AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 16, 1998
REGISTRATION NO. 333-40281
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ACME TELEVISION, LLC
ACME FINANCE CORPORATION
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 4833 52-2050588
DELAWARE 4833 33-0776961
------------------------ ------------------------ ------------------------
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
SEE TABLE OF ADDITIONAL REGISTRANTS
------------------------
650 TOWN CENTER DRIVE, SUITE 850
COSTA MESA, CA 92626
(714) 445-5791
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
THOMAS ALLEN
EXECUTIVE VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
650 TOWN CENTER DRIVE, SUITE 850
COSTA MESA, CA 92626
(714) 445-5791
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
WITH A COPY TO:
EMANUEL FAUST, JR., ESQ.
DICKSTEIN SHAPIRO MORIN & OSHINSKY LLP
2101 L STREET, N.W.
WASHINGTON, DC 20037
(202) 785-9700
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES
EFFECTIVE.
------------------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
------------------------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PROPOSED MAXIMUM AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1) OFFERING PRICE(2) PRICE(2) REGISTERED FEE
--------------------------------- ------------- ----------------- ------------------ --------------
<S> <C> <C> <C> <C>
10 7/8% Senior Discount
Notes due 2004, Series B................... $127,370,250 100% $127,370,250 $38,597 (3)
Guarantees of 10 7/8% Senior Discount Notes
due 2004, Series B......................... -- -- -- (4)
</TABLE>
(1) Gross proceeds from the initial issuance of the Senior Discount Notes.
(2) Estimated pursuant to Rule 457(f) solely for the purpose of calculating the
registration fee.
(3) Previously paid on November 14, 1997.
(4) Pursuant to Rule 457(n), no registration fee is payable with respect to the
Guarantees.
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE>
TABLE OF ADDITIONAL REGISTRANTS
ACME TELEVISION LICENSES OF MISSOURI, INC.
ACME TELEVISION HOLDINGS OF OREGON, L.L.C.
ACME TELEVISION HOLDINGS OF TENNESSEE, L.L.C.
ACME TELEVISION HOLDINGS OF UTAH, L.L.C.
ACME TELEVISION HOLDINGS OF NEW MEXICO, L.L.C.
ACME TELEVISION LICENSES OF OREGON, L.L.C.
ACME TELEVISION LICENSES OF TENNESSEE, L.L.C.
ACME TELEVISION LICENSES OF UTAH, L.L.C.
ACME TELEVISION LICENSES OF NEW MEXICO, L.L.C.
ACME TELEVISION OF OREGON, L.L.C.
ACME TELEVISION OF TENNESSEE, L.L.C.
ACME TELEVISION OF UTAH, L.L.C.
ACME TELEVISION OF NEW MEXICO, L.L.C.
ACME SUBSIDIARY HOLDINGS III, L.L.C.
------------------------
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTER)
<TABLE>
<S> <C> <C>
MISSOURI 4833 33-0775893
OREGON 4833 91-1846666
TENNESSEE 4833 62-1705161
DELAWARE 4833 33-0778414
DELAWARE 4833 33-0778416
OREGON 4833 91-1846667
TENNESSEE 4833 62-1705160
DELAWARE 4833 33-0776363
DELAWARE 4833 33-0776359
OREGON 4833 91-1827053
TENNESSEE 4833 62-1696834
DELAWARE 4833 33-0776365
DELAWARE 4833 33-0776361
DELAWARE 4833 33-0776356
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE) IDENTIFICATION NO.)
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED JANUARY 16, 1998
PROSPECTUS
ACME TELEVISION, LLC
ACME FINANCE CORPORATION
OFFER TO EXCHANGE
10 7/8% SENIOR DISCOUNT NOTES
DUE 2004, SERIES A AND FULL AND
UNCONDITIONAL GUARANTEES THEREOF
FOR
10 7/8% SENIOR DISCOUNT NOTES
DUE 2004, SERIES B AND FULL AND
UNCONDITIONAL GUARANTEES THEREOF
SUBSIDIARY GUARANTORS
ACME TELEVISION LICENSES OF MISSOURI, INC.
ACME TELEVISION HOLDINGS OF OREGON, L.L.C.
ACME TELEVISION HOLDINGS OF TENNESSEE, L.L.C.
ACME TELEVISION HOLDINGS OF UTAH, L.L.C.
ACME TELEVISION HOLDINGS OF NEW MEXICO, L.L.C.
ACME TELEVISION LICENSES OF OREGON, L.L.C.
ACME TELEVISION LICENSES OF TENNESSEE, L.L.C.
ACME TELEVISION LICENSES OF UTAH, L.L.C.
ACME TELEVISION LICENSES OF NEW MEXICO, L.L.C.
ACME TELEVISION OF OREGON, L.L.C.
ACME TELEVISION OF TENNESSEE, L.L.C.
ACME TELEVISION OF UTAH, L.L.C.
ACME TELEVISION OF NEW MEXICO, L.L.C.
ACME SUBSIDIARY HOLDINGS III, L.L.C.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON 1998,
UNLESS EXTENDED
------------------------
ACME Television, LLC, a Delaware limited liability company (the 'Company'),
and ACME Finance Corporation, a Delaware corporation and a wholly-owned
subsidiary of the Company ('ACME Finance Corporation' and, together with the
Company, the 'Issuers'), hereby offer to exchange their 10 7/8% Senior Discount
Notes Due 2004, Series B (the 'Exchange Notes'), which have been registered
under the Securities Act of 1933, as amended (the 'Securities Act'), pursuant to
a Registration Statement of which this Prospectus is a part, for a like
principal amount of their 10 7/8% Senior Discount Notes Due 2004, Series A (the
'Original Notes'), of which $175,000,000 aggregate principal amount at maturity
is outstanding on the date hereof, upon the terms and subject to the conditions
set forth in this Prospectus and in the accompanying Letter of Transmittal
(which together constitute the 'Exchange Offer'). The form and terms of the
Exchange Notes will be the same as the form and terms of the Original Notes
except that (i) the Exchange Notes will be registered under the Securities Act
and hence will not bear legends restricting the transfer thereof and (ii) the
holders of the Exchange Notes will not be entitled to certain rights of the
holders of Original Notes under the Registration Rights Agreement (as defined
herein), which rights will terminate upon the consummation of the Exchange
Offer. The Exchange Notes will evidence the same debt as the Original Notes and
will be entitled to the benefits of an indenture dated as of September 30, 1997,
governing the Original Notes and the Exchange Notes (the 'Indenture') among the
Issuers, the Guarantors (as defined) and Wilmington Trust Company, as trustee
(the 'Trustee'). The Indenture provides for the issuance of both the Exchange
Notes and the Original Notes. The Exchange Notes and the Original Notes are
sometimes referred to herein collectively as the 'Notes.' While the Issuers are
jointly and severally liable for the obligations under the Notes, ACME Finance
Corporation has only nominal assets, does not conduct any operations and was
formed solely to act as a co-issuer of the Notes. The Notes are non-recourse to
any parent entity of the Issuers (other than the Company) and their equity
holders.
(continued on next page)
------------------------
SEE 'RISK FACTORS' BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH HOLDERS OF ORIGINAL NOTES SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE
OFFER AND PROSPECTIVE PURCHASERS OF EXCHANGE NOTES SHOULD CONSIDER IN CONNECTION
WITH SUCH INVESTMENT.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1998
<PAGE>
(continued from cover)
Cash interest on the Exchange Notes will accrue at a rate of 10 7/8% per
annum on the principal amount at maturity of the Exchange Notes through and
including the maturity date, and will be payable semi-annually on March 31 and
September 30 of each year, commencing March 31, 2001. Cash interest on the
Exchange Notes will not accrue or be payable prior to September 30, 2000. The
Original Notes were issued at a substantial discount to their principal amount
at maturity, and the holders of the Exchange Notes will be required to include
the accretion of the original issue discount as gross income on a constant yield
to maturity basis in advance of receipt of the cash payments to which such
income is attributable. See 'Certain Federal Income Tax Considerations.'
The Exchange Notes are redeemable at any time and from time to time at the
option of the Issuers, in whole or in part, on or after September 30, 2001, at
the redemption prices set forth herein (expressed as a percentage of the
principal amount at maturity) plus accrued and unpaid interest to the date of
redemption. In addition, on or prior to September 30, 2000, the Issuers may
redeem, at their option, up to 35% of the aggregate principal amount at maturity
of the Notes with the net proceeds of one or more Public Equity Offerings (as
defined herein) at 110.875% of the Accreted Value (as defined herein) thereof,
as long as at least 65% of the aggregate principal amount at maturity of the
Notes originally issued remains outstanding after each such redemption and that
any such redemption occurs within 90 days of the closing of any such Public
Equity Offering. Upon a Change of Control (as defined herein), the Issuers will
be required to offer to repurchase the Exchange Notes at a purchase price equal
to (i) 101% of the Accreted Value thereof, if the purchase date is on or prior
to September 30, 2000, or (ii) 101% of the principal amount at maturity thereof,
plus accrued and unpaid interest thereon, if any, to the repurchase date, if
such date is after September 30, 2000.
The Exchange Notes are general senior unsecured obligations of the Issuers
and rank pari passu in right of payment with all future unsubordinated
indebtedness of the Issuers and senior in right of payment to any subordinated
indebtedness of the Issuers. The Exchange Notes are effectively subordinated in
right of payment to all other secured indebtedness of the Issuers. The Exchange
Notes are fully and unconditionally guaranteed to the maximum extent permitted
by law, jointly and severally, and on a senior unsecured basis, subject to
certain exceptions, by all existing and future subsidiaries of the Issuers
(collectively, the 'Subsidiary Guarantors'). After giving pro forma effect to
the Transactions (as defined herein) as of September 30, 1997, the Issuers and
the Subsidiary Guarantors had approximately $131.6 million of indebtedness
outstanding, comprised of $4.2 million of secured indebtedness (including $3.5
million of indebtedness under the Revolving Credit Facility (as defined
herein)), and $127.4 million of indebtedness evidenced by the Exchange Notes.
The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of the Issuers contained in the Registration Rights Agreement, dated
as of September 30, 1997 (the 'Registration Rights Agreement'), among the
Issuers, the Guarantors, CIBC Wood Gundy Securities Corp. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, as the initial purchasers (the 'Initial
Purchasers') of the Original Notes.
The Issuers will accept for exchange any and all validly tendered Original
Notes on or prior to 5:00 p.m., New York City time, on ,
1998 unless the Issuers, in their sole discretion, have extended the period of
time for which the Exchange Offer is open (the 'Expiration Date'). Tenders of
Original Notes may be withdrawn at any time prior to 5:00 p.m., New York City
time, on the Expiration Date. The Exchange Offer is not conditioned upon any
minimum principal amount of Original Notes being tendered for exchange pursuant
to the Exchange Offer. The Original Notes may be tendered only in integral
multiples of $1,000. The Issuers expressly reserve the right to terminate or
amend the Exchange Offer and not to accept for exchange any Original Notes not
theretofore accepted for exchange upon the occurrence of any of the conditions
specified under 'The Exchange Offer--Certain Conditions to the Exchange Offer.'
If any such termination or amendment occurs, the Issuers will give oral or
written notice to the holders of the Original Notes as promptly as practicable.
In the event the Issuers do not accept for exchange any Original Notes, the
Issuers will promptly return such Original Notes to the holders thereof.
The Original Notes were originally issued and sold on September 24, 1997 in
a transaction not registered under the Securities Act in reliance upon the
exemption provided in Rule 144A and Regulation S of the Securities Act (the
'Offering'). Accordingly, the Original Notes may not be reoffered, resold or
otherwise pledged, hypothecated or transferred in the United States unless so
registered or unless an applicable exemption
i
<PAGE>
from the registration requirements of the Securities Act is available. The
Issuers are making this Exchange Offer based upon interpretations by the staff
(the 'Staff') of the Securities and Exchange Commission (the 'Commission') as
set forth in no-action letters issued to third parties. However, the Issuers
have not sought their own no-action letter and there can be no assurance that
the Staff would make a similar determination with respect to the Exchange Offer.
Based on these no-action letters, the Issuers believe that the Exchange
Notes issued pursuant to the Exchange Offer in exchange for the Original Notes
may be offered for resale, resold and otherwise transferred by holders thereof
(other than any such holder which is an 'affiliate' of the Issuers within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery requirements of the Securities Act provided
that such Exchange Notes are acquired in the ordinary course of such holder's
business and such holder is not engaged in, and does not intend to engage in,
and has no arrangement or understanding with any person to participate in, a
distribution of such Exchange Notes. Each broker-dealer that receives the
Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it acquired the Original Notes as a result of market-making
activities or other trading activities and that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may be
amended or supplemented, may be used by a broker-dealer in connection with
resales of Exchange Notes received in exchange for Original Notes where such
Original Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Issuers have agreed that, for a
period not to exceed 180 days after the consummation of the Exchange Offer, they
will make this Prospectus available for use in connection with any such resale.
See 'Plan of Distribution.' Any holder that cannot rely upon or does not satisfy
the requirements set forth in such interpretations by the Staff must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with a resale transaction.
Any Original Notes not tendered and accepted in the Exchange Offer will
remain outstanding and will be entitled to all the rights and preferences and
will be subject to the limitations applicable thereto under the Indenture.
Following consummation of the Exchange Offer, the holders of Original Notes will
continue to be subject to the existing restrictions on transfer thereof and the
Issuers will have no further obligation to such holders to provide for the
registration under the Securities Act of the Original Notes except under certain
limited circumstances. To the extent Original Notes are tendered and accepted in
the Exchange Offer, the liquidity of any trading market for untendered and
tendered but unaccepted Original Notes could be adversely affected.
Prior to this Exchange Offer, there has been no public market for the
Original Notes or the Exchange Notes. The Issuers do not intend to list the
Exchange Notes on any securities exchange or to seek approval for quotation
through any automated quotation system. There can be no assurance that an active
market for the Exchange Notes will develop. To the extent that a market for the
Exchange Notes does develop, the market value of the Exchange Notes will depend
on many factors including prevailing interest rates, the Company's operating
results and the markets for similar securities. See 'Risk Factors--Lack of
Public Market for the Exchange Notes; Restrictions on Resale of the Original
Notes.'
The Issuers will not receive any proceeds from this Exchange Offer. The
Issuers have agreed to pay all reasonable expenses incident to this Exchange
Offer (excluding the fees of counsel to the Initial Purchasers) and will
indemnify the Initial Purchasers against certain liabilities, including
liabilities under the Securities Act. No dealer-manager is being used in
connection with this Exchange Offer.
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain statements and information that are
'forward-looking statements' within the meaning of certain provisions of the
federal securities laws. When used in this Prospectus, the words 'intend,'
'estimate,' 'expect,' 'anticipate,' 'believe' and similar expressions are
intended to identify forward-looking statements. Those statements include, among
other things, the discussions of the Company's business strategy and
expectations concerning the Company's market position, future operations,
margins, profitability, liquidity and capital resources, as well as statements
concerning the integration of the Pending Acquisitions and achievement of cost
savings and other synergies in connection therewith. Investors in the Exchange
Notes offered hereby are cautioned that reliance on any forward-looking
statement involves risks and uncertainties, and that although the Issuers
believe that the assumptions on which the forward-looking statements
ii
<PAGE>
contained herein are based are reasonable, any of those assumptions could prove
to be inaccurate, and, as a result, the forward-looking statements based on
those assumptions also could be incorrect. The uncertainties in this regard
include, but are not limited to, those identified in the risk factors discussed
herein. See 'Risk Factors.' In light of these and other uncertainties, the
inclusion of a forward-looking statement herein should not be regarded as a
representation by the Issuers that the Issuers' plans and objectives will be
achieved. The Issuers undertake no obligation to release the results of any
revisions to these forward-looking statements that may be made to reflect future
events or circumstances.
iii
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in andy State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such State.
<PAGE>
CERTAIN DEFINITIONS AND MARKET AND INDUSTRY DATA
Unless otherwise indicated, information set forth herein as to designated
market area, rank, demographic statistics and projected growth, revenue, station
audience and revenue share and number of commercial broadcasters is as reported
by BIA Publications, Inc. ('BIA') in its Investing in Television 1997 (2nd
Edition) (the 'BIA Market Report, 1997') and its BIA Research Television
Analyzer as of June 26, 1997. Unless otherwise indicated, station audience share
and ratings estimates reflect such data from sign-on to sign-off for the four
preceding sweep periods indicated as reflected in the Nielsen Media Research DMA
ratings books for the period indicated. Set forth below are certain terms
commonly used in the broadcast television industry that are used throughout this
Prospectus. Unless the context otherwise requires, such terms shall have the
respective meanings set forth below.
<TABLE>
<S> <C>
Audience share............................ The percentage of total households using television tuned to a
particular station during the time period being measured.
ABC....................................... American Broadcasting Company.
Broadcast cash flow....................... EBITDA plus corporate expenses. Although broadcast cash flow is not
calculated in accordance with GAAP, it is widely used in the
broadcast industry as a measure of a broadcasting company's
performance. Broadcast cash flow should not be considered in
isolation from or as a substitute for net income, cash flows from
operating activities and other income or cash flow statement data
prepared in accordance with GAAP, or as a measure of profitability or
liquidity.
Broadcast season.......................... The approximately 35 week period for each network, commencing with
its launch of new programming and premiere episodes of returning
programming, generally beginning in September, and ending with
completion of the May sweep period of the following calendar year.
Cable penetration......................... The number of households within a DMA which are cable subscribers
divided by the number of households which have access to cable.
CBS....................................... CBS, Inc.
Commercial broadcasters................... Stations competing for national, regional and local spot advertising.
Commercial broadcasters do not include low power and public stations,
home shopping stations and stations devoted primarily to religious
broadcasting.
Communications Act........................ Communications Act of 1934, as amended.
DMA or market............................. Designated Market Area. There are 211 DMAs in the United States with
each county in the continental United States assigned uniquely to one
DMA. Ranking of DMAs is based upon Nielsen Media Research estimates
of the number of television households.
EBITDA.................................... Operating income (loss), plus depreciation, amortization and other
noncash charges, including amortization of programming rights, minus
programming payments. Although EBITDA is not calculated in accordance
with GAAP, it is widely used as a measure of a company's ability to
service and/or incur debt. EBITDA should not be considered in
isolation from or as a substitute for net income, cash flows from
operations and other income or cash flow data prepared in accordance
with GAAP, or as a measure of profitability or liquidity.
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
Fox....................................... Fox Broadcasting Company.
FCC....................................... Federal Communications Commission.
LMA....................................... Local marketing agreement, time brokerage agreement or similar
arrangement between a broadcaster and a station licensee pursuant to
which the broadcaster provides programming to, sells advertising time
for and funds operating expenses for the applicable station, manages
certain station activities, and retains the advertising revenues of
such station, in exchange for fees paid to the licensee.
Market revenue............................ Aggregate television advertising revenue of all commercial
broadcasters within the applicable market.
NBC....................................... National Broadcasting Co., Inc.
Prime time................................ Monday through Saturday 8:00 PM to 11:00 PM (EST) and Sunday 7:00 PM
to 11:00 PM (EST).
Rating point.............................. A rating point represents one percent of all television households in
a certain DMA, as measured by A.C. Nielsen Company.
Revenue share............................. The percentage received by a station of the total television
advertising revenues available to commercial broadcasters in the
applicable DMA.
Share point............................... A share point represents one percent of all television households in
a certain DMA using at least one television set at the time of
measurement by A.C. Nielsen Company.
Sweep period.............................. Each of the approximately four week periods in February, May, July
and November used by commercial broadcasters and advertisers to
establish advertising rates based on the broadcaster's ratings for
such periods.
Syndicated programming.................... Programming purchased from production studios to be broadcast during
non-network time periods. Syndicated programming includes both
original programming and previously broadcasted programming.
Telecom Act............................... The Telecommunications Act of 1996.
Television advertising revenue............ Total time sales, including network compensation, national/regional,
local and political advertising for the market and period indicated.
The WB Network............................ The WB Television Network.
UPN....................................... United Paramount Network.
</TABLE>
v
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the financial statements
and notes hereto included elsewhere in this Prospectus. Unless otherwise
indicated, the information set forth in this Prospectus gives effect to the
Transactions (as defined). See 'The Transactions.' Unless otherwise indicated,
references to the Company refer to ACME Television, LLC and its subsidiaries.
See 'Certain Definitions and Market and Industry Data' on page iii of this
Prospectus for a description of the sources of demographic, market and industry
data included in this Prospectus.
THE COMPANY
The Company was formed to own or operate broadcast television stations in
growing medium-sized markets ranked between 20 and 75. The Company intends to
affiliate each of its broadcast television stations with The WB Network. The
Company owns, or has entered into agreements to acquire or construct and
operate, television stations in five markets which broadcast in DMAs which cover
in the aggregate 3.9% of the U.S. population. The Company's stations are as
follows:
<TABLE>
<CAPTION>
TOTAL 1996
COMMENCE/ COMMERCIAL MARKET
DMA STATION- LAUNCH BROADCASTERS CABLE REVENUE
MARKET RANK CHANNEL DATE IN MARKET PENETRATION (IN MILLIONS)(1)
- ------------------------------------- --- -------- --------- ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
St. Louis, MO........................ 21 KPLR-11 On-Air 5 53% $200.8
Portland, OR......................... 24 KWBP-32 On-Air 6 63 156.4
Salt Lake City, UT................... 36 KZAR-16 Apr '98 6 56 135.0
Albuquerque, NM...................... 48 KAUO-19 Sept '98 6 60 82.5
Knoxville, TN........................ 60 WBXX-20 On-Air 5 68 60.6
</TABLE>
- ------------------
(1) 1996 market revenue represents the aggregation television advertising
revenue of all commercial broadcasters in the applicable market during 1996
and does not represent revenue attributable solely to the Company's
stations.
The Company's strategy is to selectively acquire either underperforming
stations or construction permits for new stations and operate its stations as
affiliates of The WB Network. The Company seeks to improve operating results,
maximize revenues and EBITDA and increase value through the following
strategies:
Target Growing Medium-Sized Markets. The Company seeks to acquire and
construct stations in markets with estimated television advertising
revenues of $40 million to $225 million and where its stations can operate
as one of five or six commercial broadcasters. The Company believes that
medium-sized markets are generally less competitive than larger markets
because of the limited number of commercial broadcasters in medium-sized
markets. As a result, the Company believes that operating television
stations in less competitive markets offers greater opportunities to build
and maintain audience share and generate revenues. The Company targets
markets with diversified economies and favorable projections of population
and television advertising revenue growth. The Company's five stations will
operate in markets with an aggregate projected annual population growth
rate through the year 2000 of 1.4%, compared to the projected annual
national population growth rate of 0.8%. The Company's five stations will
operate in markets with an aggregate projected annual television
advertising revenue growth rate through the year 2000 of 5.8% compared to
the projected annual national television advertising growth rate of 5.6%.
The WB Network Affiliation. The Company expects its stations to
benefit from their affiliation with The WB Network. The WB Network has
shown continued ratings growth since its inception. For example, the 24
stations in large and medium-sized markets that became affiliates of The WB
Network at its inception have on average experienced a prime time household
ratings increase of 63% from May 1995 to May 1997 on nights with The WB
Network programming. In addition, these stations experienced an average
prime time ratings increase of 53% among 18-34 year olds over the same
period. Management believes that the increase in popularity of The WB
Network programming results in greater advertising revenues and enhanced
cash flow for network affiliates. The Company has entered into a network
affiliation agreements
1
<PAGE>
for Station KWBP and Station WBXX, will assume and extend an existing
affiliation agreement for Station KPLR and has obtained commitments from
The WB Network for an affiliation agreement covering each of its other
stations. See 'Business--Affiliation Agreements.'
Selectively Purchase Syndicated Programming. The major production
studios currently supply syndicated programming sufficient to fill
programming requirements for seven broadcast stations in a market. The
Company's stations are one of five or six commercial broadcast stations in
their respective markets. The Company believes that the limited number of
commercial broadcast stations, combined with the ability to centrally
purchase programming for five stations, will allow the Company to acquire
syndicated programming at attractive prices. The Company's Portland and
Knoxville stations have already obtained broadcast rights for syndicated
programming that will premiere during the next three broadcast seasons at
prices which the Company believes are attractive. These programs include
Friends, Full House, M*A*S*H, Star Trek: The Next Generation and The Drew
Carey Show.
Emphasis on Sales. The Company's management has hired, and intends to
continue to hire, station general managers with significant experience in
advertising sales who will be directly involved in station sales and
marketing. The Company believes that by centralizing administrative
functions, each station's general manager will be able to devote a greater
effort to local sales and marketing activities. In addition, the Company
intends to establish a commission-based compensation system for sales
personnel that will include significant incentives for the origination of
new accounts in addition to expanding current relationships.
Creating a Strong Group Identity. The Company intends to establish a
highly professional on-air appearance and identity for each of its
stations. The Company's graphics, animation and music for station imaging
will be created by a centralized corporate graphics department and will
target each station's demographic audience. The Company intends to hire
experienced personnel at the corporate level for these and similar services
that would not otherwise be available at a cost-efficient rate to its
stations on an individual basis.
Centralized Systems and Controls. Management plans to centralize the
Company's scheduling, purchasing, national sales and certain accounting
functions within the corporate office. The Company believes that this will
afford each of the station's general managers more time to focus on local
sales and marketing. Management believes that by centralizing purchasing,
the Company will be able to negotiate lower costs for equipment and
services. For example, the Company has solicited and received proposals for
a group national sales representative agreement at significantly lower
rates than would have been available to its stations on an individual
station basis. In addition, the Company has already purchased syndicated
programming on a multiple station basis and negotiated capital lease
facilities for its stations as a group on terms it considers attractive.
THE WB NETWORK
The WB Network was created by affiliates of Time Warner, Inc. ('Time
Warner'), Tribune Broadcasting ('Tribune') and Jamie Kellner as a new television
broadcast network. The WB Network was formed to provide an alternative to the
prime time and children's programming offered by the other networks. The WB
Network's focus is to provide quality programming to teens, young adults and
families with small children. The WB Network utilizes (i) the strength of Time
Warner, through its Warner Brothers division, as a leading producer of prime
time programming and Saturday morning cartoons, (ii) the network distribution
capabilities of the cable system holdings of Time Warner and the television
station holdings of Tribune, and (iii) the experience of the members of The WB
Network management team, many of whom worked with Mr. Kellner during the launch
of Fox in 1986.
Since the launch of the network on January 11, 1995, The WB Network has
increased its on-air programming from two hours of prime time programming one
night per week to nine hours of prime time programming four nights per week and
19 hours of children's programming announced for the 1997-1998 season. The WB
Network has announced plans to provide one additional evening of prime time
programming each season until every night is programmed. As of May 1997, it is
estimated that The WB Network programming is available to approximately 86% of
all television households in the United States.
