otherwise and to assign, transfer and convey the rights thereto to the Company.

(c) Name and Likeness. The Company shall have the right in perpetuity to use the Executive’s name, image, and likeness in connection with credits, advertising and publicity for product for which the Executive performs any development and/or production services, and during the Term otherwise in connection with the Company and its business.

(d) Competitive Business Restrictions. During the Term, the Executive shall not engage directly or indirectly, whether as an employee, independent contractor, consultant, partner, shareholder or otherwise, in a business or other endeavor which would or might interfere with any of his duties or obligations hereunder or which is competitive with or similar to the business of the Company or any of its subsidiaries or affiliates, including but not limited to any business related to the production, distribution or other exploitation of made for television movies or miniseries or the ownership, management, production, distribution or any other exploitation of any other audiovisual or theatrical materials. Notwithstanding the foregoing, the Executive shall have the right to own up to five percent (5%) of
the shares of any publicly traded company in the entertainment business.

(e) Non-Solicitation. The Executive further agrees that during the Term and for a period of two years thereafter, the Executive will not employ or attempt to employ or assist anyone else to employ any person who is, as of the Date of Termination, working as an officer, policymaker or in creative development (including without limitation executive employees) for or rendering services as such to the Company (e.g., this prohibition does not apply to anyone who is a short term employee engaged by the Company specifically to work on the development or production of a particular motion picture, television or other audiovisual property).

(f) Non-Compete. In consideration of the Company’s agreements herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Executive agrees, in addition to any other obligation imposed by this Section 6, that he will not, during the period beginning on the Date of Termination and ending on the second anniversary thereof (the “Non-Compete Period”), engage directly or indirectly, whether as an employee, independent contractor, consultant, partner, shareholder or otherwise, in a business or other endeavor which is competitive with or similar to any business of the Company (including without limitation any business related to the production, distribution or
other exploitation of made for television movies or miniseries), or any business which as of the Date of Termination is contemplated by the Company and has been formally considered by the Board at a meeting (any such business or endeavor, a “Competitive Business”), anywhere in the world. Notwithstanding the foregoing, at any time during the Non-Compete Period the Executive may request in writing to the Board that the Board consent to the Executive’s direct or indirect engagement in, ownership of equity interest in, or management or operation of (whether as a director, officer, employee, agent, representative, security holder, consultant or otherwise) any Competitive Business which derives less than 10% of its aggregate annual revenues from the

 

 

6

 

production, distribution or other exploitation of made for television movies or miniseries, which request the Board shall consider in good faith based upon the Board’s determination of the potential impact of the Executive’s involvement in such Competitive Business on the Company and its stockholders. The Executive specifically acknowledges that he is of special, unique and extraordinary value to the Company because of, inter alia, his personal relationships with performers, producers, writers, directors, creative sources, and distributors; that if he were to leave the Company and compete with it, the Company’s value would be materially diminished; that HEI which acquired substantially all of the outstanding Membership Interests of the Company in reliance on the good will of the business arising from
the performance by the Executive of his obligations hereunder would lose the benefit of that transaction; that HEI would not have made such acquisition of substantially all of the outstanding Membership Interests of the Company in the absence of this Agreement; that as a key executive of the Company, he has access to all confidential information, trade secrets, and the like, of the Company; that he has independent means of supporting himself and his family; and that in view of the foregoing, the restrictions imposed by this Section 6(f) are reasonably necessary to protect the Company against unfair competition by the Executive and are not unduly burdensome to the Executive. In addition, notwithstanding any provision of Section 6(d) or 6(f) to the contrary, the restrictions on the Executive under Section 6(d) and/or 6(f) shall terminate upon the 60th day following the Company’s filing for relief under Chapter 7 of the United States Bankruptcy Code (provided that such
Chapter 7 case is not converted into a Chapter 11 case under the United States Bankruptcy Code within the 60 day period following the Company’s Chapter 7 filing). The parties acknowledge and agree that if the Chapter 7 case described in the preceding sentence is timely converted into a Chapter 11 case but the Company is nevertheless liquidated rather than reorganized, then the restrictions on the Executive under Section 6(d) and/or 6(f) shall terminate upon the effective date of a liquidating plan of reorganization under Chapter 11. For the avoidance of doubt, in no event shall the Company’s filing for relief under Chapter 7 of the United States Bankruptcy Code (whether or not converted into a Chapter 11 case) cause the Non-Compete Period to extend beyond the second anniversary of the Date of Termination. Furthermore, notwithstanding any other provision of this Section 6(f), if the Company fails to make any payment to the Executive pursuant to Section 5(b)(i) (other than
in accordance with Section 5(b)(i)(B) due to the Executive’s violation of any restrictive covenant set forth in this Section 6) and the Executive notifies the Company of such failure in accordance with the notice provisions set forth in Section 10, then the Non-Compete Period shall expire after the third business day following the date the Company receives such notice from the Executive, but only if the Company has not cured the failure during the three-business day period following the Company’s receipt of such notice.