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STATION OVERVIEW
On June 17, 1997, ACME Parent (as defined) acquired Station KWBP, which
serves the Portland, Oregon DMA (the 'Portland Acquisition'), for approximately
$18.7 million in cash and $4.4 million of membership units in ACME Parent. On
October 7, 1997, the Company acquired Station WBXX, which serves the Knoxville,
Tennessee DMA (the 'Knoxville Acquisition') for $13.2 million in cash. The
Company has entered into an acquisition agreement dated July 29, 1997 to acquire
Station KPLR, St. Louis, Missouri (the 'St. Louis Acquisition') for an aggregate
purchase price of approximately $146.0 million and has entered into a time
brokerage agreement with respect to Station KPLR (the 'St. Louis LMA'). The
Company has also entered into agreements to (i) construct and acquire new
stations in the Salt Lake City, Utah and Albuquerque, New Mexico markets for an
aggregate purchase price of $14.0 million, plus approximately $8.5 million in
construction costs. See 'The Transactions.'
KPLR-11: ST. LOUIS, MO
Station KPLR operates in the St. Louis market, which is the 21st largest
DMA in the U.S. The St. Louis DMA is projected to have annual television
advertising revenue and population growth of approximately 5.4% and 0.5%,
respectively, through the year 2000. Station KPLR commenced broadcasting in 1959
and has been affiliated with The WB Network since the network's launch in 1995.
The station currently competes against four other commercial broadcasters and
captured approximately 16% of the market's television advertising revenues for
the 1996 calendar year. For the May 1997 sweep period, Station KPLR ranked third
in terms of audience ratings in its market and, among all domestic broadcast
stations affiliated with The WB Network, UPN or operated as an independent
station, was the number one ranked station in the U.S. on the basis of ratings
and audience share. Station KPLR's non-network programming emphasizes both
programs of local appeal, such as St. Louis Cardinals baseball and a 9:00 p.m.
newscast, and quality syndicated programs, such as Cheers, Full House, Living
Single, Martin and Seinfeld.
KWBP-32: PORTLAND, OR
Station KWBP operates in the Portland market, which is the 24th largest DMA
in the U.S. The Portland DMA is projected to have annual television advertising
revenue and population growth of approximately 5.9% and 1.8%, respectively,
through the year 2000. Station KWBP competes against five other commercial
broadcasters. Management anticipates completing the construction of a new
transmission facility to improve the station's signal and upgrading its studio
facility in January 1998. Station KWBP has been affiliated with The WB Network
since the network's launch in 1995. The station's syndicated programming and
future broadcast rights include Cops, Full House, Hawaii Five-O, Mama's Family,
Star Trek: The Next Generation, The Drew Carey Show and Xena--Warrior Princess.
KZAR-16: SALT LAKE CITY, UT
Station KZAR will operate in the Salt Lake City market, which is the 36th
largest DMA in the U.S. The Salt Lake City DMA is projected to have annual
television advertising revenue and population growth of approximately 6.2% and
1.9%, respectively, through the year 2000. The Salt Lake City market has a
relatively young demographic population, with over 37% of the population under
the age of eighteen, compared to the national average of 26%. Station KZAR will
compete against five other commercial broadcasters. Management anticipates
completing construction of the station and commencing broadcasting in April of
1998.
KAUO-19: ALBUQUERQUE-SANTA FE, NM
Station KAUO will operate in the Albuquerque market, which is the 48th
largest DMA in the U.S. The Albuquerque DMA is projected to have annual revenue
and population growth of approximately 5.8% and 1.6%, respectively, through the
year 2000. The Albuquerque market has a relatively young demographic population,
with approximately 30% of the population under the age of eighteen. Station KAUO
will compete against five other commercial broadcasters. Management anticipates
completing construction of the station and commencing broadcasting in September
of 1998.
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WBXX-20: KNOXVILLE, TN
Station WBXX operates in the Knoxville market, which is the 60th largest
DMA in the U.S. The Knoxville DMA is projected to have annual television
advertising revenue and population growth of approximately 6.1% and 1.4%,
respectively, through the year 2000. Station WBXX will compete against four
other commercial broadcasters. The acquisition and construction of the station
were completed and broadcasting commenced in October of 1997. The station has
purchased syndicated programming and future broadcast rights to several
syndicated programs including Cheers, Friends, Full House, M*A*S*H, Star Trek:
The Next Generation and The Drew Carey Show.
MANAGEMENT AND INVESTORS
The Company's senior management team has extensive experience in the
television industry. Jamie Kellner, the Company's Chairman and Chief Executive
Officer, was formerly the President of Fox and has over 28 years of industry
experience. Mr. Kellner is also currently the Chief Executive Officer of The WB
Network. Doug Gealy, President and Chief Operating Officer, has over 15 years of
experience in television operations and sales. Previously, Mr. Gealy served as
an Executive Vice President for Benedek Broadcasting, overseeing eight
television stations, and has also been General Manager for stations owned by NBC
and Outlet Communications. Tom Allen, Executive Vice President and Chief
Financial Officer, has over eleven years of experience in the media industry,
including seven years as Senior Vice President--Finance and Administration of
Fox. While at Fox, Mr. Allen oversaw the financial, administrative and operating
performance of the network. In addition to the senior management team, the
Company has hired and plans to hire general managers with extensive sales
experience to operate each station.
The Company is 100% owned directly or indirectly by ACME Intermediate
Holdings, LLC ('ACME Intermediate'). ACME Intermediate is 92% owned directly or
indirectly by ACME Television Holdings, LLC ('ACME Parent'). The remaining 8% of
ACME Intermediate is owned by purchasers of the Intermediate Notes (as defined).
The principal investors in ACME Parent are investment funds affiliated with Alta
Communications, Inc., BancBoston Ventures Inc., CEA Capital Partners and The TCW
Group, Inc. (collectively the 'Institutional Investors'). The Institutional
Investors have extensive experience in successfully investing in the broadcast
television industry and other broadcast and media industries. In addition, as
partial consideration upon the closing of the acquisition of their respective
stations by the Company, two of the prior owners of the Company's stations will
receive in the aggregate approximately $10.4 million of membership units in ACME
Parent. See 'The Transactions' and 'Security Ownership of Certain Beneficial
Owners and Executive Officers.'
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THE EXCHANGE OFFER
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The Issuers............................... ACME Television, LLC and ACME Finance Corporation.
The Exchange Offer........................ The Issuers are offering to exchange their Exchange Notes, which have
been registered under the Securities Act, for any and all of their
outstanding Original Notes. The Original Notes may be exchanged for
Exchange Notes only in multiples of $1,000 principal amount. The
Issuers will issue the Exchange Notes on or promptly after the
Expiration Date. The form and terms of the Exchange Notes will be the
same as the form and terms of the Original Notes except that (i) the
Exchange Notes will be registered under the Securities Act, and,
therefore, will not bear legends restricting the transfer thereof and
(ii) the holders of the Exchange Notes will not be entitled to
certain rights of the holders of the Original Notes under the
Registration Rights Agreement, which rights will terminate upon
consummation of the Exchange Offer. The Exchange Notes will evidence
the same debt as the Original Notes and both series of Notes will be
entitled to the benefits of the Indenture and treated as a single
class of debt securities. The Issuers will keep the Exchange Offer
open for not less than 30 days or longer if required by applicable
law, after the date of notice of the Exchange Offer is mailed to
holders of the Original Notes. See 'The Exchange Offer--Terms of the
Exchange Offer.'
Based upon interpretations by the Staff of the Commission set forth
in no-action letters issued to third parties, the Issuers believe
that the Exchange Notes issued pursuant to the Exchange Offer in
exchange for the Original Notes may be offered for resale, resold and
otherwise transferred by any holder thereof (other than any such
holder which is an 'affiliate' of the Issuers within the meaning of
Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery requirements of the Securities
Act, provided that such Exchange Notes are acquired in the ordinary
course of such holder's business and such holder is not engaged in,
and does not intend to engage in, and has no arrangement or
understanding with any person to participate in the distribution of
such Exchange Notes. Any holder who tenders Exchange Notes with the
intention to participate, or for the purpose of participating, in a
distribution of the Exchange Notes may not rely upon such
interpretations by the staff of the Commission and, in the absence of
an exemption, must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any
secondary resale transaction, and any such secondary resale
transaction must be covered by an effective registration statement
containing the selling securityholder information required by Item
507 of the Registration S-K under the Securities Act. Each broker-
dealer that receives the Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented, may be used by a
broker-dealer in connection with resales of Exchange Notes received
in exchange for Original Notes where such Original Notes were
acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Issuers have agreed
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5
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that, for a period not to exceed 180 days after the consummation of
the Exchange Offer, they will make this Prospectus available, for use
in connection with any such resale, to any such broker-dealer and
other persons, if any, with similar prospectus delivery requirements.
See 'Plan of Distribution.' In addition, to comply with the
securities laws of certain jurisdictions, if applicable, the Exchange
Notes may not be offered or sold unless they have been registered or
qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and complied with. The
Issuers have agreed, pursuant to the Registration Rights Agreement
and subject to certain specified limitations therein, to register or
qualify the Exchange Notes for offer or sale under the securities or
blue sky laws of such jurisdictions as any holder of the Exchange
Notes reasonably requests in writing.
Expiration Date........................... The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1998, unless extended in which case the term
'Expiration Date' shall mean the latest date and time to which the
Exchange Offer is so extended.
Conditions to the Exchange Offer.......... The Exchange Offer is subject to certain customary conditions, which
may be waived by the Issuers in whole or in part and from time to
time in their sole discretion. See 'The Exchange Offer-- Certain
Conditions to the Exchange Offer.' The Issuers reserve the right to
terminate or amend the Exchange Offer at any time prior to the
Expiration Date upon the occurrence of any such condition. The
Exchange Offer is not conditioned upon any minimum aggregate
principal amount of Original Notes being tendered for exchange.
Procedures for Tendering the Original
Notes................................... Each registered holder of Original Notes (a 'Registered Holder')
wishing to tender such Original Notes in the Exchange Offer must
complete, sign and date the Letter of Transmittal, or facsimile
thereof, in accordance with the instructions contained herein and
therein, and mail or otherwise deliver such Letter of Transmittal, or
such facsimile, together with any other required documentation, to
the Exchange Agent at the address set forth herein. Each Registered
Holder whose Original Notes are held through The Depository Trust
Company ('DTC') and wishes to participate in the Exchange Offer may
do so through DTC's Automated Tender Offer Program ('ATOP') by which
each tendering participant will agree to be bound by the Letter of
Transmittal. Any Original Notes not accepted for exchange for any
reason will be returned without expense to the tendering holder
thereof as promptly as practicable after the expiration or
termination of the Exchange Offer. See 'The Exchange
Offer--Procedures for Tendering Original Notes.'
Special Procedures for Beneficial
Owners.................................. Any beneficial owner whose Original Notes are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee
and who wishes to tender such Original Notes should contact such
registered holder promptly and instruct such registered holder to
tender on such beneficial owner's behalf. If such beneficial owner
wishes to tender on its own behalf, such beneficial owner must, prior
to completing and executing the Letter of Transmittal and delivering
its Original Notes, either make appropriate arrangements to register
ownership of the Original Notes in such
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owner's name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership may take
considerable time and may not be able to be completed prior to the
Expiration Date. See 'The Exchange Offer--Procedures for Tendering
Original Notes.'
Guaranteed Delivery Procedures............ Holders of Original Notes who wish to tender their Original Notes and
(i) whose Original Notes are not immediately available, (ii) who
cannot deliver their Original Notes, the Letter of Transmittal or any
other required documents to the Exchange Agent (as defined) prior to
the Expiration Date or (iii) who cannot complete the procedure for
book-entry transfer on a timely basis, may effect a tender of their
Original Notes according to the guaranteed delivery procedures set
forth in 'The Exchange Offer--Guaranteed Delivery Procedures.'
Withdrawal Rights......................... Tenders of Original Notes may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date. For a withdrawal to
be effective, (i) a written notice of withdrawal must be received by
the Exchange Agent (as defined) at its address set forth herein or
(ii) holders must comply with the appropriate procedures of DTC's
ATOP System. See 'The Exchange Offer-- Withdrawal Rights.'
Acceptance of Original Notes and Delivery
of Exchange Notes....................... Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, the Issuers will accept
for exchange any and all Original Notes validly tendered in the
Exchange Offer prior to 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Notes issued pursuant to the Exchange
Offer will be delivered promptly following the Expiration Date. See
'The Exchange Offer--Terms of the Exchange Offer.'
Consequences of Failure to
Exchange................................ Upon consummation of this Exchange Offer, the holders of the Original
Notes will have no further registration or other rights under the
Registration Rights Agreement, except under certain limited
circumstances. Holders of Original Notes who do not exchange their
Original Notes for the Exchange Notes pursuant to the Exchange Offer
will continue to be subject to the restrictions on transfer of such
Original Notes as set forth in the Indenture. In general, Original
Notes that are not exchanged pursuant to the Exchange Offer may not
be offered or sold except pursuant to a registration statement filed
under the Securities Act or an exemption from registration thereunder
and in compliance with applicable state securities laws. See 'The
Exchange Offer--Consequences of Failure to Exchange.'
Certain Tax Considerations................ The exchange of Original Notes for Exchange Notes by tendering
holders will not be a taxable event for federal income tax purposes,
and such holders should not recognize any taxable gain or loss or any
interest income as a result of such exchange.
Use of Proceeds........................... The Issuers will not receive any proceeds from the exchange of Notes
pursuant to the Exchange Offer.
Registration Rights Agreement............. Pursuant to the Registration Rights Agreement, the Issuers agreed (i)
to use their reasonable best efforts to file, within 45 days after
the date of the original issuance of the Original Notes, a
registration statement (the 'Exchange Offer Registration Statement')
and (ii) to use their reasonable best efforts to cause the Exchange
Offer
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Registration Statement to be declared effective under the Securities
Act within 150 days after the date of the original issuance of the
Original Notes (the 'Issue Date'). The Exchange Offer is intended to
satisfy the rights of holders of Original Notes under the
Registration Rights Agreement, which rights terminate upon
consummation of the Exchange Offer.
Shelf Registration Statement.............. In the event that, based upon applicable interpretations of the
Securities Act by the Staff of the Commission, the Issuers conclude
that they cannot effect the Exchange Offer, or if for any other
reason the Exchange Offer is not consummated within 180 days of the
Issue Date, or if a holder of the Original Notes is not permitted to
participate in the Exchange Offer or does not receive freely tradable
Exchange Notes pursuant to the Exchange Offer or, under certain
circumstances, if the Initial Purchasers or the holder of a majority
in aggregate principal amount at maturity of Notes so request, the
Issuers will use their reasonable best efforts to cause to become
effective a registration statement (the 'Shelf Registration
Statement') with respect to the resale of the Original Notes and use
their best efforts to keep such Shelf Registration Statement
continuously effective until two years after the Issue Date.
Exchange Agent............................ Wilmington Trust Company is the exchange agent for the Exchange Offer
(the 'Exchange Agent'). The address and telephone number of the
Exchange Agent are set forth in the 'The Exchange Offer-- Exchange
Agent.'
EXCHANGE NOTES
Maturity Date............................. September 30, 2004.
Original Issue Discount of Original
Notes................................... A holder of Exchange Notes will be required to include the accretion
of the original issue discount at which the Original Notes were
issued as gross income for U.S. federal income tax purposes prior to
the receipt of the cash payments to which such income is
attributable. See 'Certain U.S. Federal Income Tax
Considerations--U.S. Holders--Original Issue Discount on the Original
Notes.'
Interest.................................. Cash interest will not accrue or be payable on the Exchange Notes
prior to September 30, 2000. Thereafter, cash interest on the
Exchange Notes will accrue at a rate of 10 7/8% per annum on the
principal amount at maturity of the Exchange Notes through and
including the maturity date, and will be payable semiannually on
March 31 and September 30 of each year, commencing March 31, 2001.
Optional Redemption....................... The Exchange Notes are redeemable at any time and from time to time
at the option of the Issuers, in whole or in part, on or after
September 30, 2001, at the redemption prices set forth herein
(expressed as a percentage of the principal amount at maturity) plus
accrued and unpaid interest to the date of redemption. In addition,
on or prior to September 30, 2000, the Issuers may redeem, at their
option, up to 35% of the aggregate principal amount at maturity of
the Notes with the net proceeds of one or more Public Equity
Offerings (as defined) at 110.875% of the Accreted Value thereof, as
long as at least 65% of the aggregate principal amount at maturity of
the Notes originally issued remains outstanding after each such
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redemption and that such redemption occurs within 90 days of any such
Public Equity Offering. See 'Description of the Notes-- Optional
Redemption.'
Change of Control......................... Upon a Change of Control (as defined), the Issuers will be required
to offer to repurchase the Exchange Notes at a purchase price equal
to (i) 101% of the Accreted Value thereof, if the purchase date is on
or prior to September 30, 2000, or (ii) 101% of the principal amount
at maturity thereof, plus accrued and unpaid interest thereon, if
any, to the purchase date, if such date is after September 30, 2000.
See 'Risk Factors--Inability to Satisfy a Change of Control Offer'
and 'Description of the Notes--Change of Control Offer.'
Ranking and Guarantees.................... The Exchange Notes are general senior unsecured obligations of the
Issuers and rank pari passu in right of payment with all future
unsubordinated indebtedness of the Issuers and senior in right of
payment to any subordinated indebtedness of the Issuers. The Exchange
Notes are effectively subordinated in right of payment to all other
secured indebtedness of the Issuers. The Exchange Notes are fully and
unconditionally guaranteed (the 'Subsidiary Guarantees' or
'Guarantees') to the maximum extent permitted by law, jointly and
severally, and on a senior unsecured basis, subject to certain
exceptions, by all existing and future subsidiaries of the Issuers
(collectively, the 'Subsidiary Guarantors' or 'Guarantors'). See
'Description of the Notes--Guarantees.' The Subsidiary Guarantees
rank pari passu to all existing and future unsubordinated
indebtedness (other than secured indebtedness) of such Subsidiary
Guarantors, including any guarantees of such unsubordinated
indebtedness. After giving pro forma effect to the Transactions as of
September 30, 1997, the Issuers and the Subsidiary Guarantors had
approximately $131.6 million of indebtedness outstanding, comprised
of $4.2 million of secured indebtedness (including $3.5 million of
indebtedness under the Revolving Credit Facility), and $127.4 million
of indebtedness evidenced by the Exchange Notes. The Indenture
permits the Issuers to incur additional indebtedness (subject to
certain limitations). See 'Description of the Notes.'
Non-Recourse to Equity Holders............ The Exchange Notes are non-recourse to any parent entity or equity
holders of the Issuers (other than the Company).
Restrictive Covenants..................... The Indenture contains certain restrictive covenants with respect to
the Issuers and their Subsidiaries, including limitations on (a) the
sale of assets, including the equity interests of the Subsidiaries,
(b) asset swaps, (c) the payment of Restricted Payments (as defined),
(d) the incurrence of indebtedness and issuance of certain preferred
securities by the Issuers or the Subsidiaries, (e) the issuance of
Equity Interests (as defined) by a Subsidiary, (f) the payment of
dividends on, and the purchase, redemption or retirement of, the
equity interests or subordinated indebtedness of the Issuers, (g)
certain transactions with affiliates, (h) liens, certain
sale-leaseback transactions and the conduct of business and (i)
certain consolidations and mergers. All of these limitations and
prohibitions, however, are subject to a number of important
qualifications. See 'Description of the Notes--Certain Covenants.'
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SUMMARY UNAUDITED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
The following summary financial data reflect the results of operations of
Channel 32 for the years ended June 30, 1995 and 1996 and the period from July
1, 1996 to June 17, 1996, the Company for the nine months ended September 30,
1997 and Koplar Communications, Inc. ('Koplar Communications'), the owner of
Station KPLR, for each of the five fiscal years ended December 31, 1992, 1993,
1994, 1995 and 1996 and the nine-month periods ended September 30, 1996 and
1997. The historical information for Channel 32 for the period from July 1, 1996
to June 17, 1997 and for Koplar Communications for the nine-month periods ended
September 30, 1996 and 1997 is unaudited. The capital structure and accounting
basis of Koplar Communications subsequent to its acquisition by the Company will
differ from its historical capital structure and accounting basis.
The following unaudited pro forma consolidated statement of operations data
of the Company for fiscal year 1996 and for the nine months ended September 30,
1997 give effect to the Transactions as if such events had occurred at the
beginning of the periods presented. The following unaudited pro forma
consolidated balance sheet data at September 30, 1997 reflect the consummation
of the Knoxville Acquisition and Pending Acquisitions as if such events had
occurred on that date. The pro forma financial information may not be indicative
of the results that actually would have occurred if the transactions and
adjustments described in the accompanying notes had occurred on the dates
assumed and do not project the Company's financial position or results of
operations at any future date. See 'Pro Forma Consolidated Financial
Information.'
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HISTORICAL
THE COMPANY
HISTORICAL--CHANNEL 32 ------------- PRO FORMA
(PREDECESSOR) NINE MONTHS THE COMPANY
--------------------------------- ENDED ----------------------------------
PERIOD FROM SEPTEMBER 30, YEAR NINE MONTHS
1995 1996 JULY 1, 1997 ENDED ENDED
------- ------- 1996 ------------- DECEMBER 31, SEPTEMBER 30,
TO JUNE 17, 1996 1997
1997 ------------ ------------------
----------- (UNAUDITED) (UNAUDITED)
(UNAUDITED)
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STATEMENT OF OPERATIONS DATA:
Net revenues(1)................ $ 288 $ 2,729 $ 1,306 $ 2,155 $ 30,462 $ 23,502
Programming expenses........... 623 3,274 1,304 1,096 14,425 9,554
Selling, general and
administrative expenses...... 273 1,462 1,061 3,173 10,115 8,044
Depreciation and amortization.. 235 542 346 551 10,964 8,006
------- ------- ----------- ------------- ------------ ----------
Operating income (loss)........ (843) (2,549) (1,405) (2,665) (5,042) (2,102)
Interest expense............... (200) (3,252) (2,222) (573) (15,511) (11,198)
Income (loss) before
discontinued operations and
extraordinary items.......... (1,043) (6,015) (3,637) (3,238) (21,300) (13,628)
Net (loss)..................... (1,043) (6,015) (3,637) (3,238) (21,300) (13,628)
OTHER DATA:
Cash provided by (used in):
Operating activities......... (412) (5,260) (2,643) 4,716 -- --
Investing activities......... (1,222) (1,077) (356) (146) -- --
Financing acitivities........ 1,636 6,345 3,097 168 -- --
Ratio of earnings to fixed
charges(2)................... (421)% (85)% (64)% (465)% -- --
EBITDA(3)...................... $ (608) $(2,007) $(1,059) $(2,225) $ 8,047 $ 5,280
EBITDA margin(4)............... (211.1)% (73.5)% (81.1)% (103.2)% 26.4% 22.5%
Capital expenditures........... $ 979 $ 998 $ 356 $ 2,963 $ -- $ --
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HISTORICAL--KOPLAR
COMMUNICATIONS
HISTORICAL--KOPLAR COMMUNICATIONS -------------------------
--------------------------------------------------- NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------- -------------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ---------- -----------
(UNAUDITED) (UNAUDITED)
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STATEMENT OF OPERATIONS DATA:
Net revenues(1)....................... $39,128 $41,500 $33,146 $27,528 $27,260 $ 19,751 $21,347
Programming expenses.................. 22,532 19,592 13,581 9,503 11,365 9,413 8,458
Selling, general and administrative
expenses............................ 17,587 17,614 12,113 11,632 11,318 7,914 13,722
Depreciation and amortization......... 1,321 1,367 1,085 791 702 518 490
------- ------- ------- ------- ------- ---------- -----------
Operating income (loss)............... (2,312) 2,927 6,367 5,602 3,875 1,906 (1,323)
Interest expense...................... (6,462) (9,402) (5,777) (2,842) (2,155) (1,522) (1,117)
Income (loss) before discontinued
operations and
extraordinary items................. (9,246) (6,967) 10,295 1,916 559 (530) (2,722)
Net income (loss)..................... (9,246) (6,967) 58,691 1,916 (800) (530) (2,722)
OTHER DATA:
Cash provided by (used in):
Operating activities................ 10,533 10,623 (55,666) 6,355 8,755 9,672 9,570
Investing activities................ (482) (861) 13,817 (2,498) (787) (680) (346)
Financing activities................ (9,613) (9,555) (18,740) (5,609) (7,389) (5,670) (6,525)
Ratio of earnings to fixed
charges(2).......................... 243% 174% 335% 186% 147% 93% (236)%
EBITDA(3)............................. $ 3,228 $ 5,487 $ 5,071 $ 6,581 $ 5,922 $ (73) $(1,346)
EBITDA margin(4)...................... 8.2% 13.2% 15.3% 23.9% 21.7% (0.4)% (6.3)%
Capital expenditures.................. $ 565 $ 482 $ 839 $ 1,013 $ 687 $ 580 $ 246
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
THE COMPANY THE COMPANY
------------------------ ------------------------
AS OF SEPTEMBER 30, 1997 AS OF SEPTEMBER 30, 1997
------------------------ ------------------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................................... $ 27,211 $ 6,001
Working capital............................................... 28,542 10,345
Total assets.................................................. 225,399 251,559
Total debt(5)................................................. 131,576 131,576
Members' capital.............................................. 82,278 88,278
</TABLE>
- ------------------
(1) Net revenues is defined as total revenues less agency commissions. Net
revenues for Koplar Communications include approximately $14.3 million,
$15.4 million and $7.1 million for the years ended December 31, 1992, 1993
and 1994, respectively, relating to the operations of Station KRBK which was
sold on June 29, 1994.
(2) The ratio of earnings to fixed charges is calculated as net income before
taxes, discontinued operations and extraordinary items plus interest
expense, divided by interest expense.
(3) EBITDA is defined as operating income (loss), plus depreciation,
amortization and other noncash charges, including amortization of
programming rights, minus programming payments. Although EBITDA is not
caluclated in accordance with GAAP, it is widely used as a measure of a
company's ability to service and/or incur debt. EBITDA should not be
considered in isolation from or as a substitute for net income, cash flows
from operations and other income or cash flow data prepared in accordance
with GAAP, or as a measure of profitability or liquidity.
(4) EBITDA expressed as a percentage of net revenues.
(5) Total debt includes the current portion of capital lease obligations and
excludes programming rights payable.
11
<PAGE>
RISK FACTORS
Holders of Original Notes and prospective purchasers of Exchange Notes
should consider carefully the following factors as well as the other information
and data included in this Prospectus prior to participating in the Exchange
Offer making an investment in the Exchange Notes.
LEVERAGE AND DEBT SERVICE; REFINANCING REQUIRED
The Company incurred significant debt in connection with the Offering. As
of September 30, 1997, the Company had outstanding indebtedness of approximately
$131.6 million comprised of $4.2 million of secured indebtedness (including $3.5
million of indebtedness under the Revolving Credit Facility) and $127.4 million
of indebtedness evidenced by the Exchange Notes. The Company's highly leveraged
financial position poses substantial risks to holders of the Exchange Notes,
including the risks that: (i) a substantial portion of the Company's cash flow
from operations will be required to be dedicated to servicing its indebtedness;
(ii) the Company's highly leveraged position may impede its ability to obtain
financing in the future for working capital, capital expenditures and general
corporate purposes, including acquisitions; and (iii) the Company's highly
leveraged financial position may make it more vulnerable to economic downturns
and may limit its ability to withstand competitive pressures. The Company
believes that, based on its current level of operations after giving effect to
the Transactions, it will have sufficient capital to carry on its business and
will be able to make the scheduled interest payments on the Exchange Notes and
meet its other obligations and commitments. However, there can be no assurance
that the future cash flow of the Company will be sufficient to do so. If the
Company is unable to generate sufficient cash flow from operations in the future
to make scheduled interest payments on the Exchange Notes and to meet its other
obligations and commitments, the Company will be required to adopt one or more
alternatives, such as refinancing or restructuring its indebtedness, selling
material assets or operations or seeking to raise additional debt or equity
capital. Furthermore, the Company believes it will be necessary to refinance the
Exchange Notes at or prior to the scheduled maturity date in 2004. There can be
no assurance that any of these actions could be effected on a timely basis or on
satisfactory terms or that these actions would enable the Company to continue to
satisfy its capital requirements. See 'Management's Discussion and Analysis of
Results of Operations and Financial Condition--Liquidity and Capital Resources,'
and 'Description of the Notes.'
LIMITATIONS ON ACCESS TO CASH FLOW OF SUBSIDIARIES; HOLDING COMPANY STRUCTURE
The Company is a holding company which has no significant assets other than
its investments in its direct and indirect subsidiaries, and therefore, its
ability to make payments with respect to the Exchange Notes is dependent upon
the receipt of dividends or debt service in respect of intercompany indebtedness
from its direct and indirect subsidiaries. Future acquisitions (including
certain of the Pending Acquisitions) will be made through present or future
subsidiaries of the Company.
ABSENCE OF OPERATING HISTORY
Although the Company's management team has extensive experience in the
television industry, the Company has limited operating history. As of the date
hereof, the Company has acquired three television stations and has entered into
definitive agreements to construct two additional stations. There can be no
assurance that the Company will be able to successfully implement its business
plan, which will depend upon, among other things, the Company's ability to (i)
consummate the Pending Acquisitions (and the construction and upgrades relating
thereto) on a timely basis and on the terms and cost bases currently
contemplated and (ii) successfully operate and manage the acquired businesses.
In addition, the various stations have no consolidated operating history.
Prospective investors, therefore, have limited historical financial information
about the Company upon which to base an evaluation of its performance and an
investment in the Exchange Notes. There can be no assurance that the Company
will be successful in integrating such operations or that such integration will
not divert management resources which in a start-up venture are more limited,
cause temporary disruptions, or otherwise have an adverse effect on the Company
which may be material. See 'Business--The Company.'
12
<PAGE>
RISKS RELATED TO ACQUISITIONS
Consummation of each of the Pending Acquisitions is subject to certain
conditions beyond the Company's control. Such conditions include, among other
things (i) prior approval by the FCC of the assignments or transfers of control
of permits or licenses issued by the FCC, (ii) expiration of any applicable
waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the 'HSR Act') and (iii) maintenance of normal broadcast transmission and
operations in the ordinary course until closing. Accordingly, there can be no
assurance as to whether or when any of the Pending Acquisitions will be
consummated or whether they will be consummated on the terms described herein.
There can also be no assurance that the Company will be successful in its plans
to obtain The WB Network affiliation for all of its acquired stations, swap
certain stations or increase the signal strength of certain stations. In the
event that the Pending Acquisitions are not consummated in certain
circumstances, the Company may forfeit escrow deposits in the aggregate amount
of approximately $100,000 and otherwise be subject to claims for breach of such
agreements. See 'Business--The WB Network' and 'Business--The Stations and
Market Overviews.'
The Company intends to continue to pursue the acquisition of additional
television stations. Acquisition of television stations is subject to prior FCC
approval and applicable law which limits the number and location of broadcasting
properties that any one person or entity (including its affiliates) may own. The
market to purchase television stations is highly competitive, and many potential
acquirors may have greater resources than the Company available to effect such
acquisitions. Accordingly, there can be no assurance that the Company will be
able to make future acquisitions at prices acceptable to the Company. In
addition, rapidly growing businesses frequently experience unforeseen expenses
and delays in completing acquisitions, as well as difficulties and complications
in integrating the acquired operations without disruption in the overall
operations. As a result, acquisitions could materially adversely affect the
Company's operating results in the short term as a result of several factors,
including increased capital requirements. In addition, there can be no assurance
that the Company will have the financial resources necessary to acquire
additional stations. See '--Leverage and Debt Service; Refinancing Required.'
In connection with the Salt Lake City and Albuquerque Acquisitions, the
Company intends to undertake significant upgrading or construction of
transmission and studio facilities. Such construction activities are subject to
risks of unforeseen engineering, environmental or geological problems, weather
interference and unanticipated cost increases. Such problems, or difficulties in
obtaining any required permits, approvals or regulatory authorizations, could
delay completion of such facilities and the commencement of broadcasting at the
affected station. Although management believes that it has experience in
overseeing station facilities construction and is capable of managing such
risks, there can be no assurance that it will be able to effectively do so.
Pending receipt of FCC approval of the transfer of voting control of the
company holding the FCC licenses and other assets of Station KPLR, an amount
equal to the cash portion of the purchase for the St. Louis Acquisition ($143.0
million paid at consummation of the closing of the St. Louis LMA subject to
reduction for the amount of long term debt and notes payable of Koplar
Communications ($14.0 million as of January 2, 1998) and subject to certain
other adjustments) was deposited into escrow by the Company pursuant to an
escrow agreement (the 'Escrow Agreement') and the Company entered into the St.
Louis LMA. Pursuant to the Escrow Agreement, the sellers of Station KPLR
received the escrowed funds on January 2, 1998, in exchange for deposit into the
escrow account of all of the outstanding capital stock of Koplar Communications,
together with such other documents and instruments as the Company may reasonably
request in order to transfer such capital stock to the Company and otherwise
consummate the transaction upon receipt of the required FCC approval. In the
event such approval is not obtained by September 28, 1998, the sellers will be
required to cooperate with the Company, at the Company's request and expense, to
effect a disposition of Station KPLR to a third party, and all proceeds of such
disposition (less the sellers' expenses and the $3.0 million of fees that would
have been payable to Edward J. Koplar pursuant to his management agreement with
the Company) will be payable to the Company. There can be no assurance that, if
FCC approval is not obtained by September 28, 1998, the Company will be able to
effect a disposition of Station KPLR at net proceeds to the Company equal to or
greater than the $146.0 million aggregate purchase consideration to be paid to
the sellers of Station KPLR.
FCC regulations require that LMAs expressly permit station licensees to
retain full management and control of the station, including programming and
personnel. There can be no assurance that early termination or unanticipated
preemptions by a licensee of all or a significant portion of the scheduled
programming for the St.
13
<PAGE>
Louis LMA will not occur, or that the licensee will not otherwise interfere with
the Company's intended plan of operations for such station, including the
implementation of cost savings assumed in the Pro Forma Financial Statements (as
defined).
DEPENDENCE ON STATION KPLR
The Company's ability to make payments with respect to the Exchange Notes
is largely dependent on the results of operations and financial condition of
Station KPLR, which experienced declines in revenues and net income in 1995 and
1996. Beginning in late 1990, the television industry and, in particular the St.
Louis, Missouri, DMA experienced a severe decline in television advertising
revenues which, coupled with a continuing rise in fixed, long-term programming
costs and sports broadcast rights fees, caused Station KPLR to experience
significant cash flow difficulties. In response to these difficulties, the owner
of Station KPLR sold substantially all of the assets of a television station
which it owned in Sacramento, California (Station KRBK). Station KRBK accounted
for approximately $7.1 million, or 21.4% of total revenues of Koplar
Communications, Inc. in 1994. The declining revenue and recent losses of Station
KPLR are attributable to the cash flow difficulties of Station KPLR and the
resulting sale of Station KRBK. Although the Company believes that it can
improve the results of operations and financial condition of Station KPLR, there
can be no assurance that the declining revenue and recent losses of Station KPLR
will not continue.
DEPENDENCE ON KEY PERSONNEL
The Company's success is largely dependent on the continued services of its
senior management team, including, in particular, Messrs. Kellner, Gealy and
Allen. Although the Company believes it can adequately replace key employees in
an orderly fashion should the need arise, there can be no assurance that the
loss of such key personnel would not have a material adverse effect on the
Company. The Company's success will also be dependent in part on its ability to
recruit and retain quality general managers for its stations and other corporate
office personnel.
CERTAIN POTENTIAL CONFLICTS; CONTROL OF THE COMPANY AND ACME PARENT
Full authority for the management of ACME Parent and the Company resides in
their respective executive officers and the Board of Advisors of ACME Parent,
which initially consists of Messrs. Kellner, Gealy and Allen. ACME Parent has
entered into a consulting agreement with Mr. Kellner and employment contracts
with Messrs. Gealy and Allen, which include non-competition covenants. However,
Mr. Kellner's agreement provides that he may perform services for other
businesses unaffiliated with the Company which, in certain limited
circumstances, may be competitive with the Company. Mr. Kellner is also an owner
and chief executive officer of The WB Network. Certain of the Company's
competitors own stations in other markets which are or may seek to become,
affiliates of The WB Network, and Mr. Kellner, as an owner and chief executive
officer of The WB Network may simultaneously be engaged in The WB Network
affiliation agreements with the Company's stations and stations in other markets
owned by the Company's competitors. Upon consummation of the Salt Lake City
Acquisition and the St. Louis Acquisition, Messrs. Roberts and Koplar,
respectively, are expected to join the Board of Advisors of ACME Parent. Mr.
Roberts owns a broadcast station in the St. Louis DMA which will compete with
Station KPLR. See 'Certain Relationships and Related Transactions.' In addition,
the Institutional Investors, voting as a group, have consent rights with respect
to certain actions by the Company. Certain members of the Board of Advisors and
certain of the Institutional Investors have, or in the future may have,
interests in other broadcast television companies or other related investments.
There can be no assurance that the activities of such persons will not compete
with those of the Company, or give rise to conflicts of interest between such
persons and the Company.
DEPENDENCE ON THE WB NETWORK AFFILIATION
The Company anticipates that all of the Company's television stations will
be affiliates of The WB Network, which for the 1997-1998 broadcast season has
announced that it will provide such stations with 9 hours of prime time
programming, and 19 hours of childrens' programming per week, in return for
advertising rights during such programming. Accordingly, the Company's success
is largely dependent on the continued relationship of its stations with The WB
Network and on The WB Network's continued success as a broadcast network.
Although the Company believes that its relationship with The WB Network is
excellent, there can be no assurance that The WB Network will renew any
affiliation agreement as to all or any of the Company's stations. In addition,
The
14
<PAGE>
WB Network may fail to renew the affiliation agreement as to any station in the
event it desires to change its affiliate in the applicable market. Finally,
there can be no assurance that The WB Network programming will continue to
generate improved ratings or that The WB Network will continue to provide
programming, marketing and other support to its affiliates on the same basis as
currently provided. See 'Business--Affiliation Agreements.'
The WB Network was launched in January 1995 and has experienced operating
losses since its inception. Time Warner has reported that such losses are
expected to continue due to the start up nature of the network. The WB Network
utilizes Time Warner's capabilities as a leading producer of prime time
programming and Saturday morning cartoons, and the network distribution
capabilities of the cable system holdings of Time Warner and the television
station holdings of Tribune. Accordingly, The WB Network is dependent on the
continued support of, and its operating relationships with, Time Warner and
Tribune. Although the Company has no reason to believe that such support and
relationships will not continue for the foreseeable future, there can be no
assurance that such support and relationships will continue in their present
form. Any adverse change in The WB Network's support from or relationships with
either Time Warner or Tribune could have a material adverse effect on The WB
Network, which in turn could have a material adverse effect on the Company.
COMPETITION; IMPACT OF NEW TECHNOLOGIES; POTENTIAL COST OF SPECTRUM
The broadcast television industry is highly competitive, and the Company's
success will depend in large part on its ability to successfully compete with
other broadcast television stations and other media for viewers and advertising
revenues. The Company's stations will compete for both viewers and revenues with
network-affiliated and independent broadcast stations, cable television, home
satellite delivery, home video, direct broadcast satellite ('DBS') television
systems and video delivery systems utilizing telephone lines. Many of the
Company's competitors may have greater resources than the Company.
Advances in technology may increase competition for viewers and advertisers
and further fractionalize the video industries, which include broadcast
television. Video compression techniques currently under development are
expected to reduce the bandwidth required for television signal transmission.
Such techniques, and other technological developments, may be available to other
video delivery systems and thus present the potential for providing expanded
programming to targeted audiences. Reductions in the cost of creating additional
channel capacity could lower entry barriers for new channels and encourage the
development of specialized niche programming. The ability to reach narrowly
defined, highly targeted audiences is expected to significantly affect the
competition for advertising revenues. In addition, future competition in the
television industry may include the provision of interactive video and data
services capable of providing two-way interaction with commercial video
programming, together with information and data services, that may be delivered
by commercial television stations, cable television, DBS and other video
delivery systems. Management cannot predict the effect that these or other
technological changes will have on the broadcast television industry or the
Company's future results of operations.
In recent years, the FCC has adopted policies providing for authorization
of new technologies and a more favorable operating environment for certain
existing technologies that have the potential to provide additional competition
for television stations. Further advances in technology could facilitate the
entry of additional competitors and encourage the development of increasingly
specialized 'niche' programming. In particular, the Company may be affected by
the development and regulation of digital television ('DTV'). FCC policies could
require that the Company convert any and all stations it owns from an analog
transmission capability to a digital transmission capability. The transition may
have to occur by 2006 or earlier. Although the Company is unable to reasonably
project the costs or benefits associated with DTV at this time, DTV will require
significant new capital investments in DTV broadcasting capacity, and no
assurance can be given that the Company will have adequate financial resources
to make such capital investments. In addition, certain members of Congress from
time to time have offered and continue to offer various proposals that would
require a public auction for the spectrum necessary to effect the transition to
DTV. If enacted into law, those proposals could require broadcasters to make a
substantial investment in order to obtain the spectrum for DTV. See 'Business--
Competition.'
15
<PAGE>
RESTRICTIONS IMPOSED BY CERTAIN AGREEMENTS
The Investment and Loan Agreement (the 'Investment Agreement'), dated June
17, 1997, as amended, among ACME Parent and certain of the Institutional
Investors, and the Limited Liability Company Agreement, dated June 17, 1997, as
amended, among ACME Parent and certain of the Institutional Investors (the 'LLC
Agreement'), each contains various covenants which restrict the ability of the
Company and its subsidiaries to, among other things, incur indebtedness for
borrowed money or liens, sell a material portion of its assets, merge or acquire
additional businesses, make loans to or investments in others, enter into
sale-leaseback transactions, amend its organizational documents, change its
accounting policies, engage in affiliate transactions, declare or pay dividends
or sell or issue capital stock. These restrictions will significantly limit the
ability of the Company to take various actions without the consent of the
holders of the requisite percentage of the applicable outstanding securities of
ACME Parent. Such agreements also provide that on June 30, 2002 or upon the
occurrence of certain events, including Jamie Kellner's ceasing to serve as
Chairman and Chief Executive Officer of the Company or as a senior executive
officer of The WB Network, or the cessation of operations by The WB Network, the
Institutional Investors shall have the right to exercise voting control of ACME
Parent (subject to applicable FCC approvals), and to dispose of the Company or
cause the sale of all or substantially all of its assets. See 'The Transactions'
and 'Description of ACME Parent.' In addition, in connection with the St. Louis
Acquisition, the Company has agreed that for a period of five years from the
date of closing, the disposition of Station KPLR by the Company to certain
specified persons will, in certain circumstances (excluding creditors of the
Company exercising any rights under any financing agreement or related agreement
or instrument), require the prior approval of Edward J. Koplar.
REGULATORY MATTERS
The Company's operations are subject to extensive and changing regulation
on an ongoing basis by the FCC, which enforces the Communications Act. The prior
approval of the FCC is required for the issuance, renewal and assignment of
station permits and licenses and the transfer of control of station permits and
licensees. There can be no assurance that the FCC will approve each of the
Pending Acquisitions or any future acquisitions that require an assignment or
transfer of control of an FCC license to the Company. In addition, the FCC
permits and licenses held by the Company are subject to renewal from time to
time. The license for Station KPLR St. Louis, Missouri will expire on February
1, 1998 and a renewal application therefor was filed with the FCC on September
30, 1997 by the licensee, Koplar Television Communications L.L.C. and was
approved by the FCC on October 24, 1997. Although in substantially all cases
such licenses are renewed by the FCC, there can be no assurance that the license
for Station KPLR or any other television licenses for stations owned or to be
owned by the Company will be renewed. Even if a license is renewed, the FCC
could impose burdensome conditions or restrictions on such renewal. The
non-renewal or renewal with conditions of one or more of the Company's
television broadcast licenses could have a material adverse effect on the
Company.
Congress and the FCC currently have under consideration and may in the
future adopt new laws or modifications to existing laws, regulations and
policies regarding a wide variety of matters, including station ownership
attribution rules and station ownership limitations, which could directly or
indirectly adversely affect the ownership and operation of the Company's
broadcast properties, as well as the Company's business strategies. In addition,
courts could render decisions in cases to which the Company is not a party but
which ultimately could affect applicable law and thereby adversely affect the
Company.
Recent and prospective actions by the Congress, the FCC and the courts will
likely accelerate the trend toward vertical integration in the media and home
entertainment industries and cause the Company to face significant competition
in the future. Such measures could include the elimination or modification of
certain restrictions on television station ownership, the removal or
modification of restrictions on the participation by regional telephone
operating companies in cable television and other direct-to-home video
technologies, and the elimination or modification of restrictions on the
offering of multiple network services by the existing major television networks.
The Company is unable to predict whether other potential changes in the
regulatory environment could restrict or curtail the ability of the Company to
acquire, operate and dispose of stations in the future or, in general, to
compete with other operators of television station and other media properties.
See 'Business--Regulations.'
16
<PAGE>
INDUSTRY AND ECONOMIC CONDITIONS; SEASONALITY
The profitability of the Company's television stations is subject to
various factors that influence the television broadcasting industry as a whole.
The Company's television stations may be affected by changes in audience tastes,
priorities of advertisers, new laws and governmental regulations and policies,
changes in broadcast technical requirements, technological changes, proposals to
eliminate the tax deductibility of expenses incurred by advertisers and changes
in the willingness of financial institutions and other lenders to finance
television station acquisitions and operations. The Company cannot predict
which, if any, of these or other factors might have a significant impact on the
television broadcasting industry in the future, nor can it predict what impact,
if any, the occurrence of these or other events might have on the Company's
operations. Generally, advertising tends to decline during economic recession or
downturn. Consequently, the Company's broadcasting revenue is likely to be
adversely affected by a recession or downturn in the United States economy or
other events or circumstances that adversely affect advertising activity. In
addition, the Company's operating results in individual geographic markets could
be adversely affected by local regional economic downturns. Seasonal revenue
fluctuations are common in the television broadcasting industry and are due
primarily to fluctuations in advertising expenditures by local and national
advertisers. The Company's first fiscal quarter ending in March is expected to
produce the lowest revenue for the year.
EFFECTIVE SUBORDINATION TO SECURED DEBT
The Exchange Notes and the full and unconditional Guarantees are senior
unsecured obligations of the Issuers and the Subsidiary Guarantors,
respectively, ranking pari passu with all future unsubordinated indebtedness of
the Issuers and the Subsidiary Guarantors. The Exchange Notes and the full and
unconditional Guarantees are effectively subordinated in right of payment to all
secured indebtedness of the Issuers and the Subsidiary Guarantors. Upon any
distribution of assets pursuant to any liquidation, insolvency, dissolution,
reorganization or similar proceeding, the holders of secured indebtedness will
be entitled to receive payment in full from the proceeds of the collateral
(which will include substantially all of the Issuers' and the Subsidiary
Guarantors assets) before the holders of the Exchange Notes will be entitled to
receive any payment with respect thereto. As a result, holders of the Exchange
Notes may recover ratably less than holders of secured indebtedness of the
Issuers and the Subsidiary Guarantors. At September 30, 1997, the Company and
the Subsidiary Guarantors would have had $131.6 million of indebtedness
outstanding comprised of $4.2 million of secured indebtedness (including $3.5
million of indebtedness under the Revolving Credit Facility), and $127.4 million
of indebtedness evidenced by the Exchange Notes. Subject to the terms of the
Revolving Credit Facility, the Indenture, the Indenture governing the
Intermediate Notes (as defined), the Investment Agreement and the LLC Agreement,
the Issuers and the Subsidiary Guarantors will have the ability to incur
additional secured indebtedness. The Revolving Credit Facility will be secured
by substantially all of the Company's and the Subsidiary Guarantors' assets
other than assets securing the Capital Lease Facilities. The Capital Lease
Facilities will be secured by the assets financed thereunder. See 'Description
of the Notes.'
On September 24, 1997, ACME Intermediate sold units consisting of
approximately $71.6 million in aggregate principal amount of 12% Senior Secured
Discount Notes due 2005 (the 'Intermediate Notes') and membership units of ACME
Intermediate. The Intermediate Notes are secured by a first priority lien on all
of the outstanding membership units of the Company and all of the Capital Stock
(as defined) of each subsidiary of ACME Intermediate directly owned by ACME
Intermediate. The Intermediate Notes are not obligations of, and are not secured
by assets of, the Company or any Subsidiary Guarantor, and are effectively
subordinated in right of payment to the Exchange Notes.
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Indenture, the Revolving Credit Facility and the Indenture governing
the Intermediate Notes impose restrictions that, among other things, limit the
amount of additional indebtedness that may be incurred by the Issuers and impose
limitations on, among other things, investments, loans and other payments,
certain transactions with affiliates and certain mergers and acquisitions. The
Revolving Credit Facility also requires the Issuers to maintain specified
financial ratios and meet certain financial tests. In addition, it is an event
of default under the Revolving Credit Facility if the St. Louis Acquisition is
not completed within nine months of the Issue Date. The ability of the Issuers
to comply with such covenants and restrictions can be affected by events beyond
their control, and there can be no assurance that the Issuers will achieve
operating
17
<PAGE>
results that would permit compliance with such provisions. The breach of any of
the provisions of the Revolving Credit Facility would, under certain
circumstances, result in defaults thereunder, permitting the lenders under the
Revolving Credit Facility to accelerate the indebtedness under the Revolving
Credit Facility. If the Company were unable to pay the amounts due in respect of
the Revolving Credit Facility, the lenders thereunder could foreclose upon the
assets pledged to secure such payment. Any of such events would adversely affect
the Issuers' ability to service the Exchange Notes. See 'Description of Certain
Indebtedness--Revolving Credit Facility.'
INABILITY TO SATISFY A CHANGE OF CONTROL OFFER
The Indenture provides that, upon the occurrence of a Change of Control,
the holders of the Exchange Notes will have the right to require the Company to
repurchase the Exchange Notes at a purchase price equal to (i) 101% of the
Accreted Value thereof, if the purchase date is on or prior to September 30,
2000, or (ii) 101% of the principal amount at maturity thereof, plus accrued and
unpaid interest thereon, if any, to the purchase date, if such date is after
September 30, 2000. A Change of Control includes the liquidation or dissolution
of ACME Parent or the Company, the cessation of ACME Parent as the direct or
indirect managing member of the Company, the loss by certain investors of voting
power to elect the Board of ACME Parent during the period prior to an initial
public offering and the failure of certain investors to hold a specified
aggregate percentage of total voting power of ACME Parent membership units. In
addition to the Exchange Notes, the indebtedness outstanding pursuant to the
Revolving Credit Facility would also be payable in the event of a Change of
Control, and similar provisions may be included in future indebtedness incurred
by the Company and the Subsidiary Guarantors. If a Change of Control were to
occur, due to the highly leveraged nature of the Company, and the fact that
substantially all of its indebtedness would become payable, the Company might
not have the financial resources to repay all of such obligations. The Company's
failure to make a required repurchase of the Exchange Notes in the event of a
Change of Control would create an Event of Default under the Exchange Notes. See
'--Leverage and Debt Service; Refinancing Required' and 'Description of the
Notes--Change of Control Offer.'
RISK OF FRAUDULENT TRANSFER CONSIDERATIONS
The incurrence by a Subsidiary Guarantor of indebtedness under its
Subsidiary Guarantee will be subject to review under relevant federal and state
fraudulent transfer laws in a bankruptcy case or a lawsuit by or on behalf of
unpaid creditors of such Subsidiary Guarantor or a representative of such
creditors, such as a trustee or such Subsidiary Guarantor as
debtor-in-possession. Management believes the indebtedness represented by the
Subsidiary Guarantees is being incurred for proper purposes and in good faith,
and that based on present forecasts, asset valuations and other financial
information, each Subsidiary Guarantor is, and after the consummation of the
Offering will be, solvent, will have sufficient capital for carrying on its
business and will be able to pay its debts as they mature. Notwithstanding
management's belief, if a court were to find that, at the time of the incurrence
of indebtedness represented by a Subsidiary Guarantee, the Subsidiary Guarantor
was insolvent, was rendered insolvent by reason of such incurrence, was engaged
in a business or transaction for which its remaining assets constituted
unreasonably small capital, intended to incur, or believed that it would incur,
debts beyond its ability to pay such debts as they matured, or intended to
hinder, delay or defraud its creditors, such court could, among other things,
void all or a portion of such indebtedness and/or subordinate such indebtedness
or other existing and future indebtedness of such Subsidiary Guarantor, the
effect of which would be to entitle such other creditors to be paid in full
before any payment could be made on the Subsidiary Guarantee. The measure of
insolvency for purposes of the foregoing will vary dependent upon the law of the
relevant jurisdiction. Generally, however, a Subsidiary Guarantor would be
considered insolvent for purposes of the foregoing if the sum of its debts is
greater than all its property at a fair valuation, or if the present fair
saleable value of its assets is less than the amount that will be required to
pay its probable liability on its existing debts as they become absolute and
matured.
ORIGINAL ISSUE DISCOUNT
The Original Notes were issued with original issue discount. Holders of the
Exchange Notes will be required to include the accretion of the original issue
discount of the Original Notes in gross income for U.S. federal income tax
purposes in advance of receipt of the cash payments to which such income is
attributable. See 'Certain U.S. Federal Income Tax Considerations--Original
Issue Discount on the Original Notes' for a more detailed discussion of the U.S.
federal income tax consequences to holders of the Exchange Notes of the
purchase, ownership and disposition of the Exchange Notes. If a bankruptcy case
is commenced by or against the
18
<PAGE>
Company under the United States Bankruptcy Code, the claim of a holder of
Exchange Notes with respect to the principal amount thereof may be limited to an
amount equal to the sum of (i) the purchase price, and (ii) that portion of the
original issue discount which has been amortized as of any such bankruptcy
filing.