(g) Non-Disparagement. The Executive agrees not to disparage the Company, any of its products or practices, or any of its directors, officers, agents, representatives, stockholders or affiliates, either orally or in writing, at any time.

(h) Interpretation. In the event the terms of this Section 6 shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it will be interpreted to extend only over the maximum period of time for which it may be enforceable, over the maximum geographical area as to which it may be

 

 

7

 

enforceable, or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action. As used in this Section 6, the term “Company” shall include the Company, its parent, related entities, and any of its direct or indirect subsidiaries or affiliates.

7. Injunctive Relief. The Executive recognizes and acknowledges that a breach of the covenants contained in Section 6 will cause irreparable damage to Company and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, the Executive agrees that in the event of a breach of any of the covenants contained in Section 6, in addition to any other remedy which may be available at law or in equity, the Company will be entitled to specific performance and injunctive relief.

8. Assignment and Successors. The Company may assign its rights and obligations under this Agreement to any entity which is a successor to all or substantially all the assets of the Company, by merger or otherwise, and may assign or encumber this Agreement and its rights hereunder as security for indebtedness of the Company and its affiliates. The Executive may not assign his rights or obligations under this Agreement to any individual or entity. This Agreement shall be binding upon and inure to the benefit of the Company, the Executive and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable.

9. Governing Law. This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of New York, without reference to the principles of conflicts of law of New York or any other jurisdiction, and where applicable, the laws of the United States.

10. Notices. Any notice, request, claim, demand, document and other communication hereunder to any party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by telex, telecopy, or certified or registered mail, postage prepaid, to the following address (or at any other address as any party shall have specified by notice in writing to the other party):

 

	
                         
 	
                        (a)
 	
                        If to the Company:
 

Hallmark Entertainment, LLC

1325 Avenue of the Americas

New York, NY 10019

Attn: General Counsel

Fax Number: (212) 977-3917

with a copy to:

HEI Acquisition, LLC

c/o Kelso & Company

320 Park Avenue

New York, NY 10022

 

 

8

 

Attn: James Connors, General Counsel

Fax Number: (212) 751-3939

and a copy to:

Latham & Watkins LLP

885 Third Avenue

New York, New York 10022-4802

Attn: Bradd L. Williamson

Fax Number: (212) 751-4864

 

	
                         
 	
                        (b)
 	
                        If to the Executive, at the address set forth on the signature page hereto. 
 

with a copy to:

Frankfurt Kurnit Klein & Selz PC

488 Madison Avenue

New York, NY 10022

Attn: Thomas D. Selz

Fax Number: (347) 438-2115

11. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

12. Entire Agreement. The terms of this Agreement (together with any other agreements and instruments contemplated hereby or referred to herein) are intended by the parties to be the final expression of their agreement with respect to the employment of the Executive by the Company and may not be contradicted by evidence of any prior or contemporaneous agreement. This Agreement shall supersede all undertakings or agreements, whether written or oral, previously entered into by the Executive and the Company or any predecessor thereto or affiliate thereof (including without limitation that certain Employment Agreement between Hallmark Entertainment, Inc. and the Executive dated as of January 1, 1997, as amended) with respect to the employment of the
Executive by the Company. The parties further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement.

13. Amendments; Waivers. This Agreement may not be modified,, amended, or terminated except by an instrument in writing, signed by the Executive and the Chairman of the Board (or his delegate). By an instrument in writing similarly executed, the Executive or the Chairman of the Board (or his delegate) may waive compliance by the other party or parties with any provision of this Agreement that such other party was or is obligated to comply with or perform; provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure. No failure to exercise and no delay in exercising any right, remedy, or power
hereunder preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity.

 

 

9

 

14. No Inconsistent Actions. The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement. Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement.

15. Construction. This Agreement shall be deemed drafted equally by both the parties. Its language shall be construed as a whole and according to its fair meaning. Any presumption or principle that the language is to be construed against any party shall not apply. The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation. Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary. Also, unless the context clearly indicates to the contrary, (a) the plural includes the singular and the singular includes the plural; (b) “or” is used both conjunctively and disjunctively; (c)
“any,” “all,” “each,” or “every” means “any and all,” and “each and every”; (d) “includes” and “including” are each “without limitation”; (e) “herein,” “hereof,” “hereunder” and other similar compounds of the word “here” refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (f) all pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the entities or persons referred to may require,

16. Enforcement. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a portion of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

17. Withholding. The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreign withholding or other taxes or charges which the Company is required to withhold. The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.