LACK OF PUBLIC MARKET FOR THE EXCHANGE NOTES; RESTRICTIONS ON RESALE OF THE
ORIGINAL NOTES
There is no existing trading market for the Exchange Notes, and there can
be no assurance regarding the future development of a market for the Exchange
Notes or the ability of holders to sell their Exchange Notes, or the price at
which such holders may be able to sell their Exchange Notes. If such a market
were to develop, the Exchange Notes could trade at prices that may be lower than
the initial offering price of the Original Notes or the Accreted Value of the
Exchange Notes depending on many factors, including prevailing interest rates,
the Company's operating results and the markets for similar securities. The
Initial Purchasers have advised the Issuers that they currently intend to make a
market in the Exchange Notes. The Initial Purchasers are not obligated to do so,
however, and any market-making with respect to the Exchange Notes may be
discontinued at any time without notice. Therefore, there can be no assurance as
to the liquidity of any trading market for the Exchange Notes or that an active
public market for the Exchange Notes will develop. The Issuers do not intend to
apply for listing or quotation of the Exchange Notes on any securities exchange
or stock market. The Original Notes have not been registered under the
Securities Act or any state securities law and, unless exchanged for Exchange
Notes pursuant to the Exchange Offer, may not be offered or sold except pursuant
to an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state securities law. The
Issuers do not intend to apply for listing or quotation of the Original Notes on
any securities exchange or stock market. The Original Notes are eligible for
trading in the Private Offerings, Resale and Trading through Automated Linkages
(PORTAL) market of the National Association of Securities Dealers, Inc. The
Issuers do not intend to apply for listing or quotation of the Original Notes on
any securities exchange or stock market. The Original Notes are eligible for
trading in the Private Offerings, Resale and Trading through Automated Linkages
(PORTAL) market of the National Association of Securities Dealers, Inc.
CONSEQUENCES OF FAILURE TO EXCHANGE ORIGINAL NOTES
The Exchange Notes will be issued in exchange for Original Notes only after
timely receipt by the Exchange Agent of such Original Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documents. Therefore, holders of Original Notes desiring to tender such Original
Notes in exchange for the Exchange Notes should allow sufficient time to ensure
timely delivery. Although the Issuers intend to notify holders of defects or
irregularities with respect to tenders of Original Notes, neither the Issuers,
the Exchange Agent nor any other person shall incur any liability for failure to
give such notification.
Holders of the Original Notes who do not exchange their Original Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Original Notes, as set forth in the legend
thereon, as a consequence of the issuance of the Original Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Original Notes may not be offered or sold, unless registered under
the Securities Act and applicable state securities laws, or pursuant to an
exemption therefrom. Upon consummation of this Exchange Offer, the Issuers will
have no further obligation to provide for the registration under the Securities
Act of the Original Notes except under certain limited circumstances. In
addition, any holder of Original Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the Exchange Notes may be deemed
to have received restricted securities and, if so, will be required to comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Original Notes, where such
Original Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. To the extent
Original Notes are tendered and accepted in the Exchange Offer, the trading
market, if any, for the Original Notes not so tendered could be adversely
affected. See 'The Exchange Offer--Consequences of Failure to Exchange.'
19
<PAGE>
SPECIAL NOTE REGARDING PROJECTED FINANCIAL DATA
In connection with the offering and sale by the Initial Purchasers of the
Original Notes pursuant to Rule 144A under the Securities Act, the Issuers
prepared an Offering Memorandum (the 'Offering Memorandum') that was distributed
to prospective investors, including persons that presently may be holders of the
Original Notes. The Offering Memorandum contained certain forecasts of financial
information for the years ending December 31, 1998 through 2002 (the
'Forecasts') that are not included or incorporated by reference in this
Prospectus. The Forecasts have not been and are not expected to be made public
and the Issuers do not intend to update or otherwise revise the Forecasts to
reflect events or circumstances after the date of the Forecasts or reflect the
occurrence of unanticipated events. As with all projected financial information,
the Forecasts are subject to numerous uncertainties, many of which are beyond
the control of the Issuers, and contain assumptions that may not be attainable.
The Forecasts and actual results will vary and those variations may be material.
The Exchange Offer is being made only pursuant to this Prospectus, and no holder
of Original Notes shall rely upon any of the information set forth in the
Offering Memorandum in determining whether to participate in the Exchange Offer.
20
<PAGE>
THE TRANSACTIONS
The Company is a Delaware limited liability company, and all of its
membership interests are owned directly or indirectly by ACME Intermediate. The
membership interests of ACME Intermediate are 92% owned directly or indirectly
by ACME Parent and 8% owned directly or indirectly by the purchasers of the
Intermediate Notes. See 'Security Ownership of Certain Beneficial Owners and
Executive Officers.' The Company was formed on August 15, 1997. On such date,
ACME Parent contributed its investment in Station KWBP and certain other net
assets to the Company through ACME Intermediate (the 'Contribution').
[ORGINATIONAL CHART APPEARS HERE]
- ------------------
(1) Includes $6.0 million of membership units to be issued upon the consummation
of the Salt Lake City Acquisition.
21
<PAGE>
THE ACQUISITIONS
ACME Parent completed the Portland Acquisition on June 17, 1997 for $18.7
million in cash and $4.4 million of membership units in ACME Parent. Certain of
the Institutional Investors, management, and the other members of ACME Parent
contributed or invested the cash portion of the Portland Acquisition. The
Company completed the Knoxville Acquisition on October 7, 1997 for $13.2 million
in cash. ACME Parent or its subsidiaries have also entered into agreements to
acquire three additional television stations (these three stations collectively
are referred to as the 'Pending Acquisitions' and together with the Portland
Acquisition and the Knoxville Acquisition, the 'Acquisitions'). On August 15,
1997, ACME Parent consummated the Contribution by contributing ACME Television
of Oregon, LLC ('ACME Oregon'), ACME Television of Tennessee, LLC ('ACME
Tennessee'), and other net assets to the Company. See 'Financial
Statements--ACME Television.' The Company intends to consummate the Pending
Acquisitions as soon as practicable. However, there can be no assurance that all
or any of the Pending Acquisitions will be consummated. The following table sets
forth certain information with respect to the Acquisitions (dollars in
millions):
<TABLE>
<CAPTION>
ESTIMATED
PURCHASE CAPITAL TOTAL
STATION MARKET PRIMARY SELLER/OWNER PRICE EXPENDITURES COSTS(2)
- -------- ------------------ ---------------------------------------------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
KPLR-11 St. Louis, MO Koplar Communications, Inc. $146.0 $ 0.8 $146.8
KWBP-32 Portland, OR Channel 32, Incorporated 23.1 2.0 25.1
KZAR-16 Salt Lake City, UT Roberts Broadcasting of Salt Lake City, L.L.C. 14.0 4.5 18.5
KAUO-19 Albuquerque, NM Minority Broadcasters of Santa Fe, Inc.(1) -- 4.0 4.0
WBXX-20 Knoxville, TN Crossville TV Limited Partnership 13.2 4.5 17.7
-------- ------ --------
$196.3 $ 15.8 $212.1
====== ====== ======
</TABLE>
- ------------------
(1) The purchase price for this Acquisition is $10,000.
(2) Excludes estimated transaction costs of $3.0 million associated with the
Pending Acquisitions.
The St. Louis Acquisition
ACME Parent has entered into a definitive agreement with Koplar
Communications and its stockholders pursuant to which the Company or a
subsidiary formed for the purpose will acquire for $146.0 million all of the
outstanding capital stock of Koplar Communications, which owns the licensee of
Station KPLR, Channel 11, which is licensed to broadcast in the St. Louis
market. The acquisition of voting control of Koplar Communications by the
Company is subject to approval by the FCC. The $146.0 million acquisition cost
is comprised of the following: (i) $143.0 million of cash paid at closing of the
St. Louis LMA on September 30, 1997 subject to reduction for the amount of
long-term debt and notes payable of Koplar Communications ($14.0 million as of
January 2, 1998) and certain other adjustments, (ii) $3.0 million of consulting
fees relating to a management agreement to be entered into between the Company
and Mr. Koplar. See 'Management-- Executive Compensation.' Pending receipt of
FCC approval, the Company entered into the St. Louis LMA to operate Station KPLR
for a 10-year term with an option for the Company to renew the St. Louis LMA for
an additional 10-year term. During the LMA period, the Company will retain all
revenues generated by the station, bear the operating expenses of the station
and have the right to provide programming for the station subject to Koplar
Communications' ultimate authority for station programming and the station's
existing programming commitments.
The Portland Acquisition and Contribution
On June 17, 1997, ACME Parent acquired for approximately $23.1 million
substantially all of the assets of Channel 32, Incorporated relating to Station
KWBP, Channel 32, which is licensed to broadcast in the Portland market. For the
period from January 1, 1997 to the closing of the acquisition, ACME Parent
operated Station KWBP pursuant to an LMA. The Company anticipates completion of
the construction of a new transmission facility to improve the station's signal
and upgrade of its studio facility, which is expected to cost $2.0 million, by
January 1998. On August 15, 1997, ACME Parent consummated the Contribution by
contributing ACME Oregon, ACME Tennessee and other net assets to the Company.
22
<PAGE>
The Salt Lake City Acquisition
ACME Parent has entered into and contributed to the Company definitive
agreements to acquire for $14.0 million all of the ownership interest in Roberts
Broadcasting of Salt Lake City, L.L.C. ('Roberts Broadcasting'), which holds a
construction permit from the FCC for Station KZAR, Channel 16, which is licensed
to broadcast in the Salt Lake City market. The acquisition of Roberts
Broadcasting is subject to approval by the FCC. The $14.0 million acquisition
price will be paid as follows: (i) the Company will acquire 49% of the
outstanding equity interests of Roberts Broadcasting in exchange for $6.0
million in membership units of ACME Parent, (ii) the Company will acquire for
$3.0 million an option to acquire the remaining 51% of the outstanding equity
interests of Roberts Broadcasting and (iii) subject to completion of
construction and receipt of all required FCC approvals, the Company will
exercise its option to acquire the remaining interest in Roberts Broadcasting
for a price equal to the lesser of $5.0 million or the fair market value of such
controlling interest which will be offset by the repayment of a $4.0 million
loan to the sellers of Roberts Broadcasting to be made by ACME Parent. Pending
exercise of the option, the Company and Roberts Broadcasting will enter into a
management agreement, pursuant to which the Company will construct and acquire
programming for the station. The Company expects the construction costs to be
approximately $4.5 million. The Company anticipates that the station will
commence on-air broadcast operations by April 1998.
The Albuquerque Acquisition
The Company has entered into definitive agreements with Minority
Broadcasters of Santa Fe, Inc. ('Minority Broadcasters') to acquire the right to
construct Station KAUO, which is licensed to broadcast in the Albuquerque-Santa
Fe market (the 'Albuquerque Acquisition'). The purchase price for the
Albuquerque Acquisition will be the lesser of $10,000 or the amount approved by
the FCC as having been legitimately expended on KAUO by Minority Broadcasters.
The acquisition of the construction permit for Station KAUO is subject to
approval by the FCC. Pending this approval, the Company and Minority
Broadcasters have entered into a management agreement, pursuant to which the
Company will construct and acquire programming for the station at the Company's
expense. The Company expects the construction costs to be approximately $4.0
million. The Company anticipates that the station will commence on-air broadcast
operations by September 1998. A commercial broadcast television station in this
market currently holds a secondary affiliation agreement with The WB Network,
which management believes will be terminated once Station KAUO commences
broadcasting.
The Knoxville Acquisition
On October 7, 1997, the Company acquired for $13.2 million in cash, all of
the partnership interests of Crossville TV Limited Partnership ('Crossville
Limited'), the licensee of Station WINT, Channel 20, which is licensed to
broadcast in the Knoxville market and completed the construction of new
transmission facilities and upgrading of its studio facilities. The construction
and upgrade costs were approximately $4.5 million. Upon consummation of this
acquisition, the Company changed the station's call letters from WINT to WBXX.
THE FINANCINGS
The Company entered into a number of financing arrangements (collectively,
the 'Financings' and, together with the Acquisitons, the 'Transactions.)' The
following table sets forth certain financing arrangements for ACME Parent and
its subsidiaries pursuant to the Transactions (dollars in thousands):
<TABLE>
<S> <C>
ACME PARENT:
Convertible Debentures.................................................................... $ 20,000
Membership Units(1)....................................................................... 35,400
ACME INTERMEDIATE:
Units..................................................................................... 40,000
THE COMPANY:
Capital Lease Facilities.................................................................. 0
Revolving Credit Facility................................................................. 3,500
Offering.................................................................................. 127,370
--------
ACME Parent consolidated total financings............................................ $226,270
========
</TABLE>
- ------------------
(1) Includes $6.0 million of membership units to be issued upon the consummation
of the Salt Lake City Acquisition.
23
<PAGE>
ACME Parent Equity Contribution
In June 1997, ACME Parent issued $14.7 million gross proceeds of 10% Junior
Subordinated Convertible Debentures (the 'Convertible Debentures') and $12.2
million of membership units issued upon the consummation of the Portland
acquisition.
On the Issue Date, ACME Parent issued Convertible Debentures and membership
units for aggregate gross proceeds of approximately $22.5 million, the net
proceeds of which were contributed to the Company through ACME Intermediate (the
'Parent Equity Contribution').
ACME Intermediate Contribution
On September 24, 1997 ACME Intermediate sold units (the 'Units') consisting
of approximately $71.6 million in aggregate principal amount of 12% Senior
Secured Discount Notes due 2005 (the 'Intermediate Notes') and membership units
of ACME Intermediate, representing 8% of the fully-diluted membership units of
ACME Intermediate (the 'Units Offering'). The gross proceeds from the Units
Offering of $40.0 million were received on September 30, 1997. ACME Intermediate
contributed the net proceeds from the Units Offering to the Company (the
'Intermediate Equity Contribution'). ACME Intermediate is currently offering to
exchange its Series B Intermediate Notes (the 'Intermediate Exchange Notes'),
which have been registered under the Securities Act, for a like principal amount
of its Series A Intermediate Notes (the 'Intermediate Original Notes'), sold on
the Issue Date, pursuant to the conditions set forth in the registration
statement filed by ACME Intermediate (the 'Intermediate Exchange Offer
Registration Statement').
ACME Television Offering
On September 24, 1997, the Issuers sold (the 'Offering') $175.0 million in
aggregate principal amount of maturity of 10 7/8% Senior Discount Notes due
2004, Series A. The gross proceeds from the Offering of $127.4 million were
received on September 30, 1997. The Issuers are currently offering to exchange
the Exchange Notes for the Original Notes pursuant to the conditions set forth
in the registration statement filed by the Issuers, of which this prospectus is
a part. The net proceeds from the Offering together with the proceeds of the
other Financings and cash on hand were used to consummate the St. Louis LMA and
the Knoxville Acquisition and will be used to consummate the Pending
Acquisitions.
The Company intends to temporarily invest the net remaining proceeds of the
Offering and the Units Offering in short-term, investment grade securities prior
to the consummation of the Pending Acquisitions. If any of the Pending
Acquisitions are not consummated, the Company intends to use the net proceeds
designated for any such acquisition (and related expenditures) for working
capital, capital expenditures, general corporate purposes, and to finance future
acquisitions.
Revolving Credit Facility
In addition to the Parent Equity Contribution, the Intermediate Equity
Contribution and the proceeds of the Offering, the Company entered into an
amended and restated $40.0 million revolving credit facility (the 'Revolving
Credit Facility') among the Company, as borrower, each of its subsidiaries, as
guarantors, Canadian Imperial Bank of Commerce, New York Agency ('CIBC'), and
the several lenders named therein, the proceeds of which are to be used to fund
future acquisitions and for working capital and general corporate purposes. As
of September 30, 1997, the Revolving Credit Facility bore interest at a rate of
8.6875%.
Capital Lease Facilities
The Company intends to enter into capital lease facilities aggregating
$20.0 million in availability (the 'Capital Lease Facilities'). The Capital
Lease Facilities will be used to finance substantially all of the expected
capital expenditures for the construction or upgrade of the Company's stations.
USE OF PROCEEDS
The Issuers will not receive any cash proceeds from the issuance of the
Exchange Notes. In consideration for issuing the Exchange Notes as contemplated
in this Prospectus, the Issuers will receive in exchange Original Notes in like
principal amount, which will be cancelled and as such will not result in any
increase in indebtedness of the Company.
24
<PAGE>
CAPITALIZATION
(DOLLARS IN THOUSANDS)
The following table sets forth the capitalization of the Company as of
September 30, 1997:
<TABLE>
<S> <C>
Cash........................................................................................ $ 27,211
========
Note payable to bank........................................................................ $ 3,500
Capital lease obligations outstanding (including current portion)........................... 706
Original Notes.............................................................................. 127,370
--------
Total debt........................................................................... 131,576
Members' capital............................................................................ 82,278
--------
Total capitalization................................................................. $213,854
========
</TABLE>
25
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial statements (the
'Pro Forma Financial Statements') are based on the financial statements of ACME
Television, Koplar Communications and Channel 32, Incorporated ('Channel 32')
included elsewhere in this Prospectus, adjusted to give effect to the
Transactions. The unaudited pro forma consolidated statements of operations give
effect to the Knoxville Acquisitions and the Pending Acquisitions as if they had
occurred as of the beginning of the periods shown, and the unaudited pro forma
consolidated balance sheet gives effect to the Knoxville Acquisition and the
Pending Acquisitions as if they had occurred as of September 30, 1997. The pro
forma data are based upon available information and certain assumptions that
management believes are reasonable. The Pro Forma Financial Statements do not
purport to represent what the Company's result of operations or financial
condition would actually have been had the transactions occurred on such dates
or to project the Company's results of operations or financial condition for any
future period or date. The Pro Forma Financial Statements should be read in
conjunction with the financial statements of ACME Television and the historical
financial statements of Koplar Communications and Channel 32, the prior owners
of Station KPLR and Station KWBP, respectively, included elsewhere in this
Prospectus, and 'Management's Discussion and Analysis of Results of Operations
and Financial Condition.'
In connection with the St. Louis Acquisition, the Company entered into the
St. Louis LMA with Koplar Communications. Edward J. Koplar is the controlling
stockholder, chief executive officer and chief operating officer of Koplar
Communications. In addition, the Company intends to enter into the Management
Agreement with Mr. Koplar, and grant to an affiliate of Mr. Koplar the right to
encode the broadcast signals of Station KPLR and other television stations the
Company owns or operates with such entity's interactive technology. The Company
has also granted to Mr. Koplar approval rights with respect to certain
dispositions of Station KPLR by the Company for a period of five years. In
connection with the Portland Acquisition, the Company entered into an LMA with
Channel 32. See 'Certain Relationships and Related Transactions.' In addition,
Channel 32 obtained $4.4 million of membership units in ACME Parent upon
consummation of the Portland Acquisition. Prior to such arrangements in
connection with the Acquisitions, the Company had no relationships with any of
the owners of such businesses.
The Knoxville Acquisition and the Pending Acquisitions will be accounted
for using the purchase method of accounting. After each acquisition, the total
consideration of such acquisition will be allocated to the tangible and
intangible assets acquired and liabilities assumed based upon their respective
estimated fair values. The allocation of the aggregate total consideration
included in the Pro Forma Financial Statements is preliminary as the Company
believes further refinement is impractical at this time. However, the Company
does not expect that the final allocation of the total consideration will
materially differ from the preliminary allocations set forth herein.
26
<PAGE>
ACME TELEVISION, LLC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
HISTORICAL
----------------------------- PRO FORMA PRO FORMA
ACME KOPLAR ------------ -----------
TELEVISION COMMUNICATIONS ADJUSTMENTS THE COMPANY
------------ -------------- ------------ -----------
<S> <C> <C> <C> <C>
Cash and cash equivalents.......................................... $ 27,211 $ -- $ (21,210)(1) $ 6,001
Accounts receivable, net........................................... 405 7,281 -- 7,686
Due from affiliates................................................ 14,876 -- -- 14,876
Current portion of programming rights.............................. 581 4,889 -- 5,470
Prepaid expenses and other current assets.......................... 201 513 -- 714
------------ -------------- ------------ -----------
Total current assets..................................... 43,274 12,683 (21,210) 34,747
Property and equipment, net........................................ 4,177 2,394 -- 6,571
Programming rights, net of current portion......................... 590 4,097 -- 4,687
Deposit............................................................ 143,016 -- (143,000)(1) 16
Other assets....................................................... 11,772 3,148 (3,000)(1) 9,337
(2,583)(2)
Broadcast licenses and other intangibles........................... 22,570 -- 171,905(1) 194,475
------------ -------------- ------------ -----------
Total assets............................................. $225,399 $ 22,322 $ 2,112 $ 249,833
============ ============== ============ ===========
LIABILITIES AND MEMBERS' CAPITAL/SHAREHOLDERS' DEFICIT
Accounts payable and accrued liabilities........................... $ 10,072 $ 9,289 $ 1,000(1) $ 14,653
(5,708)(2)
Current portion of programming rights payable...................... 876 5,089 -- 5,965
Current portion of note payable-programmer......................... -- 400 (400)(2) --
Note payable to bank............................................... 3,500 -- -- 3,500
Current portion of capital lease obligations....................... 284 -- -- 284
------------ -------------- ------------ -----------
Total current liabilities................................ 14,732 14,778 (5,108) 24,402
Programming rights payable, net of current portion................. 597 4,542 -- 5,139
Obligations under lease, net of current portion.................... 422 -- -- 422
Note payable-programmer............................................ -- 3,455 (3,455)(2) --
Other long-term liabilities........................................ -- 2,222 2,000(1) 4,222
Senior discount notes.............................................. 127,370 -- -- 127,370
Other long-term debt............................................... -- 12,381 (12,381)(2) --
------------ -------------- ------------ -----------
Total liabilities........................................ 143,121 37,378 (18,944) 161,555
Members' capital/shareholders' equity.............................. 85,516 46 6,000(1) 91,516
(46)(3) --
Accumulated deficit (3,238) (15,102) 15,102(3) (3,238)
------------ -------------- ------------ -----------
Total members' capital/shareholders' deficit 82,278 (15,056) 21,056 88,278
------------ -------------- ------------ -----------
Liabilities and members' capital/shareholders' deficit............. $225,399 $ 22,322 $ 2,112 $ 249,833
============ ============== =========== ===========
</TABLE>
(See notes on the following page)
27
<PAGE>
ACME TELEVISION, LLC
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(1) Reflects the allocation of the purchase prices for the Knoxville Acquisition
and the Pending Acquisitions as follows (dollars in thousands):
<TABLE>
<CAPTION>
KZAR AND ESTIMATED
KPLR WINT KAUO COSTS TOTAL
-------- ------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Consideration:
Cash........................................................ $ 0 $13,200 $ 8,010 $ 0 $ 21,210
Deposits.................................................... 143,000 -- -- -- 143,000
ACME Parent Membership Units................................ -- -- 6,000 -- 6,000
Prepaid acquisition costs................................... -- -- -- 3,000 3,000
Consulting payments under management agreement ($1.0 million
current and $2.0 million long-term)...................... 3,000 -- -- -- 3,000
-------- ------- -------- --------- --------
Total.................................................. 146,000 13,200 14,010 3,000 176,210
Less:
Fair value of net tangible assets acquired.................. 4,305 -- -- -- 4,305
-------- ------- -------- --------- --------
Broadcast licenses.......................................... $141,695 $13,200 $14,010 $ 3,000 $171,905
======== ======= ======= ======= ========
</TABLE>
(2) Adjustments to record the estimated fair value of net tangible assets
acquired in the St. Louis Acquisition as follows (dollars in thousands):
<TABLE>
<S> <C>
Book value of net assets acquired.......................................................... $(15,056)
Other assets not acquired.................................................................. (2,583)
Note payable-programmer not assumed:
Current portion.......................................................................... 400
Long-term portion........................................................................ 3,455
Other long-term note not assumed........................................................... 12,381
Accrued liabilities:
Accrued liabilities not assumed.......................................................... 5,900
Working capital purchase price adjustment................................................ (192)
--------
Fair value of net assets acquired.......................................................... $ 4,305
========
</TABLE>
(3) Elimination of Station KPLR historical shareholders' deficit.
28
<PAGE>
ACME TELEVISION, LLC
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL(1)
------------------------- PRO FORMA PRO FORMA
CHANNEL KOPLAR ----------- -----------
32 COMMUNICATIONS ADJUSTMENTS THE COMPANY
------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues...................................................... $3,202 $ 27,260 $ -- $ 30,462
Operating expenses:
Programming................................................. 3,060 11,365 -- 14,425
Selling, general and administrative......................... 1,497 11,318 (2,700)(4) 10,115
Depreciation and amortization............................... 557 702 9,705(5) 10,964
------- -------------- ----------- -----------
Total operating expenses................................. 5,114 23,385 7,005 35,504
------- -------------- ----------- -----------
Operating income (loss)....................................... (1,912 ) 3,875 (7,005) (5,042)
Interest expense.............................................. (3,330 ) (2,155) (15,511)(2) (15,511)
-- -- 5,485(3) --
Other, net.................................................... (491 ) (699) 443(6) (747)
------- -------------- ----------- -----------
Income (loss) before income taxes and extraordinary item...... (5,733 ) 1,021 (16,588) (21,300)
Income tax (expense) benefit.................................. -- (462) 462(7) --
------- -------------- ----------- -----------
Net income (loss) before extraordinary item................... $(5,733) $ 559 $ (16,126) $ (21,300)
======= ======== ========= =========
OTHER DATA:
EBITDA(8)(9)................................................ $ (575 ) $ 5,922 $ 2,700(4) $ 8,047
====== ======== =========== =========
</TABLE>
- ------------------
(1) The Company was not formed as of December 31, 1996. Accordingly, historical
results have not been presented. The unaudited consolidated statement of
operations for Station KWBP includes the six months ended June 30, 1996 and
the six months ended December 31, 1996.
(2) Reflects (i) interest expense (10.875% per annum) and amortization of
issuance costs (estimated to be $5.8 million amortized over 7 years) on the
Notes, and (ii) amortization of issuance costs on capital lease obligations
and bank fees (estimated to be $700,000 amortized over 5 years.)
(3) Reflects adjustment to eliminate historical interest expense.
(4) Reflects the (i) decrease in payroll and payroll related costs of selling,
general and administrative personnel due to termination of employees or
reduction in levels of compensation and (ii) elimination of certain
marketing programs as follows (dollars in thousands):
<TABLE>
<S> <C>
Adjustments to selling, general and administrative expenses:
Reductions of senior executive compensation.................... $ 1,750
Reductions of sales force...................................... 300
Discontinued marketing programs................................ 400
Other reductions............................................... 250
---------
$ 2,700
=========
</TABLE>
(5) Reflects the amortization of $194.1 million of broadcast licenses, relating
to the Acquisitions, over a 20 year period.
(6) Reflects the adjustment to eliminate the reserve recorded by Koplar
Communications on a note receivable from a related party. This note
receivable will not be acquired by the Company.
(7) Reflects adjustment to income tax expense.
<PAGE>
(8) EBITDA is defined as operating income (loss), plus depreciation,
amortization and other noncash charges, including amortization of
programming rights, minus programming payments. Although EBITDA is not
calculated in accordance with GAAP, it is widely used as a measure of a
Company's ability to service and/or incur debt. EBITDA should not be
considered in isolation from or as a substitute for net income, cash flows
from operations and other income or cash flow data prepared in accordance
with GAAP, or as a measure of profitability or liquidity.
(9) Pro Forma EBITDA has not been adjusted to reflect the elimination of
payments of certain program obligations relating to programs where Station
KPLR's rights have expired or which are not currently being utilized by
Station KPLR or to reflect the impact of other potential adjustments to the
value of programming rights.
29
<PAGE>
ACME TELEVISION, LLC
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
---------------------------- PRO FORMA PRO FORMA
ACME KOPLAR ----------- -----------
TELEVISION COMMUNICATIONS ADJUSTMENTS THE COMPANY
---------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues...................................................... $ 2,155 $ 21,347 $ -- $ 23,502
Operating expenses:
Programming................................................. 1,096 8,458 -- 9,554
Selling, general and administrative......................... 3,173 13,722 (7,851)(3) 9,044
Depreciation and amortization............................... 551 490 6,965(4) 8,006
---------- -------------- ----------- -----------
Total operating expenses............................... 4,820 22,670 (886) 26,604
---------- -------------- ----------- -----------
Operating income (loss)....................................... (2,665) (1,323) 886 (3,102)
Interest expense, net......................................... (573) (1,117) (11,198)(1) (11,198)
1,690(2)
Other, net.................................................... -- (1,313) 985(5) (328)
---------- -------------- ----------- -----------
Income (loss) before income taxes........................... (3,238) (3,753) (7,637) (14,628)
Income taxes (expense) benefit................................ -- (1,031) (1,031)(6) --
---------- -------------- ----------- -----------
Net income (loss)............................................. $ (3,238) $ (2,722) $ (8,668) $ (14,628)
======== ======== ========= =========
OTHER DATA:
EBITDA(7)(8)................................................ $ (7,225) $ (1,346) $ 7,851(3) $ 4,280
======== ======== =========== =========
</TABLE>
- ------------------
(1) Reflects (i) interest expense (10.875% per annum) and amortization of
issuance costs (estimated to be $5.8 million amortized over 7 years) on the
Notes, and (ii) amortization of issuance costs on capital lease obligations
and bank fees (estimated to be $700,000 amortized over 5 years).
(2) Reflects adjustment to eliminate historical interest expense.
(3) Entry records (i) decrease in payroll and payroll related costs of selling,
general and administrative personnel due to termination of employees or
reductions in levels of compensation and (ii) elimination of certain
marketing programs as follows (dollars in thousands):
<TABLE>
<S> <C>
Adjustments to selling, general and administrative expenses:
Reductions of senior executive compensation......................................................... $ 7,138
Reductions of sales force........................................................................... 225
Discontinued marketing programs..................................................................... 300
Other reductions.................................................................................... 188
---------
$ 7,851
=========
</TABLE>
(4) Reflects amortization of broadcast licenses as follows: (i) $22.7 million of
Station KWBP broadcast licenses rights for the period from January 1, 1997
to June 16, 1997 (acquisition date) using a 20 year estimated life, and (ii)
$171.9 million broadcast licenses relating to the Knoxville Acquisition and
the Pending Acquisitions, amortized over an estimated life of 20 years.
(5) Reflects adjustment to eliminate the reserve recorded by Koplar
Communications on a note receivable from a related party. The note
receivable from related party will not be assumed by the Company.
(6) Reflects adjustment to income tax expense.
(7) EBITDA is defined as operating income (loss), plus depreciation,
amortization and other noncash charges, including amortization of
programming rights, minus programming payments. Although EBITDA is not
calculated in accordance with GAAP, it is widely used as a measure of a
company's ability to service and/or incur debt. EBITDA should not be
considered in isolation from or as a substitute for net income, cash flows
from operations and other income or cash flow data prepared in accordance
with GAAP, or as a measure of profitability or liquidity.
(8) Pro forma EBITDA has not been adjusted to reflect the elimination of
payments of certain program obligations on programs where Station KPLR's
rights have expired or which are not currently being utilized by Station
KPLR or to reflect the impact of other potential adjustment to the value of
programming rights.
30
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following tables contain selected historical consolidated financial
information with respect to ACME Television, Koplar Communications and Channel
32. The selected historical financial data of ACME Television set forth below as
of September 30, 1997 and for the nine months ended September 30, 1997 have been
derived from the audited financial statements of ACME Television included
elsewhere in this Offering Memorandum which have been audited by KPMG Peat
Marwick LLP, independent certified public accountants. The selected historical
financial data set forth below with respect to Koplar Communications as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 are derived from the audited financial statements included
elsewhere herein. The selected financial data set forth below for Koplar
Communications as of December 31, 1994, 1993 and 1992 and for each of the two
years in the period ended December 31, 1993 are derived from financial
statements not included elsewhere herein. The selected historical financial data
of Channel 32, for the period from December 16, 1993 (inception) to June 30,
1994, for each of the years in the two-year period ended June 30, 1996 are
derived from the financial statements of Channel 32, included elsewhere in this
Prospectus, which have been audited by KPMG Peat Marwick LLP, independent
certified public accountants. The selected historical financial data of Channel
32 for the period from July 1, 1996 to June 17, 1997 are derived from the
unaudited financial statements of Channel 32, included elsewhere in this
Prospectus. The selected historical financial data should be read in conjunction
with 'Management's Discussion and Analysis of Results of Operations and
Financial Condition' and the financial statements of ACME Television, Koplar
Communications, and Channel 32 included elsewhere in this Prospectus.
SELECTED HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ACME TELEVISION ENDED
SEPTEMBER 30,
STATEMENT OF OPERATIONS DATA: 1997
-------------
<S> <C>
Revenues........................................................................................... $ 2,155
Operating expenses:
Programming...................................................................................... 1,096
Selling, general and administrative.............................................................. 3,173
Depreciation and amortization.................................................................... 551
-------------
Total operating expenses.................................................................... 4,820
-------------
Operating loss.............................................................................. (2,665)
-------------
Interest expense................................................................................... (573)
-------------
Loss before income taxes.................................................................... (3,238)
Income taxes....................................................................................... --
-------------
Net loss.................................................................................... $(3,238)
=============
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA: AS OF
SEPTEMBER 30,
1997
-------------
(UNAUDITED)
<S> <C>
Cash and cash equivalents.......................................................................... $ 27,211
Working capital.................................................................................... 28,542
Total assets....................................................................................... 225,399
Total debt(1)...................................................................................... 131,576
Members' Capital................................................................................... 82,278
</TABLE>
- ------------------
(1) Total debt includes the current portion of capital lease obligations and
excludes programming rights payable.
31
<PAGE>
KOPLAR COMMUNICATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues(1).............................. $39,128 $41,500 $33,146 $27,528 $27,260 $19,751 $21,347
------- ------- ------- ------- ------- -------- ---------
Operating expenses:
Programming............................ 22,532 19,592 13,581 9,503 11,365 9,413 8,458
Selling, general and administrative.... 17,587 17,614 12,113 11,632 11,318 7,914 13,722
Depreciation and amortization.......... 1,321 1,367 1,085 791 702 518 490
------- ------- ------- ------- ------- -------- ---------
Total operating expenses............ 41,440 38,573 26,779 21,926 23,385 17,845 22,670
------- ------- ------- ------- ------- -------- ---------
Operating income (loss)............. (2,312) 2,927 6,367 5,602 3,875 1,906 (1,323)
------- ------- ------- ------- ------- -------- ---------
Other income (expense):
Interest expense....................... (6,462) (9,402) (5,777) (2,842) (2,155) (1,522 ) (1,117)
Other, net............................. (472) (492) (2,059) (321) (699) (489 ) (1,313)
Other non-recurring gains(2)........... -- -- 15,036 -- -- -- --
------- ------- ------- ------- ------- -------- ---------
Other income (expense).............. (6,934) (9,894) 7,200 (3,163) (2,854) (2,011 ) (2,430)
------- ------- ------- ------- ------- -------- ---------
Income (loss) before income taxes,
discontinued operations and
extraordinary items............... (9,246) (6,967) 13,567 2,439 1,021 (105 ) (3,753)
Income tax provision (benefit)........... -- -- 3,272 523 462 425 (1,031)
------- ------- ------- ------- ------- -------- ---------
Income (loss) before discontinued
operations and extraordinary
items............................. (9,246) (6,967) 10,295 1,916 559 (530 ) (2,722)
Discontinued operations(3)............... -- -- 1,262 -- --
------- ------- ------- ------- ------- -------- ---------
Income (loss) before extraordinary
items............................. (9,246) (6,967) 11,557 1,916 559 (530 ) (2,722)
Extraordinary items, net of income
taxes(4)............................... -- -- 47,134 (1,359) -- --
------- ------- ------- ------- ------- -------- ---------
Net income (loss)...................... $(9,246) $(6,967) $58,691 $ 1,916 $ (800) $ (530 ) $(2,722)
======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------- SEPTEMBER 30,
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................... $ 1,464 $ 1,902 $ 80 $ 244 $ 23 $ --
Working capital................................ (83,628) (88,216) 115 (1,709) 3,799 (2,095)
Total assets................................... 49,898 46,538 29,443 29,559 23,313 22,322
Long-term debt and obligations under capital
leases(5).................................... 36,089 35,422 15,561 15,282 13,650 12,381
Stockholders' equity (deficit)................. (60,679) (67,646) (12,339) (11,534) (12,334) (15,056)
</TABLE>
- ------------------
(1) Revenues include approximately $14.3 million, $15.4 million and $7.1 million
for the years ended December 31, 1992, 1993 and 1994, respectively, relating
to the operations of Station KRBK which was sold on June 29, 1994.
(2) Other non-recurring gains are comprised of a gain of $11.4 million on the
sale of a broadcasting facility and $3.6 million realization under a tax
sharing agreement.
(3) Discontinued operations are comprised of income from the operations of
divested subsidiaries.
(4) Extraordinary items for the year ended December 31, 1994 are comprised of:
(i) a $21.5 million gain on forgiveness of programming obligations, (ii) a
$24.8 million gain on forgiveness of senior debt, and (iii) an $800,000 gain
on forgiveness of other obligations. The extraordinary item for the year
ended December 31, 1996 is comprised of $1.4 million loss on early
extinguishment of debt.
(5) Includes the principal balances of the Company's senior notes, revolving
loan agreement and capital lease agreements.
32
<PAGE>
CHANNEL 32
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED YEAR ENDED PERIOD FROM
DECEMBER 31, 1993 JUNE 30, JUNE 30, JULY 1, 1996
(INCEPTION) 1995 1996 TO JUNE 17,
TO JUNE 30, ------------- ------------- 1997
1994 --------------
----------------- (PREDECESSOR) (SUCCESSOR)
(SUCCESSOR)
(PREDECESSOR) (UNAUDITED)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C>
Revenues.......................................... $ -- $ 288 $ 2,729 $ 1,306
Operating expenses:
Programming..................................... 6 623 3,274 1,304
Selling, general and administrative............. 11 273 1,462 1,061
Depreciation and amortization................... -- 235 542 346
----- ------------- ------------- --------------
Total operating expenses..................... 17 1,131 5,278 2,711
----- ------------- ------------- --------------
Operating income............................. (17) (843) (2,549) (1,405)
----- ------------- ------------- --------------
Other income (expense):
Interest expense.................................. (5) (200) (3,252) (2,222)
Interest income................................... -- -- 45 --
Write-off due to parent........................... -- -- (189) --
Other, net........................................ -- -- (70) (10)
----- ------------- ------------- --------------
Other income (expense)....................... (5) (200) (3,466) (2,232)
----- ------------- ------------- --------------
Loss before income taxes..................... (22) (1,043) (6,015) (3,637)
Income taxes...................................... -- -- -- --
----- ------------- ------------- --------------
Net loss..................................... $ (22) $(1,043) $(6,015) $ (3,637)
===== ============= ============= ==============
</TABLE>
- ------------------
(1) Effective July 1, 1995, Peregrine Communications, Ltd. acquired Channel 32,
Incorporated. As a result of the acquisition, the financial information for
the periods after the acquisition ('Successor') is presented on a different
cost basis than for periods prior to the acquisition ('Predecessor') and,
therefore, is not comparable.
33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
The following discussion relating to Koplar Communications is based upon
the historical financial statements included elsewhere herein of Koplar
Communications for the years ended December 31, 1994, 1995 and 1996 and for the
nine months ended September 30, 1996 and 1997. The following discussion relating
to Channel 32 is based upon the historical financial statements of Channel 32
for the period from December 16, 1993 (inception) to June 30, 1994, the years
ended June 30, 1995 and 1996 and the period from July 1, 1996 to June 17, 1997.
The results of operations of ACME Television for the nine months ended September
30, 1997 include the operations of Station KWBP, which ACME Parent acquired on
June 17, 1997 and operated by it pursuant to an LMA from January 1, 1997 to the
date of acquisition.
The Company's revenues are primarily derived from the sale of broadcast
advertising time to national, regional and local advertisers and advertising
time exchanged for goods and services. All revenues are stated net of any agency
and national sales representative commissions. Revenues for Channel 32 include
the value associated with barter agreements in which broadcast time is exchanged
for programming rights. Revenue and expenses for Koplar Communications do not
include barter transactions.
The Company's station operating expenses consist of programming expenses;
marketing and selling costs, including commissions paid to the Company's sales
staff and ratings/research data costs; technical and similar operations costs;
and general and administrative expenses. Long-term programming rights are
initially recorded as an asset at cost. Programming expenses include
amortization of long-term programming rights, which the Company assesses the
value of on an ongoing basis. When unamortized costs of long-term programming
rights exceed the estimated undiscounted future revenue, the Company adjusts the
carrying value of such programming rights and such adjustment is reflected as a
programming expense.
The Company expects to have net losses primarily as the result of non-cash
charges attributable to the amortization of intangibles acquired and interest
expense incurred in connection with the purchase of each station.
EBITDA is defined as operating income (loss), plus depreciation,
amortization and other non-cash charges, including amortization of programming
rights, minus programming payments. Although EBITDA is not calculated in
accordance with GAAP, it is widely used as a measure of a company's ability to
service and/or incur debt. EBITDA should not be considered in isolation from or
as a substitute for net income, cash flows from operations and other income or
cash flow data prepared in accordance with GAAP, or as a measure of
profitability or liquidity.
KOPLAR COMMUNICATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------- --------------------------------
STATEMENT OF OPERATIONS DATA: 1994 1995 1996 1996 1997
----- ----- ----- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net revenue............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Programming............................. 41.0 34.5 41.7 47.7 39.6
Selling, general and administrative..... 36.5 42.3 41.5 40.0 64.3
Depreciation and amortization........... 3.3 2.9 2.6 2.6 2.3
----- ----- ----- ------ ------
Operating income (loss)................. 19.2 20.9 14.2 9.7 (6.2)
Interest expense........................ 17.4 10.3 7.9 7.7 5.2
EBITDA.................................. 15.3 23.9 21.7 (0.4%) (6.3%)
</TABLE>
34
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996
Koplar Communications' net revenues for the nine months ended September 30,
1997 were $21.3 million as compared to $19.8 million for the nine months ended
September 30, 1996, representing a 8.1% increase. This increase was a result of
slightly higher total market revenues and improved Station KPLR ratings during
the 1997 period as compared to the corresponding prior period.
Koplar Communications' programming expenses for the nine months ended
September 30, 1997 were $8.5 million, as compared to $9.4 million for the
corresponding period of the prior year, representing a 10.0% decrease. This
decrease was primarily attributable to a non-recurring adjustment to the
carrying value of certain programming rights in the amount of $1.5 million
during the 1996 period. Amortization of programming rights was $3.6 million and
payments on programming obligations were $4.2 million for the nine months ended
September 30, 1997 compared to amortization of programming rights, including an
adjustment to the carrying value of programming rights, of $5.5 million and
payments of programming obligations of $4.1 million for the prior period.
Koplar Communications' selling, general & administrative expenses for the
nine months ended September 30, 1997 were $13.7 million as compared to $7.9
million for the corresponding period of the prior year, representing a 73.4%
increase. This increase related primarily to non-recurring senior executive
compensation relating to the transactions with ACME Television during 1997.
Depreciation and amortization for the nine months ended September 30, 1997
was $490,000, as compared to $518,000 for the corresponding period of the prior
year.
Interest expense for the nine months ended September 30, 1997 was $1.1
million as compared to $1.5 million for the corresponding period of the prior
year, representing a 27.0% decrease. This decrease was due to the July 1996
refinancing of Koplar Communications' bank debt (revolver and term loan) which
resulted in a reduction in the interest rate applicable to borrowings from
approximately 12% to prime plus 0.75% (9% at December 31, 1996).
Other, net expenses increased to $1.3 million for the nine months ended
September 30, 1997 from $489,000 for the nine months ended September 30, 1996.
This increase of $824,000 is due primarily to a $985,000 provision in 1997 to
reduce the carrying value of a note receivable from ISW, Inc., a company
affiliated with Koplar Communications' majority shareholder.
Income tax benefit for the nine months ended September 30, 1997 was $1.0
million and represented approximately 27.5% of pre-tax income compared to a tax
expense of $425,000 for the corresponding period of the prior year.
EBITDA for the nine months ended September 30, 1997 was ($1.3) million, as
compared to $73,000 for the corresponding period of the prior year.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Koplar Communications' net revenues for the year ended December 31, 1996
were $27.3 million as compared to $27.5 million for the year ended December 31,
1995, representing a 1.0% decrease. Station KPLR experienced a decrease in spot
advertising and other revenue of $900,000 offset by an increase of $700,000
attributable to advertising sales during broadcasts of St. Louis Cardinals
baseball.
Koplar Communications' programming expenses in 1996 were $11.4 million as
compared to $9.5 million during the prior year, representing a 19.6% increase.
This increase was primarily the result of a non-recurring adjustment in the
carrying value of certain programming rights in the amount of $1.5 million
during the 1996 period. Amortization of programming rights, including an
adjustment to the carrying value of programming rights, was $6.9 million and
payments on programming obligations were $5.5 million for the year ended
December 31, 1996 compared to amortization of programming rights of $5.4 million
and payments of programming obligations of $5.2 million for the prior year.
35
<PAGE>
Koplar Communications' selling, general & administrative expenses in 1996
were $11.3 million as compared to $11.6 million for the prior year, representing
a 2.7% decrease.
Depreciation and amortization in 1996 was $702,000 as compared to $791,000
for the prior year. This decrease was related to certain assets becoming fully
depreciated in early 1996.
Interest expense in 1996 was $2.2 million as compared to $2.8 million for
the prior year. This reduction in interest expense was primarily the result of
the refinancing of the Koplar Communications' bank debt at lower interest rates,
which occurred in July 1996.
Other, net expenses in 1996 were $699,000 as compared to $321,000 for the
prior year. This increase primarily relates to provisions in 1996 to reduce the
carrying value of a note receivable from an affiliated company.
Income tax expense in 1996 was $462,000, representing 45.2% of pre-tax
income as compared to $523,000 for 1995, which represented 21.4% of the period's
pre-tax income. The higher effective tax rate incurred in 1996 relates primarily
to the non-deductibility of certain travel and entertainment expenses. The lower
effective tax rate for 1995 relates to the reversal of valuation allowances
attributable to certain of Koplar Communications' deferred tax assets utilized
by it during the period.
As a result of the debt refinancing discussed above, unamortized deferred
financing costs were written off, resulting in a loss or early extinguishment of
debt of $1.4 million, net of taxes of $868,000.
EBITDA for the year ended December 31, 1996 was $5.9 million as compared to
$6.6 million for the corresponding period of the prior year, representing a
10.0% decrease. This decrease is mainly attributable to slight decreases in net
revenues and increases in programming payments during 1996 as compared to 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenues in 1995 were $27.5 million compared to revenues in the prior year
of $33.1 million. This decrease in revenues of $5.6 million was primarily
related to the sale of Station KPLR's independent television Station KRBK in
Sacramento, California in June 1994. Station KRBK had contributed $7.1 million
of revenue during 1994. Net of the effects of the sale of Station KRBK, overall
revenue of Koplar Communications increased $1.5 million due primarily to an
increase in Koplar Communications' share of national spot revenue.
Programming expenses for Station KPLR were $9.5 million in 1995 as compared
to $13.6 million during 1994. This $4.1 million decrease primarily relates to
1994 programming expenses of $3.9 million at Station KRBK. Amortization of
programming rights was $5.4 million and payments on programming obligations were
$5.2 million for the year ended December 31, 1995 compared to amortization of
programming rights of $7.3 million and payments of programming obligations of
$9.7 million for the prior year.
Selling, general and administrative expenses during 1995 were $11.6 million
compared to $12.1 million during 1994. This $481,000 decrease primarily relates
to 1994 selling, general and administrative expenses at Station KRBK of $2.6
million offset by approximately $2.1 million in increased expenses at Koplar
Communications relating to expansions in general staffing levels and increased
promotional spending.
Depreciation and amortization expenses were $791,000 in 1995 as compared to
$1.1 million in 1994. This decrease of approximately $400,000 was attributable
to the sale of Station KRBK in June 1994.
Interest expense decreased to $2.8 million in 1995 from $5.8 million in
1994. This reduction of $3.0 million was due to lower borrowings during the 1995
period resulting from the sale of Station KRBK in June 1994, and restructuring
of Koplar Communications' debt obligations during 1994.
Other, net expenses were $321,000 in 1995 as compared to $2.1 million in
1994. This decrease of $1.8 million relates primarily to non-recurring legal,
consulting and other expenses incurred in 1994 in connection with Koplar
Communications' restructuring.
Koplar Communications' tax expense during 1995 was $523,000, representing
21.4% of pre-tax income as compared to an expense of $3.3 million, representing
24.1% of pre-tax income in 1994.
36
<PAGE>
During 1994, Koplar Communications recorded several non-recurring
transactions in connection with Koplar Communications' restructuring including
the gain on the sale of Station KRBK ($11.4 million), the realization of amounts
due under a tax sharing agreement ($3.6 million) and the forgiveness of various
debt, programming and other obligations ($47.1 million, in the aggregate). In
addition, the Company recorded approximately $1.3 million of income from the
operations of Koplar Properties, Inc. and World Events Productions, Ltd. which
were discontinued during 1994.
Koplar Communications' EBITDA was $6.6 million in 1995 as compared to $5.1
million during 1994. This increase of $1.5 million relates primarily to losses
sustained by Station KRBK which was sold in June 1994.
CHANNEL 32
PERIOD FROM JULY 1, 1996 TO JUNE 17, 1997 COMPARED TO THE YEAR ENDED JUNE 30,
1996
Net revenues for the period from July 1, 1996 to June 17, 1997 were $1.3
million, as compared to $2.7 million for year ended June 30, 1996 which
represented a decrease of 51.9%. Channel 32 entered into a LMA with the Company
effective January 1, 1997. Accordingly, there were no significant revenues
subsequent to December 31, 1996.
Programming and production expenses for the period from July 1, 1996 to
June 17, 1997 were $1.3 million, as compared to $3.3 million for the year ended
June 30, 1996, representing a decrease of 60.6%. The decrease in programming
expenses relate primarily to the LMA effective January 1, 1997 and a write-off
of impaired program rights amounting to approximately $780,000 in the prior
period.
Selling, general and administrative expenses for the period from July 1,
1996 to June 17, 1997 were $1.1 million as compared to $1.5 million for the year
ended June 30, 1996, representing a 26.7% decrease. The decrease relating to the
LMA was partially offset by an increase in staffing. In addition, there were
certain outside consulting expenses during the 1996 period, which were not
incurred during the 1997 period.
Depreciation and amortization for the period from July 1, 1996 to June 17,
1997 was $346,000, as compared to $542,000 for the year ended June 30, 1996,
representing a decrease of 36.2%. This resulted primarily from the acceleration
of depreciation and amortization on certain property and equipment in the prior
year.
Interest expense for the period from July 1, 1996 to June 17, 1997 was $2.2
million, as compared to $3.3 million for the year ended June 30, 1996. The
decrease was primarily attributable to the amortization of a significant portion
of the $3.0 million of interest due on the original due date of one of Channel
32's notes payable during the nine months ended March 31, 1996, partially offset
by amortization of extension fees in the 1997 period.
There was no interest income during the period from July 1, 1996 to June
17, 1997 compared to $29,000 for the year ended June 30, 1996.
During the year ended June 30, 1996, approximately $189,000 due from
Channel 32's parent was written off.
Other expenses, net for the period from July 1, 1996 to June 17, 1997 were
$10,000, as compared to $70,000 for the year ended June 30, 1996. This decrease
was primarily related to the loss on sale or disposal of certain equipment of
approximately $55,000 during the 1996 period.
EBITDA for the period from July 1, 1996 to June 17, 1997 was ($1,059,000)
as compared to ($2,007,000) for the year ended June 30, 1996.
YEAR ENDED JUNE 30, 1996 COMPARED TO YEAR ENDED JUNE 30, 1995
Effective July 1, 1995, Peregrine Communications, Ltd acquired Channel 32.
As a result of this acquisition, the financial information for the periods after
the acquisition ('Successor') is presented on a different cost basis than for
periods prior to the acquisition ('Predecessor') and, therefore, may not be
comparable.
37
<PAGE>
Net revenues for the year ended June 30, 1996 ('fiscal 1996') were $2.7
million, as compared to $288,000 for the year ended June 30, 1995 ('fiscal
1995') in 1995. Channel 32 began broadcasting in January 1995 as an affiliate of
The WB Network. Accordingly, the revenues for fiscal 1995 include only
approximately five months of operating results in a start up period compared to
a full year for fiscal 1996.
Programming and production expenses for fiscal 1996 were $3.3 million, as
compared to $623,000 for fiscal 1995. This increase reflects a write-off of
impaired programming of approximately $780,000 and a full year impact of
increased costs relating to improved quality of programming in fiscal 1996.
Selling, general and administrative expenses for fiscal 1996 were $1.5
million, as compared to $273,000 for fiscal 1995. This increase resulted from an
increase in activity associated with the start-up of the station's broadcasting
activities.
Depreciation and amortization expenses for fiscal 1996 were $542,000, as
compared to $235,000 for fiscal 1995. The increase relates to the amortization
of intangible assets resulting from Channel 32's acquisition by Peregrine
Communications, Ltd. and a full year's depreciation and amortization of property
and equipment primarily relating to broadcasting activities.
Interest expense for fiscal 1996 was $3.3 million, as compared to $200,000
for fiscal 1995. Channel 32 issued a note payable in November 1995. Accordingly,
this note was outstanding for nearly eight months during fiscal 1996. In
addition, a significant portion of the $3.0 million additional interest payment
relating to the debt agreement was accrued during fiscal 1996.
Interest income was $45,000 for fiscal 1996 and there was no interest
income for fiscal 1995.
During fiscal 1996, approximately $189,000 due from Station KWBP's parent
was written off.
Other expenses, net for fiscal 1996 were $70,000 and there were no such
expenses in fiscal 1995. This increase relates primarily to the loss of sale or
disposal of certain equipment amounting to approximately $55,000.
EBITDA for fiscal 1996 was ($1.2 million) as compared to ($608,000) for
fiscal 1995.
YEAR ENDED JUNE 30, 1995 COMPARED TO THE PERIOD FROM DECEMBER 16, 1993
(INCEPTION) TO JUNE 30, 1994
Channel 32 began broadcasting in January 1995. Accordingly, the twelve
months ended June 30, 1995 include only five full months of broadcast
operations. For the period from Channel 32's inception (December 1993) through
June 30, 1994, there were only minimal organizational and start up costs.