18. Employee Acknowledgement. The Executive acknowledges that he has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based on his own judgment.

19. Survival. The expiration or termination of the Term shall not impair the rights or obligations of any party hereto, which shall have accrued prior to such expiration or termination.

 

 

10

 

20. Section 409A. The parties acknowledge and agree that, to the extent applicable, this Agreement shall be interpreted in accordance with, and the parties agree to use their best efforts to achieve timely compliance with, Section 409A of the Internal Revenue Code of 1986, as amended, and the Department of Treasury Regulations and other interpretive guidance issued thereunder (“Section 409A”), including without limitation any such regulations or other guidance that may be issued after the Effective Date. Notwithstanding any provision of this Agreement to the contrary, in the event
that the Company determines that any amounts payable hereunder would otherwise be taxable to the Executive under Section 409A, the Company may adopt such limited amendments to this Agreement and appropriate policies and procedures, including amendments and policies with retroactive effect, that the Company reasonably determines are necessary or appropriate to comply with the requirements of Section 409A and thereby avoid the application of penalty taxes under such Section.

[signature page follows]

 

 

11

 

IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written.

 

	
                         
 	
                         
 	
                        COMPANY
 
	
                          
 	
                         
 	
                        By: 
 	
                        
 /s/ Illegible
 
	
                         
 	
                         
 	
                        Its:
 	
                         
 
	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                        EXECUTIVE
 
	
                          
 	
                         
 	
                        

                        By: 
 	
                          
 
	
                         
 	
                         
 	
                         
 	
                        Peter von Gal
 
	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                        Residence Address:
 
	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                         
 

Peter von Gal – Employment Agreement

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written.

 

	
                         
 	
                         
 	
                        COMPANY
 
	
                          
 	
                         
 	
                        

                        By: 
 	
                        /s/ Robert Halmi Jr.  
 
	
                         
 	
                         
 	
                        Its:
 	
                         
 
	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                        EXECUTIVE
 
	
                          
 	
                         
 	
                        By: 
 	
                        
 /s/ Peter von Gal
 
	
                         
 	
                         
 	
                         
 	
                        Peter von Gal
 
	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                        Residence Address:
 
	
                         
 	
                         
 	
                         
 	
                        1795 Shippan Ave
 
	
                         
 	
                         
 	
                         
 	
                        Stamford, CT 06902
 

Peter von Gal – Employment Agreement

 

 

Exhibit A

[Profits Interest Award]

 

 

EXHIBIT A

Profits Interest Awards

Except as otherwise provided in this Exhibit A to the Executive’s Employment Agreement (the “Employment Agreement”), the Value Units awarded to the Executive shall be governed by the provisions of the Amended and Restated Limited Liability Company Agreement of RHI Entertainment Holdings, LLC (the “LLC Agreement”). Unless otherwise noted, any capitalized term used in this Exhibit A shall have the respective meaning assigned to such term in the LLC Agreement.

Allocation of Value Units

On the Effective Date, the Executive shall receive one-hundred and twenty-five (125) Value Units (the “Initial Executive Units”) of the initial Value Units issued to the Management Members on the Effective Date (as defined in the Employment Agreement). For purposes of this Exhibit A, “Executive Value Units” shall mean the Initial Executive Units, together with the number (if any) of Value Units that are allocated to the Executive following the Effective Date (the “Post-Closing Value Units”) in accordance with the LLC Agreement.

Treatment of Value Units upon Termination

Notwithstanding anything to the contrary in the LLC Agreement:

Complete Forfeiture of Executive Value Units:

In the event the Executive’s employment is terminated at anytime (a) for Cause (as defined in the Employment Agreement), (b) as a result of the Executive’s death or Disability (as defined in the Employment Agreement) or (c) as a result of the Executive’s resignation with or without Good Reason, the number of Executive Value Units shall be reduced to zero and shall be forfeited without any payment required to be made in respect thereof.

Initial Executive Units:

If the Executive’s employment is terminated at anytime without Cause (as defined in the Employment Agreement), then the number of Initial Executive Units shall be adjusted according to the applicable provision described below depending on the date of such termination:

 

	
                         
 	
                        (1)
 	
                        If the Executive is terminated without Cause (as defined in the Employment Agreement) at anytime prior to the first anniversary of the Effective Date, then the number of Initial Executive Units allocated to the Executive shall be reduced to zero and shall be forfeited without any payment required to be made in respect thereof;
 

	
                         
 	
                        (2)
 	