Accordingly, there is no meaningful comparison of the results of operations
between the two periods.
RESULTS OF OPERATIONS--ACME TELEVISON
During the nine months ended September 30, 1997, the Company generated $2.1
million in revenues, primarily relating to revenues generated pursuant to the
local marketing agreement to operate Station KWBP and revenues generated
subsequent to the acquisition on June 17, 1997.
Programming expenses of $1.1 million and selling, general and
administrative expenses of $3.2 million primarily related to ACME Parent's LMA
with respect to Station KWBP, expenses incurred subsequent to the acquisition on
June 17, 1997 and to modest start-up costs for Station WBXX. Selling, general
and administrative expenses also included corporate overhead allocated from ACME
Parent to ACME Television.
Depreciation and amortization expenses of $551,000 relate primarily to the
depreciation and amortization of fixed assets and amortization of broadcasting
licenses subsequent to the acquisition of Station KWBP on June 17, 1997.
Interest expense of $573,000 relates primarily to interest payments assumed
in conjunction with the LMA relating to Station KWBP and also includes interest
on capital leases and on bank credit facilities.
38
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
On September 30, 1997, ACME Intermediate made a capital contribution of
$60.1 million to the Company in exchange for membership units. The Company also
received gross proceeds from the Offering aggregating $127.4 million on
September 30, 1997, and concurrently placed $143 million in escrow in connection
with the St. Louis Acquisition, which was disbursed on January 2, 1998. As of
September 30, 1997, the Company's cash on hand approximated $27.2 million.
The Company's primary sources of liquidity in addition to its current cash
on hand will be available borrowings under the Revolving Credit Facility and the
Capital Lease Facilities, which are expected to be utilized to fund the Pending
Acquisitions, fund construction and upgrades to the stations acquired and
provide working capital.
The Company is highly leveraged. As of September 30, 1997, the Company has
indebtedness of $131.6 million (including the current portion of capital lease
obligations, excluding programming rights payable). The ability of the Company
to service its indebtedness will depend upon future operating performance, which
is subject to the success of the Company's business strategy, prevailing
economic conditions, regulatory matters, levels of interest rates and financial,
business and other factors, many of which are beyond the Company's control. See
'Risk Factors--Leverage and Debt Service; Refinancing Required,' '--Limitation
on Access to Cash Flow of Subsidiaries; Holding Company Structure.'
The Revolving Credit Facility provides for a five year, senior secured
revolving credit facility with available borrowings (subject to certain
borrowing conditions) of $40.0 million. The Revolving Credit Facility is
intended to be used for general corporate purposes and to fund future
acquisitions. Borrowings under the Revolving Credit Facility are subject to,
among other things, maintenance of minimum operating cash flow, a ratio of
EBITDA to cash interest expense and a maximum amount of senior debt to EBITDA
and total debt to EBITDA. See 'Description of Indebtedness--Revolving Credit
Facility.'
The Intermediate Notes were issued on September 30, 1997 pursuant to an
indenture between ACME Intermediate and Wilmington Trust Company, which will
contain certain restrictions on the ability of the Company and its subsidiaries,
as direct and indirect subsidiaries of ACME Intermediate, to take certain
actions or engage in certain types of transactions. The net proceeds of the
Intermediate Notes were used to fund the Intermediate Equity Contribution.
The Investment Agreement and the LLC Agreement each contain restrictions on
the ability of the Subsidiary Guarantors to declare or pay dividends to the
Company in the absence of the consent of certain parties thereto. See 'Risk
Factors--Restrictions Imposed on Certain Agreements.' The Indenture prevents the
Subsidiary Guarantors from declaring or paying any dividend or distribution to
the Company unless no Default or Event of Default has occurred and certain
financial covenants are satisfied. See 'Description of the Notes--Certain
Covenants--Limitation on Restricted Payments.' The Revolving Credit Facility
also prohibits distributions from the Subsidiary Guarantors to the Company
except for certain circumstances provided that a default has not occurred
thereunder. See 'Description of Certain Indebtedness--Revolving Credit
Facility.'
The Company believes that it has adequate resources to complete the Pending
Acquisitions, meet its working capital, maintenance and capital expenditure and
debt service obligations for the foreseeable future. The Company believes that
working capital, together with available borrowings under the Revolving Credit
Facility and the Capital Lease Facilities, net proceeds of the Parent Equity
Contribution and the Intermediate Equity Contribution and future financings,
gives and will continue to give the Company the ability to fund acquisitions and
other capital requirements in the future. However, there can be no assurance
that the future cash flows of the Company will be sufficient to meet all of the
Company's obligations and commitments. See 'Risk Factors-- Leverage and Debt
Service; Refinancing Required.'
The Company's ability to incur additional indebtedness is limited under the
terms of the Indenture, the Revolving Credit Facility, the LLC Agreement, the
Investment Agreement and the indenture relating to the Intermediate Notes. These
limitations take the form of consent requirements and/or certain leverage ratios
and are dependent upon certain measures of operating profitability. In addition,
under the terms of the Revolving Credit
39
<PAGE>
Facility, the LLC Agreement and the Investment Agreement, capital expenditures
and acquisitions that do not meet certain criteria will require the consent of
certain parties to such agreements.
CAPITAL EXPENDITURES
The Company expects to spend in the aggregate $18.4 million over the next
two years, of which $15.8 million would be used to fund estimated construction
and upgrade costs at the Company's stations, and $2.6 million would be used as
maintenance capital expenditures. See 'The Transactions--Acquisitions.' The
Company believes that maintenance capital expenditures will be approximately
$1.3 million in each of the next several years. There can be no assurance that
the Company's capital expenditure plans will not change in the future.
OTHER
The Company's revenues vary throughout the year. As is typical in the
broadcast television industry, the Company's first quarter generally produces
the lowest revenues for the year, and the fourth quarter generally produces the
highest revenues for the year. The Company's operating results in any period may
be affected by the incurrence of advertising and promotion expenses that do not
necessarily produce commensurate revenues in the short-term until the impact of
such advertising and promotion is realized in future periods.
IMPACT OF INFLATION
The Company believes that inflation will not have a material impact on its
results of operations.
YEAR 2000 ISSUES
The Company utilizes software and related technologies in performing
purchasing, sales and accounting functions related to its business. It is
anticipated that these functions will be affected by the date change in the year
2000. The Year 2000 issue exists because many computer systems and applications
currently use two-digit date fields to designate a year. As the century date
change occurs, date-sensitive systems will recognize the year 2000 as 1900, or
not at all. This inability to recognize or properly treat the year 2000 may
cause systems to process critical financial and operational information
incorrectly. The Company, like many other companies, expects to incur
expenditures over the next two years to address this issue. Although a final
cost estimate has not been determined, it is anticipated that such Year 2000
costs will not result in material increases to expenses as such costs are
incurred.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company does not believe that any of the recent accounting
pronouncements will have a material impact on the Company's financial
statements.
40
<PAGE>
BUSINESS
THE COMPANY
The Company was formed to own or operate broadcast television stations in
growing medium-sized markets ranked between 20 and 75. The Company intends to
affiliate each of its broadcast television stations with The WB Network. The
Company owns, or has entered into agreements to acquire or construct and
operate, television stations in five markets which broadcast in DMAs which cover
in the aggregate 3.9% of the U.S. population.
The Company's strategy is to selectively acquire either underperforming
stations or construction permits for stations and operate its stations as
affiliates of The WB Network. The Company seeks to improve operating results,
maximize revenue and EBITDA and increase value through the following strategies:
Target Growing Medium-Sized Markets. The Company seeks to acquire and
construct stations in markets with estimated television advertising revenues of
$40 million to $225 million and where its stations can operate as one of five or
six commercial broadcasters. The Company believes that medium-sized markets are
generally less competitive than larger markets because of the limited number of
commercial broadcasters in medium-sized markets. As a result, the Company
believes that operating television stations in less competitive markets offers
greater opportunities to build and maintain audience share and generate
revenues. The Company targets markets with diversified economies and favorable
projections of population and television advertising revenue growth. The
Company's five stations will operate in markets with an aggregate projected
annual population growth rate through the year 2000 of 1.4%, compared to the
projected annual national population growth rate of 0.8%. The Company's five
stations will operate in markets with an aggregate projected annual television
advertising revenue growth rate through the year 2000 of 5.8% compared to the
projected annual national television advertising growth rate of 5.6%.
The WB Network Affiliation. The Company expects its stations to benefit
from their affiliation with The WB Network. The WB Network has shown continued
ratings growth since its inception. For example, the 24 stations in large and
medium-sized markets that became affiliates of The WB Network at its inception
have on average experienced a prime time household ratings increase of 63% from
May 1995 to May 1997 on nights with The WB Network programming. In addition,
these stations experienced an average prime time ratings increase of 53% among
18-34 year olds over the same period. Management believes that the increase in
popularity of The WB Network programming results in greater advertising revenues
and enhanced cash flow for network affiliates. The Company has entered into
network affiliation agreements for Station KWBP and Station WBXX, will assume
and extend an existing affiliation agreement for Station KPLR and has obtained
commitments from The WB Network for an affiliation agreement covering each of
its other stations. See 'Business--Affiliation Agreements.'
Selectively Purchase Syndicated Programming. The major production studios
currently supply syndicated programming sufficient to fill programming
requirements for seven broadcast stations in a market. The Company's stations
are one of five or six commercial broadcast stations in their respective
markets. The Company believes that the limited number of commercial broadcast
stations, combined with the ability to centrally purchase programming for five
stations, will allow the Company to acquire syndicated programming at attractive
prices. The Company's Portland and Knoxville stations have already obtained
broadcast rights for syndicated programming that will premiere during the next
three broadcast seasons at prices which the Company believes are attractive.
These programs include Friends, Full House, M*A*S*H, Star Trek: The Next
Generation and The Drew Carey Show.
Emphasis on Sales. The Company's management has hired, and intends to
continue to hire, station general managers with significant experience in
advertising sales who will be directly involved in station sales and marketing.
The Company believes that by centralizing administrative functions, each
station's general manager will be able to devote a greater effort to local sales
and marketing activities. In addition, the Company intends to establish a
commission-based compensation system for sales personnel that will include
significant incentives for the origination of new accounts in addition to
expanding current relationships.
Creating a Strong Group Identity. The Company intends to establish a
highly professional on-air appearance and identity for each of its stations. The
Company's graphics, animation and music for station
41
<PAGE>
imaging will be created by a centralized corporate graphics department and will
target each station's demographic audience. The Company intends to hire
experienced personnel at the corporate level for these and similar services that
would not otherwise be available at a cost-efficient rate to its stations on an
individual basis.
Centralized Systems and Controls. Management plans to centralize the
Company's scheduling, purchasing, national sales and certain accounting
functions within the corporate office. The Company believes that this will
afford each of the station's general managers more time to focus on local sales
and marketing. Management believes that by centralizing purchasing, the Company
will be able to negotiate lower costs for equipment and services. For example,
the Company has solicited and received proposals for a group national sales
representative agreement at significantly lower rates than would have been
available to its stations on an individual station basis. In addition, the
Company has already purchased syndicated programming on a multiple station basis
and negotiated capital lease facilities for its stations as a group on terms it
considers attractive.
THE WB NETWORK
Overview. The WB Network was created by Time Warner, Tribune and Jamie
Kellner as a new television broadcast network. The WB Network was formed to
provide an alternative to the prime time and children's programming offered by
the other networks. The WB Network's focus is to provide quality programming to
teens, young adults and families with small children. The WB Network utilizes
(i) the strength of Time Warner, through its Warner Brothers division, as a
leading producer of prime time programming and Saturday morning cartoons, (ii)
the network distribution capabilities of the cable system holdings of Time
Warner and the television station holdings of Tribune, and (iii) the experience
of the members of The WB Network management team, many of whom worked with Mr.
Kellner during the launch of Fox in 1986.
Since the launch of the network on January 11, 1995, The WB Network has
increased its on-air programming from two hours of prime time programming one
night per week to nine hours of prime time programming four nights per week and
19 hours of children's programming announced for the 1997-1998 season. The WB
Network has announced plans to provide one additional evening of prime time
programming each season until every night is programmed. As of May 1997, it is
estimated that The WB Network programming is available to approximately 86% of
all television households in the United States.
The WB Network and its affiliates benefit significantly from the Warner
Brothers brand, which is among the most recognized company brands in the world.
Warner Brothers, which owns 66.5% of The WB Network, is a leading producer of
prime time network television shows. In addition to its popular prime time
programming, Warner Brothers is a leading producer of animated programming. Many
of Warner Brothers' animated programs feature popular Looney Toons characters
such as Bugs Bunny, Daffy Duck, Tazmanian Devil, Tweety Bird, Sylvester, Road
Runner and Wile E. Coyote. More recently, Warner Brothers has produced such
shows as Batman: The Animated Series, Animaniacs, Pinky and the Brain, Superman
and Men In Black. The Company believes that Warner Brothers television animation
has played an integral part in the popularity of The WB Network's programming
among children and teenagers.
The WB Network senior management team is headed by Jamie Kellner, who
serves as Chief Executive Officer. Mr. Kellner previously served as President of
Fox from its inception in 1986 to 1993. Many of the same people who served under
Mr. Kellner at Fox currently comprise the senior management at The WB Network,
including: Garth Ancier (Entertainment President), Susanne Daniels (Executive
Vice President of Programming), Bob Bibb and Lew Goldstein (Executive Vice
Presidents of Marketing), Jed Petrick (Senior Vice President of Sales) and Brad
Turell (Senior Vice President of Publicity).
Distribution. The WB Network has increased its coverage of households in
the United States from 77% at network launch in early 1995 to 86% as of May
1997. The WB Network has a three-tiered distribution strategy designed to
increase its coverage of domestic households towards the goal of 100%: (i) DMAs
ranked 1-20 will be served primarily by affiliate stations owned by Tribune;
(ii) DMAs ranked 21-100 will be served primarily by affiliate stations owned by
major middle market broadcasters such as the Company; and (iii) DMAs ranked
101-211 will be served by WeB, a joint venture designed to provide The WB
Network programming on local cable systems in smaller DMAs.
42
<PAGE>
In July 1997, Sinclair Broadcast Group ('Sinclair') announced its intention
to switch the affiliation of its stations in five markets from UPN to The WB
Network and its intention to renew the existing affiliate agreements for three
other Sinclair stations that are currently affiliated with The WB Network for an
additional ten years.
Strategy and Programming. The WB Network's strategy is to provide quality
programming suitable for children, teens, young adults, and families with small
children during the 'family hour' from 8:00-9:00 PM. 100% of The WB Network's
programming during the 8:00-9:00 PM (EST) time slot has been recognized by the
Parent's Television Council as 'family-friendly,' as compared to 43% for ABC,
50% for CBS, and 0% for Fox, NBC, and UPN. After 9:00 PM, The WB Network offers
programming which is more suitable for adults. In addition, The WB Network
utilizes Warner Brothers television animation to provide cartoons for The WB
Network's Saturday morning and weekday animated children's block, branded as
Kids' WB! For the May 1997 sweep period, Kids' WB! Saturday morning programming
was the third highest ranked children's programming after Fox and ABC. The
following table sets forth certain programs which The WB Network is currently
broadcasting or has announced plans to broadcast:
<TABLE>
<CAPTION>
PRIMETIME: CARTOONS:
- --------------------------------------- ---------------------------------------
<S> <C>
7th Heaven Animaniacs
Buffy the Vampire Slayer Batman Adventures
Dawson's Creek Bugs 'N' Daffy
Jamie Foxx Calamity Jane
Nick Freno Captain Planet
Alright Already Men in Black
Parent Hood Pinky & The Brain
Sister, Sister The New Daffy Duck Show
Smart Guy The New Superman
Steve Harvey Show The Sylvester & Tweety Mysteries
The Tom Show Tiny Toon Adventures
Three Umptee-3
Wayans Brothers
</TABLE>
THE STATIONS AND MARKET OVERVIEWS
KPLR-11: ST. LOUIS, MO
Station KPLR-11 operates as The WB Network affiliate in the St. Louis,
Missouri market, which represents the 21st largest DMA in the U.S. The St. Louis
DMA has approximately 1.1 million television households, a total population of
3.0 million, and an estimated average household income of $40,861 per year. The
Company estimates that the total television advertising market in St. Louis in
1996 was $200.8 million, a 5.5% increase over 1995. Approximately 53% of the
households in the St. Louis market are cable television subscribers. The St.
Louis DMA has five commercial television stations. The Fox, CBS, NBC and The WB
Network affiliates are VHF stations, and the ABC affiliate is a UHF station.
The following table outlines summary information regarding the commercial
television stations in the St. Louis DMA:
<TABLE>
<CAPTION>
CALL AUDIENCE
OWNER LETTERS CHANNEL AFFILIATION SHARE(1)
- ------------------------------------------------------- ----- ------- ----------- --------
<S> <C> <C> <C> <C>
ACME Television........................................ KPLR 11 WB 12%
Fox Television......................................... KTVI 2 Fox 10
Belo Corp.............................................. KMOV 4 CBS 20
Gannett Co., Inc....................................... KSDK 5 NBC 23
Sinclair Broadcast Group............................... KDNL 30 ABC 10
</TABLE>
- ------------------
(1) Represents average audience share from Monday to Sunday in May 1997.
43
<PAGE>
The following table sets forth market revenue and share information for the
St. Louis DMA and Station KPLR (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Television advertising revenues................................ $175,200 $190,400 $200,800
Revenue growth................................................. 10.2% 8.7% 5.5%
Gross station revenue.......................................... $ 29,845 $ 31,740 $ 31,870
Station gross revenue growth................................... (2.5)% 6.3% 0.4%
Station revenue share.......................................... 17.0% 16.7% 15.9%
</TABLE>
Station KPLR was constructed in 1959 and is subject to an affiliation
agreement with The WB Network. Station KPLR is a VHF station with one of the
three strongest signals in the market. In addition to network programming,
Station KPLR currently broadcasts a local news program at 9:00 PM, owns the
rights to broadcast St. Louis Cardinals baseball through 1999, and offers
syndicated programming such as Cheers, Full House, Living Single, Martin and
Seinfeld. During the May 1997 sweep period, Station KPLR was ranked as first
among independent and UPN and The WB Network affiliate broadcast stations in the
U.S. Such ranking means that Station KPLR had the highest number of viewers per
thousand viewers in its market, in comparison to the number of viewers per
thousand for such other stations in their respective markets.
KWBP-32: PORTLAND, OR
Station KWBP-32 operates as The WB Network affiliate in the Portland,
Oregon market, which represents the 24th largest DMA in the U.S. The Portland
DMA has approximately 1.0 million television households, a total population of
2.5 million, and an estimated average household income of $38,223 per year. The
Company estimates that the total television advertising market in Portland in
1996 was $156.4 million, a 7% increase over 1995. Approximately 63% of the
households in the Portland market are cable television subscribers. The Portland
DMA has six commercial television stations. The ABC, CBS, NBC and UPN affiliates
are VHF stations, and the Fox and The WB Network affiliates are UHF stations.
The following table outlines summary information regarding the commercial
television stations in the Portland DMA:
<TABLE>
<CAPTION>
CALL AUDIENCE
OWNER LETTERS CHANNEL AFFILIATION SHARE(1)
- ------------------------------------------------------- ------- ------- ----------- --------
<S> <C> <C> <C> <C>
ACME Television........................................ KWBP 32 WB 2%
Fisher Broadcasting.................................... KATU 2 ABC 17
Lee Enterprises, Inc................................... KOIN 6 CBS 14
Belo Corp.............................................. KGW 8 NBC 18
BHC Communications..................................... KPTV 12 UPN 10
Meredith Corp.......................................... KPDX 49 Fox 9
</TABLE>
- ------------------
(1) Represents average audience share from Monday to Sunday in May 1997.
The following table sets forth market revenue and share information for the
Portland DMA and Station KWBP (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,(1)
----------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Television advertising revenues................................ $139,800 $146,100 $156,400
Revenue growth................................................. 16.0% 4.5% 7.0%
Gross station revenue(2)....................................... NA $ 307 $ 1,682
Station gross revenue growth................................... NA NA 447.9%
Station revenue share.......................................... NA 0.2% 1.1%
</TABLE>
- ------------------
(1) Station KWBP commenced commercial broadcasting in January 1995.
(2) Station KWBP has historically used a fiscal year end of June 30. Gross
revenues are therefore shown for the twelve month period ending June 30,
1995 and 1996 and exclude barter revenues.
44
<PAGE>
KZAR-16: SALT LAKE CITY, UT
Station KZAR-16, upon its construction, will operate as The WB Network
affiliate in the Salt Lake City, Utah market, which represents the 36th largest
DMA in the U.S. The Salt Lake City DMA has approximately 671,000 television
households, a total population of 2.1 million, and an estimated average
household income of $38,927 per year. The Salt Lake City market has a relatively
young demographic population, with over 37% of the population under the age of
eighteen (according to the National Association of Television Broadcasters in
its 1997 Television Market-By-Market Review ('NAB')) compared to the national
average of 26% (according to the 1990 Bureau of the Census Report). The Company
estimates that the total television advertising market in Salt Lake City in 1996
was $135.0 million, a 9.2% increase over 1995. Approximately 56% of the
households in the Salt Lake City market are cable television subscribers. The
Salt Lake City DMA has six commercial television stations. The ABC, CBS, and NBC
affiliates are VHF stations, and the Fox and UPN affiliates are UHF stations.
Station KZAR, The WB Network affiliate, will also be a UHF station.
The following table outlines summary information regarding the commercial
television stations in the Salt Lake City DMA:
<TABLE>
<CAPTION>
CALL AUDIENCE
OWNER LETTERS CHANNEL AFFILIATION SHARE(1)
- ---------------------------------------------------- ------- ------- ----------- ----------
<S> <C> <C> <C> <C>
ACME Television..................................... KZAR 16 WB not on air
CBS Station Group................................... KUTV 2 CBS 13%
United Television................................... KTVX 4 ABC 16
Bonneville International Corp....................... KSL 5 NBC 18
Fox Television...................................... KSTU 13 Fox 12
Larry K. Miller Broadcasting........................ KJZZ 14 UPN 10
</TABLE>
- ------------------
(1) Represents average audience share from Monday to Sunday in May 1997.
The following table sets forth market revenue information for the Salt Lake
City DMA (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Television advertising revenues................................ $116,500 $123,600 $135,000
Revenue growth................................................. 18.6% 6.1% 9.2%
</TABLE>
Station KZAR will commence broadcasting upon completion of its
construction, which the Company estimates will occur in April 1998. Management
believes that there exists sufficient popular syndicated programming in the
market available for the station to acquire at attractive prices.
KAUO-19: ALBUQUERQUE/SANTA FE, NM
Station KAUO-19, upon its construction, will operate as The WB Network
affiliate in the Albuquerque/Santa Fe, New Mexico market, which represents the
48th largest DMA in the U.S. The Albuquerque/Santa Fe, DMA has approximately
565,000 television households, a total population of 1.6 million, and an
estimated average household income of $34,614 per year. The Albuquerque/Santa Fe
market has a relatively young demographic population, with approximately 30% of
the population under the age of eighteen (according to NAB). The Company
estimates that the total television advertising market in Albuquerque/Santa Fe
in 1996 was $82.5 million, a 4.6% increase over 1995. Approximately 60% of the
households in the Albuquerque/Santa Fe market are cable television subscribers.
The Albuquerque/Santa Fe DMA has six commercial television stations. The ABC,
CBS, NBC and Fox affiliates are VHF stations, and the UPN affiliate is a UHF
station. Station KAUO, The WB Network affiliate, will also be a UHF station.
45
<PAGE>
The following table outlines summary information regarding the commercial
television stations in the Albuquerque DMA:
<TABLE>
<CAPTION>
CALL AUDIENCE
OWNER LETTERS CHANNEL AFFILIATION SHARE(1)
- ----------------------------------------------------- ----- ------- ----------- ----------
<S> <C> <C> <C> <C>
ACME Television...................................... KAUO 19 WB not on air
Belo Corp............................................ KASA 2 Fox 7%
Hubbard Broadcasting Inc............................. KOB 4 NBC 18
Pulitzer Broadcasting Inc............................ KOAT 7 ABC 19
Lee Enterprises Inc.................................. KRQE 13 CBS 15
Ramar Communications Inc............................. KASY 50 UPN --
</TABLE>
- ------------------
(1) Represents average audience share from Monday to Sunday in May 1997.
The following table sets forth market revenue information for the
Albuquerque/Santa Fe DMA (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Television advertising revenues.................................... $75,300 $78,900 $82,500
Revenue growth..................................................... 27.6% 4.8% 4.6%
</TABLE>
The station will commence broadcasting upon completion of the construction,
which the Company estimates will occur in September 1998. Management believes
that there exists sufficient popular syndicated programming in the market
available for the station to acquire at attractive prices. A commercial
broadcast station in this market currently holds a secondary affiliation
agreement with The WB Network, which management believes will be terminated once
Station KAUO commences broadcasting.
WBXX-20: KNOXVILLE, TN
Station WBXX-20 operates as The WB Network affiliate in the Knoxville,
Tennessee market, which represents the 60th largest DMA in the U.S. The
Knoxville DMA has approximately 456,000 television households, a total
population of 1.2 million, and an estimated average household income of $33,774
per year. The Company estimates that the total television advertising market in
Knoxville in 1996 was $60.6 million, a 11.8% increase over 1995. Approximately
68% of the households in the Knoxville market are cable television subscribers.
The Knoxville DMA has five commercial television stations. The ABC, CBS, and NBC
affiliates are VHF stations, and the Fox and The WB Network affiliates are UHF
stations.
The following table outlines summary information regarding the commercial
television stations in the Knoxville DMA:
<TABLE>
<CAPTION>
CALL AUDIENCE
OWNER LETTERS CHANNEL AFFILIATION SHARE(1)
- ------------------------------------------------------- ----- ------- ----------- --------
<S> <C> <C> <C> <C>
ACME Television........................................ WBXX 20 WB --
Young Broadcasting Inc................................. WATE 6 ABC 15%
Gray Communications.................................... WLVT 8 CBS 12
Gannett Co. Inc........................................ WBIR 10 NBC 23
Raycom Media........................................... WTNZ 43 Fox 5
</TABLE>
- ------------------
(1) Represents average audience share from Monday to Sunday in May 1997.
The following table sets forth market revenue information for the Knoxville
DMA (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Television advertising revenues.................................... $54,700 $54,200 $60,600
Revenue growth..................................................... 16.9% (0.1)% 11.8%
</TABLE>
The station re-commenced broadcasting upon the installation of new
transmission facilities, which were completed in October 1997. The station
recently purchased new syndicated programming and rights to future syndicated
programs such as Cheers, Friends, Full House, M*A*S*H, Star Trek: The Next
Generation and The Drew Carey Show. The Company changed the call letters of this
station from WINT to WBXX upon its acquisition by the Company.
46
<PAGE>
AFFILIATION AGREEMENTS
Station KWBP, Station KPLR and Station WBXX have each entered into station
affiliation agreements (the 'KWBP Affiliation Agreements,' the 'KPLR Affiliation
Agreement' and the 'WBXX Affiliation Agreement,' respectively, and collectively,
the 'Affiliation Agreements') with The WB Network which provide each station the
exclusive right to broadcast The WB Network programming in its DMA.
Under the Affiliation Agreements, The WB Network has retained the right to
program and sell 75% of the advertising time available during the prime time
schedule with the remaining 25% available for sale by the stations, provided
that in the case of the KPLR Affiliation Agreement, the station has the right to
preempt The WB Network programming for St. Louis Cardinals baseball, St. Louis
Blues hockey and University of Missouri basketball broadcasts. The WB Network
retains approximately 50% of the advertising time available during children's
programs and late fringe programs (if and when included in the network's
schedule), with the balance allocated to the applicable station.
In addition to the advertising time reserved for sale by The WB Network,
each station is also required to pay annual compensation to The WB Network
according to formulas designed to result in the payment, to The WB Network of
amounts equal to 25% of the 'added-value' to the station from its affiliation
with The WB Network, as determined by the average station ratings among adults
18-49 during prime time programming provided by The WB Network and the number of
prime time programming hours provided by The WB Network. Pursuant to the
Affiliation Agreements, the Company participates in cooperative marketing with
The WB Network whereby the network reimburses up to 50% of certain approved
advertising expenditures by a station to promote network programming. The
Affiliation Agreements also contain a clause entitling the applicable station to
the benefits of any more favorable terms agreed to by The WB Network with any
affiliate except for superstation WGN during the term of the Affiliation
Agreements, and any subsequent modifications thereto.
The Company has obtained a conditional commitment from The WB Network to
extend the existing Affiliation Agreements to five year terms. The Affiliation
Agreements are subject to termination (i) by The WB Network, upon sixty days
notice, in the event The WB Network ceases operations or is substantially
restructured, (ii) upon the occurrence and continuation for four consecutive
weeks of certain force majeure events causing a failure to provide programs by
The WB Network or a failure to broadcast such programs by the station, (iii)
upon assignment of the applicable station's FCC license without consent to such
assignment by The WB Network; or (iv) upon a material change in the station's
transmitter location, power, frequency or programming format.
The Company has obtained commitments from The WB Network to enter into
affiliation agreements with the Company's remaining stations upon their
acquisition by the Company, on substantially the same terms and conditions as
Stations WBXX, KPLR and KWBP's affiliation agreements with The WB Network, and,
in the case of Station KPLR, to extend the existing agreement to a seven-year
term. Upon completion of the St. Louis Acquisition, the Company intends to enter
into an overriding group affiliation agreement with The WB Network covering all
of its stations. Although the group affiliation agreement supersedes the
individual affiliation agreements of each station, such individual affiliation
agreements will continue in effect and the Company intends to continue to renew
such agreements, allowing the Company the flexibility to dispose of a station
with a surviving affiliation agreement in effect.
INDUSTRY OVERVIEW
Commercial television broadcasting began in the United States on a regular
basis in the 1940s over a portion of the broadcast spectrum commonly known as
the VHF Band (very high frequency broadcast channels numbered 2 through 13
('VHF')). Television channels were later assigned by the FCC under an additional
broadcast spectrum commonly known as the UHF Band (ultra-high frequency
broadcast channels numbered 14 through 83 ('UHF'); channels 70 through 83 have
been reassigned to non-broadcast services). Currently there are a limited number
of channels available for broadcasting in any one DMA, and the license to
operate a broadcast station is granted by the FCC.
Although UHF and VHF stations compete in the same market, UHF stations have
historically suffered a competitive disadvantage, as: (i) UHF signals are more
subject to obstructions such as terrain than VHF signals and (ii) VHF stations
are able to provide higher quality signals to a wider area. Over time, the
disadvantage of UHF stations has gradually declined through: (i) UHF stations'
carriage on local cable systems, (ii) improvement
47
<PAGE>
in television receivers, (iii) improvement in television transmitters, and (iv)
increased availability of quality programming.
All television stations throughout the United States are grouped into
approximately 211 generally recognized DMAs which are ranked in size according
to the estimated number of television households. Each DMA is determined as an
exclusive geographic area consisting of all counties in which the home-market
commercial stations receive the greatest percentage of total viewing hours.
A majority of the commercial television stations in the United States are
affiliated with NBC, CBS, or ABC (the 'Major Networks'). Each Major Network
provides the majority of its affiliates' programming each day without charge in
exchange for a substantial majority of the available advertising time in the
programs supplied. Each Major Network sells this advertising time and retains
the revenue. The affiliate receives compensation from the Major Network and
retains the revenue from advertising time sold in and between network programs
and in programming the affiliate produces or purchases from non-network sources.
Stations which are not affiliated with one of the Major Networks were
previously considered independent stations. Independent stations generally
broadcast syndicated programming, which is acquired by the station for cash or
occasionally barter. The acquisition of syndicated programming generally grants
the acquiring station exclusive rights to broadcast a program in the market for
a specified period of time or a number of episodes agreed upon between the
independent station and the syndicator of the programming. Types of syndicated
programming include feature films, popular television series previously shown on
network television and current television series produced for direct
distribution to television stations. Through barter and cash-plus-barter
arrangements, a national syndicated program distributor typically retains a
portion of the available advertising time for programming it supplies, in
exchange for reduced fees to the station for such programming.
Fox, UPN and The WB Network have each established an affiliation with some
of the formerly independent stations. However, the amount of programming per
week supplied to the affiliates by these networks is significantly less than
that of the Major Networks, and as a result, these stations retain a
significantly higher portion of the available inventory of broadcast time for
their own use than Major Network affiliates.
Television stations derive their revenues primarily from the sale of
national, regional and local advertising. All network-affiliated stations,
including those affiliated with Fox, UPN and The WB Network, are required to
carry spot advertising sold by their networks. This reduces the amount of
advertising available for sale directly by the network-affiliated stations.
Advertisers wishing to reach a national audience usually purchase time
directly from the Major Networks, Fox, UPN and The WB Network, or advertise
nationwide on an ad hoc basis. National advertisers who wish to reach a
particular region or local audience buy advertising time directly from local
stations through national advertising sales representative firms. Additionally,
local businesses purchase advertising time directly from the station's local
sales staff. Advertising rates are based upon factors which include the size of
the DMA in which the station operates, a program's popularity among the viewers
that an advertiser wishes to attract, the number of advertisers competing for
the available time, demographic characteristics of the DMA served by the
station, the availability of alternative advertising media in the DMA,
aggressive and knowledgeable sales forces and the development of projects,
features and marketing programs that tie advertiser messages to programming.
Because broadcast television stations rely on advertising revenues, declines in
advertising budgets, particularly in recessionary periods, may adversely affect
the broadcast business.
COMPETITION
Broadcast television stations compete for advertising revenues primarily
with other broadcast television stations and, to a lesser extent, with radio
stations and cable system operators serving the same market. Major Network
programming generally achieves higher household audience levels than those of
Fox, UPN and The WB Network and other syndicated programming aired by
independent stations. This is attributable to a number of factors, including the
Major Networks' efforts to reach a broader audience, generally better signal
carriage when broadcasting over VHF channels versus UHF channels and the greater
amount of network programming being broadcast weekly. However, greater amounts
of advertising time are available for sale during Fox, UPN and The WB Network
programming and non-network syndicated programming, and as a result, the Company
believes that the Company's programming will achieve a share of television
market advertising revenues greater than its share of the market's audience.
48
<PAGE>
Broadcast television stations compete with other television stations in
their DMAs for the acquisition of programming. Generally, cable systems do not
compete with local stations for programming, but various national cable networks
do from time to time acquire programming that could have been offered to local
television stations. Public broadcasting stations generally compete with
commercial broadcasters for viewers, but do not compete for advertising
revenues. Historically, the cost of programming had increased because of an
increase in the number of independent stations and a shortage of quality
programming. However, over the past five years, program prices have stabilized
or declined as a result of recent increases in the supply of programming.
Currently programming studios produce enough programming to fill the broadcast
time on seven commercial stations.
REGULATION
Federal Regulation of Television Broadcasting. Television broadcasting is
subject to the jurisdiction of the FCC under the Communications Act. The
Communications Act prohibits the operation of television broadcasting stations
except under a license issued by the FCC. The Communications Act empowers the
FCC, among other things, to issue, revoke and modify broadcasting licenses,
determine the locations of stations, regulate the equipment used by stations,
adopt regulations to carry out the provisions of the Communications Act and
impose penalties for violation of such regulations. The Communications Act
provides penalties for violation of such regulations. The Communications Act
prohibits the assignment of a license or the transfer of control of a licensee
without prior approval of the FCC. On February 8, 1996, the President signed
into law the Telecom Act, which substantially amended the Communications Act.
Set forth below is a general description of some of the principal areas of FCC
regulation of the broadcast television industry.
License Grant and Renewal. A party must obtain a construction permit from
the FCC in order to build a new television station. Once a station is
constructed, the permittee will receive a license which must be renewed by the
FCC at the end of each license term. On January 24, 1997, pursuant to the
Telecom Act, the FCC increased the terms of such licenses and their renewal to
eight years. The Telecom Act directs the FCC to grant renewal of a broadcast
license if it finds that the station has served the public interest,
convenience, and necessity and that there have been no serious violations (or
other violations which would constitute a 'pattern of abuse') by the licensee of
the Communications Act or FCC rules and policies. If the FCC finds that a
licensee has failed to meet these standards, and there are no sufficient
mitigating factors, the FCC may deny renewal or condition renewal appropriately,
including renewing for less than a full term. Any other party with standing may
petition the FCC to deny a broadcaster's application for renewal. However, only
if the FCC issues an order denying renewal will the FCC accept and consider
applications from other parties for a construction permit for a new station to
operate on the channel subject to such denial. The FCC may not consider any such
applicant in making determinations concerning the grant or denial of the
licensee's renewal application.
Some of the Pending Acquisitions involve the Company's acquisition of
construction permits for stations not yet constructed. After each station is
built, the Company will apply for a license to 'cover', or replace, the
construction permit. The Company is not aware of any facts or circumstances that
would prevent the issuance or renewal of the licenses for the stations being
acquired. The Communications Act provides that licenses continue in effect until
the FCC disposes of the renewal application.
Local Marketing Agreements. The Company has or intends to enter into LMAs
from time to time in connection with certain of the Pending Acquisitions, and
contemplates utilizing LMAs in connection with future acquisitions. By using
LMAs, the Company gains the ability to provide programming and other services to
a station proposed to be acquired pending receipt of all applicable FCC
approvals with respect to the actual transfer of control or assignment of the
applicable station license.
FCC rules and policies generally require that the Company's LMAs permit the
station licensee to retain ultimate control of the applicable station, including
programming, and there can be no assurance that the Company will be able to air
all of its scheduled programming on stations with which it has an LMA, or that
in such event, the Company will receive the anticipated revenue from the sale of
advertising for such programming. In addition, LMA's sometimes require that
existing programming contracts of the licensee be honored. Accordingly, there
can be no assurance that early termination of an LMA or unanticipated
preemptions by a licensee of all or a significant portion of the Company's
scheduled programming for a station subject to an LMA will not occur.
Termination of an LMA or material preemptions of programming thereunder could
adversely affect the Company.
49
<PAGE>
Multiple- and Cross-Ownership Restrictions. Current FCC regulations and
policies impose significant restrictions on certain positional and ownership
interests in broadcast companies and other media. The officers, directors and
certain equity owners of a broadcast company are deemed to have 'attributable
interests' in the broadcast company. In the case of a corporation, ownership is
generally attributed to officers, directors and equity holders who own 5% or
more of the company's outstanding voting stock. Institutional investors,
including mutual funds, insurance companies and banks acting in a fiduciary
capacity, may own up to 10% of the outstanding voting stock without being
subject to attribution, provided that such equity holders exercise no control
over the management or policies of the broadcasting company. Limited liability
companies are generally treated as limited partnership for purposes of the FCC
rules. These rules do not attribute limited partnership interests as long as the
partnership certifies that the limited partners are insulated from management in
accordance with the FCC's established criteria; if the certification is properly
made, only the general partner (or managing member) of the partnership is deemed
to have an attributable interest.
Under current FCC rules governing multiple ownership of broadcast stations,
a license to operate a television station will not be granted (unless
established waiver standards are met) to any party (or parties under common
control) that has an attributable interest in another television station with an
overlapping service contour (the 'Duopoly Rule'). FCC regulations also prohibit
one owner from having attributable interests in television broadcast stations
that reach in the aggregate more than 35% of the nation's television households.
For purposes of this calculation, stations in the UHF band (channels 14-69) are
attributed with only 50% of the households attributed to stations in the VHF
band (channels 2-13). The rules further prohibit (with certain qualifications)
the holder of an attributable interest in a television station from also having
an attributable interest in a radio station, daily newspaper or cable television
system serving a community located within the relevant coverage area of that
television station. Separately, the FCC's 'cross-interest' policy may, in
certain circumstances, prohibit the common ownership of an attributable interest
in one media outlet and a non-attributable equity interest in another media
outlet in the same market. In pending rulemaking proceedings, the FCC is
considering, among other possible changes, (i) the modification of its
attribution rules and the 'cross-interest' policy, (ii) the relaxation of the
Duopoly Rule and (iii) specific rules regarding ownership attribution to govern
television LMAs comparable to those currently in force with respect to radio
LMAs.
Review of 'Must-Carry' Rules. FCC regulations implementing the Cable
Television Consumer Protection and Competition Act of 1992 (the '1992 Cable
Act') require each television broadcaster to elect, at three year intervals
beginning October 1, 1993, to either (i) require carriage of its signal by cable
systems in the station's market ('must-carry') or (ii) negotiate the terms on
which such broadcast station would permit transmission of its signal by the
cable systems within its market ('retransmission consent'). The United States
Supreme Court upheld the must-carry rules in a 1997 decision.
Digital Television Services. The FCC has adopted rules for implementing
digital television ('DTV') service in the United States. Implementation of DTV
will improve the technical quality of television signals and will provide
broadcasters the flexibility to offer new services, including high-definition
television ('HDTV') and data broadcasting.
The FCC has established service rules and adopted a Table of Allotments for
digital television. The Table provides all eligible broadcasters a second
broadcast channel to each full-power television station for DTV operation.
Stations will be permitted to phase in their DTV operations over a period of
years following the adoption of a final table of allotments, after which they
will be required to surrender their non-DTV channel. Affiliates of the top four
networks in the top ten markets must be on the air with a digital signal by May
1, 1999. Affiliates of the top four networks in the next twenty largest markets
must be on the air with a digital signal by November 1, 1999. The FCC has set a
target of 2006 as the end-date of analog broadcasts. Meanwhile, Congress has
from time to time considered proposals that would require incumbent broadcasters
to bid at auction for the additional spectrum required to effect a transition to
DTV, or, alternatively, would assign DTV spectrum to incumbent broadcasters and
require the early surrender of their non-DTV channel for sale by public auction.
The Telecom Act and the FCC's rules impose certain conditions on the FCC's
implementation of DTV service. Among other requirements, the FCC must (i) limit
the initial eligibility for such licenses to existing television broadcast
licensees or permittees; (ii) allow DTV licensees to offer ancillary and
supplementary services; (iii) charge appropriate fees to broadcasters that
supply ancillary and supplementary services for which
50
<PAGE>
such broadcasters derive certain nonadvertising revenues; and (iv) recover at an
unspecified time either the DTV license or the original license (the 'NTSC'
license) held by the broadcaster.
There are details regarding how interference levels will be calculated that
the FCC has not yet ruled on. Conversion to DTV operations could reduce a
station's geographical coverage area after such rules are adopted if the
interference standards are changed. Equipment and other costs associated with
the DTV transition, including the necessity of temporary dual-mode operations,
will impose some near-term financial costs on television stations providing the
service. The potential also exists for new sources of revenue to be derived from
DTV. The Company cannot predict the overall effect the transition to DTV might
have on the Company's business.
Other Pending FCC Proceedings. In 1995, the FCC issued notices of proposed
rulemaking proposing to modify or eliminate most of its remaining rules
governing the broadcast network-affiliate relationship. The network-affiliate
rules were originally intended to limit networks' ability to control programming
aired by affiliates or to set station advertising rates and to reduce barriers
to entry by new networks. These proceedings are pending. The dual network rule,
which generally prevents a single entity from owning more than one broadcast
television network, is among the rules under consideration in these proceedings.
However, the Telecom Act substantially relaxed the dual network rule by
providing that an entity may own more than one television network; however, no
two national television networks in existence on February 8, 1996 may merge or
be acquired by the same party. The Company is unable to predict how or when the
FCC proceedings will be resolved or how those proceedings or the relaxation of
the dual network rule may affect the Company's business.
Pursuant to a Congressional directive contained in the Telecom Act, the FCC
has commenced a proceeding to devise rules and an implementation schedule for
universal closed captioning of video programming.
The FCC continues to enforce strictly its regulations concerning
broadcasters' equal employment obligations, 'indecent' programming, political
advertising, environmental concerns, technical operating matters and antenna
tower maintenance. The FCC also has made clear its intent to enforce equal
employment opportunity guidelines and recruitment efforts and record-keeping
requirements by imposing monetary forfeitures, periodic reporting conditions and
short-term license renewals.
There are additional FCC regulations as well as policies, and regulations
and policies of other federal agencies, affecting the business and operations of
broadcast stations. Proposals for additional or revised rules are considered by
federal regulatory agencies and Congress from time to time. It is not possible
to predict the resolution of these issues or other issues discussed above,
although their outcome could, over a period of time, affect, either adversely or
favorably, the broadcasting industry generally or the Company specifically.
The foregoing does not purport to be a complete summary of all the
provisions of the Communications Act, the Telecom Act or other Congressional
acts or of the regulations and policies of the FCC thereunder. Reference is made
to the Communications Act, the Telecom Act, other Congressional acts, such
regulations and policies, and the public notices promulgated by the FCC for
further information.
EMPLOYEES
At December 31, 1997, the Company had 68 employees, none of which were
subject to collective bargaining agreements and Koplar Communications employed
at Station KPLR approximately 95 employees, 43 of which were subject to
collective bargaining agreements. The Company believes that its relationships
with its employees are good.
51
<PAGE>
PROPERTIES AND FACILITIES
Set forth below is certain information with respect to the Company's
existing and planned studio and other leased facilities. All of the Company's
leased studio, office and tower facilities are or are anticipated to be leased
pursuant to long-term leases that management believes to be adequate.
Information as to tower height reflects the height above average terrain (HAAT)
as reported in the BIA Market Report, 1997.
<TABLE>
<CAPTION>
LOCATION--USE APPROXIMATE SIZE OWNERSHIP
- ------------------------------------------------- ---------------- ---------
<S> <C> <C>
St. Louis, MO
Studio and office facilities(1)................ 36,000 sq. ft. Owned
Tower.......................................... 1,011 ft. Owned
Beaverton, OR
Studio and office facilities................... 15,255 sq. ft. Leased
Tower.......................................... 1,785 ft. Leased
Knoxville, TN
Studio and office facilities................... 8,000 sq. ft. Leased
Tower.......................................... 2,795 ft. Leased
Provo, UT
Studio and office facilities................... 8,000 sq. ft. Leased
Tower.......................................... 2,308 ft. Leased
</TABLE>
- ------------------
(1) Excludes 30,000 square feet of apartment space located above the studio and
office facilities.
In connection with the Albuquerque Acquisition, the Company is currently in
the process of securing leases for studio and office facilities and transmission
facilities. See 'Risk Factors--Risks Related to Acquisitions.' Management
believes that its facilities are adequate for the conduct of its business
presently and for the foreseeable future.
The principal executive offices of the Company and its subsidiaries is 650
Town Center Drive, Suite 850, Costa Mesa, CA, 92626, (714) 445-5791.
LEGAL PROCEEDINGS
The Company expects its operating subsidiaries to be parties to various
legal proceedings from time to time in the course of their business activities.
The Company maintains comprehensive general liability and other insurance which
it believes to be adequate for the purpose. The Company does not know of any
pending legal proceedings involving it or any of the stations to be acquired
which would have a material adverse affect on its financial condition or results
of operations.
The Company's FCC applications for the Salt Lake City, the Albuquerque and
the St. Louis Acquisitions were filed with the FCC on September 19, 1997,
October 8, 1997 and September 30, 1997, respectively.
The Company's FCC application for the Albuquerque Acquisition was approved
by the FCC on December 16, 1997 and will become final once the approval is no
longer subject to review which will occur 40 days after public notice is given
by the FCC provided that no successful third party objection or FCC rescission
occurs during that time. The Company's FCC application for the Salt Lake City
Acquisition was approved by the FCC on October 20, 1997 and such approval has
become final and no longer subject to review. The renewal application for the
license for Station KPLR was filed by the licensee, Koplar Television
Communications L.L.C., on September 30, 1997 and the FCC granted approval on
October 24, 1997.
The Company has been advised that a third party has filed an application to
register 'ACME Television' as a service mark under federal law and has claimed
common law rights in such service mark that predate its use by the Company. The
Company is presently considering the alternatives available to it, which include
the filing of a notice of opposition to registration of the service mark for
such third party, negotiations with such third party to acquire its interest in
the mark or agree to simultaneous use of the mark by each party in connection
with its business, or ceasing to use 'ACME Television' as a mark. The Company
cannot at this time predict the outcome of such alternatives, and there can be
no assurance that the Company will be able to continue to use 'ACME Television'
as a service mark.
52
<PAGE>
MANAGEMENT
Full authority for the management of ACME Parent and the Company resides in
their respective executive officers and the Board of Advisors of ACME Parent.
Messrs. Kellner, Gealy and Allen each hold the same executive offices of the
Company, ACME Intermediate and ACME Parent. Set forth below is certain
information with respect to the members of the Board of Advisors of ACME Parent
and the current and proposed senior management of the Company. All ages are set
forth as of June 30, 1997. In addition to the current and proposed members of
the Board of Advisors, there will be two additional board members appointed no
later than December 17, 1997. See 'Description of ACME Parent--LLC Agreement.'
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- ---------------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS/BOARD MEMBERS
Jamie Kellner.......................... 50 Chairman of the Board, Chief Executive
Officer and Member of the Board of Advisors
Douglas Gealy.......................... 37 President, Chief Operating Officer and Member
of the Board of Advisors
Thomas Allen........................... 44 Executive Vice President, Chief Financial
Officer and Member of the Board of Advisors
PROPOSED BOARD MEMBERS
Edward J. Koplar....................... 54 Chief Executive Officer of ACME St. Louis,
Inc. and Member of the Board of Advisors(1)
Michael V. Roberts..................... 48 Member of the Board of Advisors(2)
GENERAL MANAGERS
Lewis F. Cosby, III.................... 47 General Manager of Station WINT
Stephen W. Dant........................ 48 General Manager of Station KWBP
John J. Greenwood...................... 35 General Manager of Station KAUO
William A. Lanesey..................... 37 General Sales Manager of Station KPLR
</TABLE>
- ------------------
(1) Mr. Koplar is expected to hold these offices upon consummation of the St.
Louis Acquisition.
(2) Mr. Roberts is expected to hold this office upon consummation of the Salt
Lake City Acquisition.
Jamie Kellner--Mr. Kellner is a founder of ACME Parent and serves as its
Chairman, Chief Executive Officer and is a member of its Board of Advisors,
which has exclusive authority to manage its business and affairs. Mr. Kellner is
also a founder, chief executive officer and partner of The WB Television Network
since January 1993. Previously, Mr. Kellner was President of the Fox
Broadcasting Company for over five years. He currently serves on the board of
directors of SMART TV, LLC and NELVANA LTD.
Douglas Gealy--Mr. Gealy is also a founder of ACME Parent and serves as its
President and Chief Operating Officer and a member of the Board of Advisors.
Since June of 1996, Mr. Gealy has been involved in development activities with
respect to ACME Parent. Prior to founding ACME Parent, Mr. Gealy served for one
year as Executive Vice President of a group of eight broadcast television
stations owned by Benedek Broadcasting. Previously, Mr. Gealy was a Vice
President and General Manager of Station WCMH and its LMA WWHO, in Columbus,
Ohio, and following the acquisition of these stations by NBC, served as
President and General Manager of these stations.
Thomas Allen--Mr. Allen is a founder, member of the Board of Advisors,
Executive Vice President and the Chief Financial Officer of ACME Parent. Since
June of 1996, Mr. Allen has been involved in development activities with respect
to the Company. Previously, Mr. Allen was the Chief Operating Officer and Chief
Financial Officer for Virgin Interactive Entertainment, from August 1993 to May
1996. Prior to that, Mr. Allen served as the Chief Financial Officer of the Fox
Broadcasting Company for approximately seven years.
Edward J. Koplar--Mr. Koplar will become a member of the Board of Advisors
of ACME Parent and the Chief Executive Officer of ACME St. Louis, Inc. upon
completion of the St. Louis Acquisition. Since 1979, Mr. Koplar has been the
President for Koplar Communications and its predecessor for Station KPLR,
Channel 11, St. Louis, Missouri.
53
<PAGE>
Michael V. Roberts--Mr. Roberts will become a member of the Board of
Advisors pending a waiver by the FCC related to a station in which Mr. Roberts
has an attributable interest in the St. Louis DMA. Mr. Roberts is co-founder of
Roberts Broadcasting which owns several television stations in medium-sized
markets in the U.S. and has served as its Chairman and Chief Executive Officer
since 1989. Mr. Roberts is also the founder of companies active in commercial
real estate development, construction program management and corporate
management consulting. He currently serves on the board of directors of Home
Shopping Network.
Lewis F. Cosby, III--Mr. Cosby joined the Company in August 1997 as the
general manager of Station WINT in Knoxville. From 1988 to 1996, Mr. Cosby was a
partner and general manager of the CBS affiliate in Knoxville. Mr. Cosby has 25
years of experience in the broadcasting industry.
Stephen W. Dant--Mr. Dant has been managing Station KWBP in Portland since
June of 1997. Prior to joining the Company, Mr. Dant acted as a Vice
President--General Manager for Citadel Communications, where he managed the ABC
affiliate in Lincoln, NE. Before Citadel Communications, Mr. Dant managed
stations in medium-sized markets for Davis-Goldfarb Company from 1993 to 1995
and Gateway Communications from 1988 to 1993. Mr. Dant has over 20 years of
experience in the broadcasting industry.
John J. Greenwood--Mr. Greenwood joined the Company in August 1997 to
assist in developing the Company's stations in Knoxville and Salt Lake City. Mr.
Greenwood will ultimately be the general manager for Station KAUO in
Albuquerque. Prior to joining the Company, since 1994, Mr. Greenwood acted as
the general sales manager and general manager for the Fox affiliate in
Montgomery, AL for Woods Communication Corporation. From 1991 to 1994, Mr.
Greenwood worked for Scripps Howard Broadcasting Co. as a sales manager for the
CBS affiliate in Cincinnati, OH.