                        If the Executive is terminated without Cause (as defined in the Employment Agreement) at anytime on or after the first anniversary of the Effective Date, but before the second anniversary of the Effective Date, then (a) fourteen (14) of the Initial Executive Units shall be fully vested (but shall only be entitled to participate in distributions in accordance with the terms and conditions of the
 

 

 

LLC Agreement) and shall no longer be subject to the forfeiture provisions of the Employment Agreement or the LLC Agreement and (b) one-hundred and eleven (111) of the Initial Executive Units shall be forfeited without any payment required to be made in respect thereof;

 

	
                         
 	
                        (3)
 	
                        If the Executive is terminated without Cause (as defined in the Employment Agreement) at anytime on or after the second anniversary of the Effective Date, but before the third anniversary of the Effective Date, then (a) twenty-eight (28) of the Initial Executive Units shall be fully vested (but shall only be entitled to participate in distributions in accordance with the terms and conditions of the LLC Agreement) and shall no longer be subject to the forfeiture provisions of the Employment Agreement or the LLC Agreement and (b) ninety-seven (97) of the Initial Executive Units shall be forfeited without any payment required to be made in respect thereof; or
 

	
                         
 	
                        (4)
 	
                        If the Executive is terminated without Cause (as defined in the Employment Agreement) at anytime on or after the third anniversary of the Effective Date, then (a) forty-two (42) of the Initial Executive Units shall be fully vested (but shall only be entitled to participate in distributions in accordance with the terms and conditions of the LLC Agreement) and shall no longer be subject to the forfeiture provisions of the Employment Agreement or the LLC Agreement and (b) eighty-three (83) of the Initial Executive Units shall be forfeited without any payment required to be made in respect thereof
 

Post-Closing Value Units:

If the Executive’s employment is terminated at anytime without Cause (as defined in the Employment Agreement), then, in addition to the forfeiture and vesting provisions described above relating to the Initial Executive Units, the number of any Post-Closing Value Units shall be adjusted according to the applicable provision described below depending on the date of such termination:

 

	
                         
 	
                        (1)
 	
                        If the Executive is terminated without Cause (as defined in the Employment Agreement) at anytime prior to the First anniversary of the date such Post-Closing Value Units were allocated to the Executive (the “Date of Grant”), the number of such Post-Closing Value Units shall be reduced to zero and shall be forfeited without any payment required to be made in respect thereof;
 

	
                         
 	
                        (2)
 	
                        If the Executive is terminated without Cause (as defined in the Employment Agreement) at anytime on or after the first anniversary of the Date of Grant relating to such Post-Closing Value Units, but before the second anniversary of such Date of Grant, then (a) 11.11% of such Post-Closing Value Units (rounded to the nearest whole number) shall be fully vested (but shall only be entitled to participate in distributions in accordance with the terms and conditions of the LLC Agreement) and shall no longer be subject to the forfeiture provisions of the Employment Agreement or the LLC Agreement and (b) 88.89% of such Post- Closing Value Units (rounded to the nearest whole number) shall be forfeited without any payment required to be made in respect thereof;
 

	
                         
 	
                        (3)
 	
                        If the Executive is terminated without Cause (as defined in the Employment Agreement) at anytime on or after the second anniversary of the Date of Grant
 

 

 

relating to such Post-Closing Value Units, but before the third anniversary of such Date of Grant, then (a) 22.22% of such Post-Closing Value Units (rounded to the nearest whole number) shall be fully vested (but shall only be entitled to participate in distributions in accordance with the terms and conditions of the LLC Agreement) and shall no longer be subject to the forfeiture provisions of the Employment Agreement or the LLC Agreement and (b) 77.78% of such Post-Closing Value Units (rounded to the nearest whole number) shall be forfeited without any payment required to be made in respect thereof; or

 

	
                         
 	
                        (4)
 	
                        If the Executive is terminated without Cause (as defined in the Employment Agreement) at anytime on or after the third anniversary of the Date of Grant relating to such Post-Closing Value Units, then (a) 33.33% of such Post-Closing Value Units (rounded to the nearest whole number) shall be fully vested (but shall only be entitled to participate in distributions in accordance with the terms and conditions of the LLC Agreement) and shall no longer be subject to the forfeiture provisions of the Employment Agreement or the LLC Agreement and (b) 66.67% of such Post-Closing Value Units (rounded to the nearest whole number) shall be forfeited without any payment required to be made in respect thereof.
 

Defined Terms Relating to Termination Events

Notwithstanding anything to the contrary in the LLC Agreement, the definitions of “Termination for Cause,” “Disability” and “Good Reason” contained in the LLC Agreement shall be replaced in their entirety with the definitions of “Cause,” “Disability” and “Good Reason,” in each case as applicable, that are contained in this Employment Agreement.

Survival

The provisions of this Exhibit A shall survive the termination of the Employment Agreement.

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