William A. Lanesey--Mr. Lanesey will join Station KPLR as general sales
manager in September 1997. He has over 14 years of broadcasting sales
experience. Most recently, Mr. Lanesey acted as Vice President of Sales for the
NBC affiliate in Columbus, Ohio from 1991 to 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ALL OTHER
COMPENSATION
------------
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------- -------------------------------------
OTHER RESTRICTED SECURITIES PAYOUTS
ANNUAL STOCK UNDERLYING LTIP
SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS
NAME AND PRINCIPAL POSITION YEAR ($) ($) $ ($) (#) (#)(4)
- --------------------------- ------- -------- -------- ------------ ---------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jamie Kellner,
Chief Executive
Officer(1)............... 1997(2) (3) -- -- -- -- 40.0 --
Douglas Gealy,
Chief Operating
Officer(1)............... 1997(2) 250,000 -- -- -- -- 30.0 --
Thomas Allen,
Chief Financial
Officer(1)............... 1997(2) 133,900 150,000 -- -- -- 30.0 --
</TABLE>
- ------------------
(1) Each of Messrs. Kellner, Gealy and Allen commenced employment with the
Company on June 17, 1997. Mr. Gealy received compensation retroactive to
January 1, 1997.
(2) This table reflects the amount of compensation to be received by the end of
the only completed fiscal year of the Company.
(3) The Consulting Agreement with Mr. Kellner does not provide for annual
compensation; however, the Compensation Committee of ACME Parent has the
discretion to pay Mr. Kellner such compensation pursuant thereto in the
future as it deems appropriate.
(4) This column contains the number of Management Carry Units of ACME Parent
owned by Messrs. Kellner, Gealy and Allen. Ownership of these units entitles
them to certain distribution rights upon achievement of certain returns by
non-management investors and are subject to forfeiture or repurchase by ACME
Parent in the event of the termination of each individual's employment by
ACME Parent under certain specified circumstances. The Management Carry
Units vest over a five-year period, subject to acceleration upon the
occurrence of certain events, such as an initial public offering, a change
in control or a sale of ACME Parent. The dollar value of payouts as a result
of ownership of these units cannot presently be determined.
54
<PAGE>
EXECUTIVE COMPENSATION
ACME Parent has entered into a six-year consulting agreement (the
'Consulting Agreement') with Jamie Kellner, and six-year employment agreements
(the 'Employment Agreements') with each of Messrs. Gealy and Allen, in each case
subject to reduction to five-year terms upon the consummation of an initial
public offering of common stock of a successor to ACME Parent (an 'ACME IPO').
The Employment Agreements provide for an initial base salary of $250,000 each
for Messrs. Allen and Gealy, subject to minimum annual adjustments for increases
in the CPI. The Consulting Agreement does not provide for an initial base fee;
however, the Compensation Committee has the discretion to pay Mr. Kellner such
compensation pursuant thereto in the future as it deems appropriate. Messrs.
Gealy and Allen are required to devote their full business time and attention to
the business of ACME Parent and its subsidiaries. In addition, Messrs. Gealy and
Allen have each agreed that during their respective engagement periods, each
will make available to the Company video broadcast or distribution opportunities
that could deliver The WB Network programming for DMA markets 20 to 100. Mr.
Kellner is not required to devote any minimum time to the performance of his
consulting duties or to make available to ACME Parent all video broadcast or
distribution opportunities of which he may be aware. In connection with their
engagement by ACME Parent, Messrs. Kellner, Gealy and Allen have each agreed
that during such engagement and for a period of three years (subject to certain
exceptions) thereafter, he will not engage in activities competitive with those
of the Company in any DMA in which the Company operates.
In connection with the St. Louis Acquisition, ACME Parent will enter into a
management agreement with Edward J. Koplar (the 'Management Agreement'). The
Management Agreement will have a term of three years, subject to automatic
renewal for successive one year terms unless either party provides notice of
termination. The Management Agreement provides for an annual fee of $1,000,000.
Mr. Koplar is required to devote a sufficient amount of time, as determined in
his reasonable judgment, necessary to manage and operate Station KPLR. Under the
Management Agreement, Mr. Koplar has the right to voluntarily terminate his
services provided thereunder and be paid any remaining consulting fees that
would be payable for the remaining term of the Management Agreement at the
effective date of such termination. In addition, if Mr. Koplar terminates the
Management Agreement for cause, he is entitled to (i) the balance of the
consulting fee which would have been payable to him through the remaining
portion of the term of the Management Agreement, had such termination not
occurred; and (ii) a maximum of $4,000,000, which amount decreases in $1,000,000
increments on each anniversary of the effective date of the Management
Agreement. In addition, ACME Parent has agreed to grant Koplar Interactive
Systems International, L.L.C. ('KISI'), an entity controlled by Mr. Koplar, the
right to encode the broadcast signals of any other television stations it owns
or operates with KISI's interactive technology.
LONG-TERM INCENTIVE PLAN
The Company intends to adopt and maintain a long-term incentive
compensation plan in which all general managers of Company stations will be
eligible to participate. It is presently contemplated that such plan will be
structured to provide incentive compensation to general managers based on the
performance of their particular stations and the Company's stations as a whole.
The ultimate terms and conditions of such plan will be determined by the
Company, subject to the approval of ACME Parent and the Institutional Investors.
The Company anticipates that it will adopt a similar plan for certain officers
who were not founders of ACME Parent.
55
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's stations have or will enter into affiliation agreements with
The WB Network and related marketing arrangements. Jamie Kellner is an owner and
the chief executive officer of The WB Network. See 'Business--Affiliation
Agreements.'
In connection with the St. Louis Acquisition, the Company entered into the
St. Louis LMA with Koplar Communications. Edward J. Koplar is the controlling
stockholder, chief executive officer and chief operating officer of Koplar
Communications. See 'The Transactions--The Acquisitions--The St. Louis
Acquisition.' In addition, the Company intends to enter into the Management
Agreement with Mr. Koplar, and grant to an affiliate of Mr. Koplar the right to
encode the broadcast signals of Station KPLR and other television stations the
Company owns or operates with such entity's interactive technology. See
'Management--Executive Compensation.' The Company has also granted to Mr. Koplar
approval rights with respect to certain dispositions of Station KPLR by the
Company for a period of five years.
In connection with the Salt Lake City Acquisition, the Company intends to
enter into long-term agreements to lease studio facilities and transmission
tower space for Station KZAR from an affiliate of Michael V. Roberts upon terms
to be agreed upon prior to the closing of the Offering.
In connection with the Salt Lake City Acquisition, the Company will
reimburse the sellers of Roberts Broadcasting for up to $1.0 million of
development expenses incurred with respect to Station KZAR.
In connection with the Portland Acquisition, the Company entered into an
LMA with Channel 32, Incorporated for Station KWBP.
The owner of the seller of Station KAUO is a member of the immediate family
of Mr. Roberts and Steven C. Roberts.
Pursuant to an agreement among Koplar Communications, an affiliate of
Roberts Broadcasting, Mr. Roberts and Steven C. Roberts, the affiliate of
Roberts Broadcasting cannot (i) transfer its license for Station WHSL, East St.
Louis, Illinois, (ii) commit any programming time of the station for commercial
programming or advertising or (iii) enter into an LMA with respect to such
station until June 1, 1998. Upon the written consent of the affiliate of Roberts
Broadcasting, Mr. Roberts and Steven C. Roberts, these restrictions can be
extended for an additional two year term. In the event that the current
affiliation agreement for this station is terminated, the substitute format must
be substantially similar to the current home shopping network format or, in the
alternative, an infomercial format. The annual payment from Koplar
Communications for these agreements was $200,000 during the first three years
and will be $300,000 during the additional two year term.
In connection with the transactions contemplated by the LLC Agreement, the
Investment Agreement and the Acquisitions, ACME Parent and the Company have paid
or agreed to pay an aggregate of approximately $3.5 million in financial
advisory fees to CEA, Inc. CEA ACME, Inc., and CEA Capital Partners USA, L.P.
are affiliates of CEA Inc.
Immediately prior to the closing of the Units Offering, The TCW Group, Inc.
exchanged its right to receive a portion of the membership units of ACME
Intermediate offered pursuant to the Units Offering for (i) a convertible
debenture of ACME Subsidiary Holdings IV, LLC ('Holdings IV'), a subsidiary of
ACME Parent, which is convertible into such membership units of ACME
Intermediate, and (ii) preferred membership units of Holdings IV.
Pursuant to the definitive agreements with respect to the Acquisitions, the
Company has made customary representations and warranties to the sellers and
agreed to indemnify such sellers for breach of such representations and
warranties. The holders of ACME Parent's Seller Units or their affiliates are
beneficiaries of such indemnification.
The Company believes that the terms of each of the foregoing transactions
are or were at least as favorable to the Company or its affiliates as those that
could be obtained from an unaffiliated party.
56
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND EXECUTIVE OFFICERS
Full authority for the management of ACME Parent and the Company resides in
their respective executive officers and the Board of Advisors of ACME Parent.
Messrs. Kellner, Gealy and Allen each hold the same executive offices of the
Company, ACME Intermediate and ACME Parent. Accordingly, the following table
sets forth certain information regarding the beneficial ownership of ACME
Parent's membership units and Convertible Debentures after giving effect to the
Transactions by (i) certain holders or groups of related holders who,
individually or as a group, are the beneficial owners of 5% or more of the fully
diluted equity interests of ACME Parent, (ii) the executive officers and members
of the Board of Advisors of ACME Parent and (iii) the executive officers and
members of the Board of Advisors of ACME Parent as a group. The LLC Agreement of
ACME Parent authorizes the issuance of 50,000 Investor Units, 20,000 of which
are issuable upon conversion of the Convertible Debentures (at a conversion rate
equal to $1,000 of principal amount per Investor Unit), 20,000 Seller Units, 600
Management Capital Units, 942.5 Class A Founder Units, 533.33 Class B Founder
Units, 100 Management Carry Units and 100 Terminated Management Units. The
Percentage of Beneficial Ownership column set forth below reflects ownership
percentages determined assuming conversion of the Convertible Debentures and is
based upon capital contribution (or, in the case of the Convertible Debentures,
amounts to be deemed to be capital contributions upon conversion). Pursuant to
the LLC Agreement, distributions are made in respect of the various classes of
such membership units in accordance with certain priority distributions and
ownership percentages as set forth therein, and vary among the respective
classes of membership units based upon the extent to which holders of designated
classes of such membership units have achieved specified cumulative
distributions. Currently, Messrs. Kellner, Gealy and Allen are the beneficial
owners of the only outstanding voting membership units of ACME Parent. See
'Description of ACME Parent--LLC Agreement.'
<TABLE>
<CAPTION>
PERCENTAGE OF
BENEFICIAL
NUMBER OF OWNERSHIP
UNITS OR ON AN AS
PRINCIPAL CONVERTED
AMOUNTS OF FULLY-DILUTED
NAME(1) TYPE OF INTEREST DEBENTURES BASIS
- ------------------------------------------------ ------------------------ ------------- -------------
<S> <C> <C> <C>
BancBoston Ventures Inc......................... Investor Units 8,491.7 19.5
Class B Founder Units 133.3 0.3
Convertible Debentures $ 1,000,000.0 2.3
Channel 32, Incorporated........................ Seller Units 4,400.0 10.1
ACME Capital Partners(2)(4)..................... Class A Founder Units 942.5 2.2
Alta ACME, Inc.(3)(5)(6)........................ Class B Founder Units 133.3 0.3
CEA ACME, Inc.(4)............................... Class B Founder Units 133.3 0.3
Alta Communications VI, L.P.(5)(6).............. Convertible Debentures $ 6,960,315.1 16.0
Alta-Comm S by S, LLC(5)(6)..................... Convertible Debentures $ 158,434.9 0.4
Alta Subordinated Debt Partners III, L.P.(6).... Convertible Debentures $ 2,372,916.7 5.4
CEA Capital Partners USA, L.P................... Convertible Debentures $ 9,491,666.7 21.8
TCW Shared Opportunity Fund II, L.P.(7)......... Investor Units 1,590.9 3.7
Class B Founder Units 33.3 0.1
TCW Leveraged Income Trust, L.P.(7)............. Convertible Debentures $ 4,772,636.7 11.0
LINC ACME, Corporation(7)....................... Class B Founder Units 100.0 0.2
CIBC Wood Gundy Securities Corp.(8)............. Investor Units 4,593.8 10.5
Steven C. Roberts............................... Seller Units 3,000.0 6.9
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
BENEFICIAL
NUMBER OF OWNERSHIP
UNITS OR ON AN AS
PRINCIPAL CONVERTED
AMOUNTS OF FULLY-DILUTED
NAME(1) TYPE OF INTEREST DEBENTURES BASIS
- -------------------------------------------------- -------------------------- ---------- -------------
<S> <C> <C> <C>
Named Executive Officers and Board Members:
Jamie Kellner(9) ................................. Management Capital Units 290.0 0.7
1545 East Valley Road Management Carry Units 40.0 --
Montecito, CA 93108
Douglas Gealy(9) ................................. Management Capital Units 160.0 0.3
890 Bluespring Lane Management Carry Units 30.0 --
Frontenac, MO 63131
Thomas Allen(9) .................................. Management Capital Units 150.0 0.3
650 Town Center Dr., Suite 850 Management Carry Units 30.0 --
Costa Mesa, CA 92626
Michael V. Roberts ............................... Seller Units 3,000.0 6.9
1408 North Kingshighway
Suite 300
St. Louis, MO 63113
All members of the Board of Advisors and named
executive officers as a group (4 persons)......... Management Capital Units 600.0 1.4
Management Carry Units 100.0 --
Seller Units 3,000.0 6.9
</TABLE>
- ------------------
(1) Except as otherwise noted below, the persons named in the table have sole
voting power and investment power with respect to all units or convertible
debentures set forth in the table.
(2) Certain general partners of ACME Capital Partners may be deemed to have or
share voting or investment power with respect to the membership units held
by ACME Capital Partners. The general partners of ACME Capital Partners
disclaim beneficial ownership with respect to such membership units except
to the extent of their proportionate pecuniary interests therein.
(3) Alta Communications VI, L.P., Alta Subordinated Debt Partners III, L.P. and
Alta--Comm S by S, LLC own all of the shares of Alta ACME, Inc. and
therefore each of these entities may be deemed to have or share voting or
investment power with respect to the membership units held by Alta ACME,
Inc. Alta Communications VI, L.P. owns approximately 73.3% of the shares of
Alta ACME, Inc. and therefore may be deemed to control Alta ACME, Inc. The
principals of Alta Communications VI, L.P., Alta Subordinated Debt Partners
III, L.P. and Alta Comm S by S, LLC disclaim beneficial ownership of all
such membership interests and shares of common stock of Alta ACME, Inc.
except to the extent of their proportionate pecuniary interests therein. In
addition, individually no stockholder, director or officer of Alta ACME,
Inc. is deemed to have or share such voting or investment power.
(4) CEA Capital Partners USA, L.P. owns all of the shares of CEA ACME, Inc. and
therefore may be deemed to have or share voting or investment power with
respect to the membership units held by CEA ACME, Inc. The principals of CEA
Capital Partners USA, L.P. disclaim beneficial ownership of all such
membership units and shares of common stock in CEA ACME, Inc. except to the
extent of their proportionate pecuniary interests therein. J. Patrick
Michael, Jr. owns a controlling interest in the general partner of CEA
Capital Partners USA, L.P. and therefore may be deemed to beneficially own
the Convertible Debentures and membership units held by CEA Capital Partners
USA, L.P. Mr. Michael disclaims beneficial ownership of all such Convertible
Debentures and membership units of CEA Capital Partners USA, L.P. except to
the extent of his proportionate pecuniary interests therein.
(5) Alta Communications VI, L.P. and Alta Comm S by S, LLC are part of an
affiliated group of investment funds referred to collectively as the Alta
Communications Funds. The general partner of Alta Communications VI, L.P. is
Alta Communications VI Management Partners, L.P. Alta Communications VI
Management Partners, L.P. exercises sole voting and investment power with
respect to all of the convertible debentures held of record by Alta
Communications VI, L.P. Alta Communications, Inc. provides investment
advisory services to each of the funds comprising the Alta
(Footnotes continued on next page)
58
<PAGE>
(Footnotes continued from previous page)
Communications Funds. Certain of the principals of Alta Communications, Inc.
are partners of Alta Communications VI Management Partners, L.P. and Alta
Comm S by S, LLC and as such may be deemed to have or share voting or
investment power with respect to the convertible debentures held by Alta
Communications VI, L.P. and Alta Comm S by S, LLC; individually no partner
or officer of Alta Communications VI Management Partners, L.P. is deemed to
have or share such voting or investment power. The principals of Alta
Communications, Inc. disclaim beneficial ownership of all such convertible
debentures and shares of common stock in Alta ACME, Inc. except to the
extent of the proportionate pecuniary interests therein. In addition,
certain principals of Alta Communications, Inc. are affiliated with Burr,
Egan, Deleage & Co.
(6) The general partner of Alta Subordinated Debt Partners III, L.P. ('ASDP') is
Alta Subordinated Debt Management III, L.P. Alta Subordinated Debt
Management III, L.P. exercises sole voting and investment power with respect
to all of the securities held of record by ASDP. Burr, Egan, Deleage & Co.,
directly or indirectly, provides investment advisory services to ASDP.
Certain of the principals of Burr, Egan, Deleage & Co. are partners in Alta
Subordinated Debt Management III, L.P. and, as such, may be deemed to have
or share voting or investment power with respect to the securities held by
ASDP; individually no partner or officer of Alta Subordinated Debt
Management III, L.P. is deemed to have or share such voting or investment
power. The principals of Burr, Egan, Deleage & Co. disclaim beneficial
ownership of all of such securities except to the extent of their
proportionate pecuniary interests therein. In addition, certain principals
of Burr, Egan, Deleage & Co. are affiliated with Alta Communications, Inc.
(7) TCW Shared Opportunity Fund II, L.P., TCW Leveraged Income Trust, L.P. and
LINC ACME, Corporation are subsidiaries of The TCW Group, Inc.
(8) CIBC Wood Gundy Securities Corp. was an Initial Purchaser in the Offering.
(9) Messrs. Kellner, Gealy and Allen are each executive officers of the Company,
ACME Intermediate and ACME Parent and members of the Board of Advisors of
ACME Parent. The Management Carry Units owned by Messrs. Kellner, Gealy and
Allen entitle them to certain distribution rights upon achievement of
certain returns by non-management investors and are subject to forfeiture or
repurchase by ACME Parent in the event of the termination of each
individual's employment by ACME Parent under certain specified
circumstances.
59
<PAGE>
DESCRIPTION OF ACME PARENT
LLC AGREEMENT
The Limited Liability Company Agreement dated June 17, 1997 of ACME
Television Holdings, LLC, as amended, (the 'LLC Agreement') provides for the
admission of various persons as members of ACME Parent (the 'Members'), and sets
forth the relative interests, rights and obligations of the Members. Each Member
has such economic interest in the distributions, allocations of profits and
losses and other relative rights, duties and powers as set forth in the LLC
Agreement.
The LLC Agreement authorizes the issuance of 50,000 Investor Units, each of
which represents a capital contribution of $1,000 per unit and a preferential
return amount of $1,000 per unit (the 'Investor Units'), 20,000 Seller Units,
each of which represents a capital contribution of $1,000 per unit and a
preferential return amount of $1,000 per unit (the 'Seller Units'), 600
Management Capital Units, each of which represents a capital contribution of
$1,000 per unit and a preferential return amount of $2,000 per unit (the
'Management Capital Units'), 942.5 Class A Founder Units, each of which
represents a capital contribution of $1,000 per unit and a preferential return
amount of $1,500 per unit (the 'Class A Founder Units'), and 533.33 Class B
Founder Units, each of which represents a capital contribution of $1,000 per
unit and a preferential return amount of $1,500 per unit (the 'Class B Founder
Units' together with the Class A Founder Units, the Management Capital Units,
the Seller Units, and the Investor Units, the 'Non-Carry Units'). In addition,
the LLC Agreement authorizes the issuance of 100 Management Carry Units (the
'Management Carry Units'), each representing an initial capital contribution of
$1.00, and 100 Terminated Management Units (the 'Terminated Management Units').
The Management Carry Units, all of which are issued to Messrs. Kellner, Gealy
and Allen, are subject to repurchase, forfeiture and exchange for Terminated
Management Units as set forth in the LLC Agreement. The Management Carry Units
vest over a five-year period, subject to acceleration upon the occurrence of
certain events, such as an initial public offering, a change in control or a
sale of ACME Parent. Terminated Management Units may be issued to holders of
Management Carry Units upon their termination of employment with ACME Parent.
Each outstanding membership unit is entitled to its pro rata share of all
profits and losses of ACME Parent and to participate in distributions made by
ACME Parent from time to time. The LLC Agreement provides that, prior to any
distributions to Management Carry Units, the holders of Non-Carry Units are
entitled to a priority return of their capital contributions ($1,000 per
membership unit), plus varying preferential returns thereon (the 'Priority
Capital Distributions'). After the holders of Non-Carry Units have received
their Priority Capital Distributions, the holders of Non-Carry Units and
Management Carry Units share any residual distributions with the holders of the
Management Carry Units being entitled to receive up to fifty percent (50%) of
any such residual distributions. If any Terminated Management Units are issued
in exchange for Management Carry Units, the holders of Terminated Management
Units will be entitled to participate in distributions after all of the Priority
Distributions have been made.
The membership units include various rights and limitations with respect to
transferability as set forth in the LLC Agreement. In addition, Investor Units
are subject to redemption at any time at the option of the holders of a majority
of interest of the Investor Units after June 30, 2008 or upon any acceleration
or pre-payment of the Convertible Debentures. Each of the other membership
units, except for the Management Carry Units, are subject to redemption at the
option of the holders of a majority in interest of the applicable class of
membership units at any time upon the acceleration or pre-payment of the
Convertible Debentures.
The LLC Agreement vests full and exclusive control of the management of the
business and affairs of ACME Parent in a three member Board of Advisors (the
'Board'), provided that the Board is required to obtain the prior written
consent of the holders of at least 60% in interest of the Class B Founder Units
for any of the following actions: (i) redemption of membership units, (ii)
issuance of additional membership units, (iii) change in number of authorized
membership units, (iv) payment or declaration of any dividend or distribution,
(v) authorization of any merger or consolidation of ACME Parent or any of its
subsidiaries, (vi) authorization of the reorganization, sale or sale of material
assets of ACME Parent or any of its Subsidiaries, (vii) authorization of any
reclassification or recapitalization of the outstanding membership units, (viii)
engagement by ACME Parent or its subsidiaries in any business other than the
business now conducted or contemplated, (ix) alteration, modification or
amendment of the LLC Agreement or the Investment Agreement and (x) application
or consent
60
<PAGE>
to appointment of a receiver, trustee, custodian or liquidator; admission in
writing by ACME Parent of the inability to pay debts; general assignment for
benefit of creditors; and any action to take advantage of bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or liquidation
laws; provided that any of the actions in clause (x) above shall require the
prior written consent of members holding all of the Class B Founder Units and a
majority in interest of each class of the Class A Founder Units and the
Management Capital Units, voting separately. The size of the Board will increase
to at least five members no later than December 17, 1997 upon election of two
additional individuals by the holders of a majority of the Management Carry
Units, subject to the approval of the holders of a majority in interest of the
Management Carry Units and at least 60% in interest of the Class B Founder
Units. In addition, the Company anticipates that Messrs. Koplar and Roberts will
become members of the Board of Advisors upon consummation of the St. Louis
Acquisition and the Salt Lake City Acquisition, respectively.
Messrs. Kellner, Gealy and Allen are the initial members of the Board and
their successors will be appointed by the holders of the Management Carry Units
so long as none of the following events has occurred: (i) June 30, 2002, (ii)
the thirtieth day after Jamie Kellner shall have ceased to act as Chairman and
Chief Executive Officer of ACME Parent or be employed by The WB Network in a
senior management capacity, (iii) the earlier of (A) the one-hundred and
twentieth (120th) day after a clear and unequivocal announcement by Time Warner
or The WB Network of the cessation of operations of The WB Network or (B) the
thirtieth (30th) day after cessation of operation of The WB Network, (iv) the
thirtieth (30th) day after the date Time Warner ceases to own at least
thirty-five percent (35%) of the outstanding equity interests of The WB Network,
(v) the holders of any indebtedness in aggregate amount of $5,000,000 take any
action to accelerate any of the Indebtedness outstanding or foreclose on
collateral pledged in connection therewith or (vi) ACME Parent breaches certain
terms and conditions of the LLC Agreement or the Investment Agreement. If any
one of the aforementioned events occurs and ACME Parent has not consummated an
initial public offering, the holders of a majority in interest of the Class B
Founder Units shall be entitled to remove all members of the existing Board of
Advisors and to elect six members of a reconstituted Board of Advisors made up
of seven members and the holders of a majority in interest of the Management
Capital Units shall be entitled to elect the remaining member of the
reconstituted Board of Advisors. So long as any one of the aforementioned events
has not occurred that has not been waived in writing, Messrs. Kellner, Gealy,
Allen and Koplar will be entitled to two votes on each matter to be voted on at
any meeting of the Board and each other member of the Board will be entitled to
one vote,
all actions to be taken by the Board will be by vote or written consent of a
majority of the votes cast by
Board members.
So long as ACME Parent has not consummated an initial public offering, ACME
Parent will have a compensation committee (the 'Compensation Committee')
consisting of five (5) members, three (3) of which shall be appointed by holders
of a majority in interest of the Class B Founder Units, one (1) of which shall
be, so long as he is an officer of ACME Parent, Jamie Kellner, and one (1) of
which shall be an unaffiliated member of the Board of Advisors. Any actions by
the Compensation Committee shall require the affirmative vote of three (3) of
the five (5) members of the Compensation Committee. The Compensation Committee
has the exclusive power and authority to determine annually the appropriate
annual compensation for each of the officers of ACME Parent. Except for Mr.
Kellner, the members of the Compensation Committee have not yet been named.
The LLC Agreement also provides for indemnification of the Board of
Advisors, any Affiliate of the members of the Board of Advisors and each person
serving as an officer, employee or other agent of the ACME Parent, including
persons serving at the request of ACME Parent as directors, managers, officers,
employees, agents or trustees of another organization in which ACME Parent has
any interest as a shareholder, creditor or otherwise, with respect to
liabilities incurred acting on behalf of ACME Parent, subject to limitations
imposed thereon by applicable law.
INVESTMENT AGREEMENT
Pursuant to the Investment Agreement, certain of the Institutional
Investors agreed to purchase $40.0 million in the aggregate of Investor Units
and Convertible Debentures of ACME Parent. The Investment Agreement also
provides that the holders of the Investor Units and Convertible Debentures,
voting together as a class, have the right to consent to certain transactions by
ACME Parent and its subsidiaries, including incurring indebtedness for borrowed
money (other than the Notes and the Revolving Credit Facility), acquisitions of
additional stations or
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licenses, amendments to its organizational documents and the making of
distributions in respect of its membership units.
DESCRIPTION OF CERTAIN INDEBTEDNESS
REVOLVING CREDIT FACILITY
On December 2, 1997, the Company entered into an amended and restated
revolving credit facility (the 'Revolving Credit Facility') with Canadian
Imperial Bank of Commerce, New York agency, as agent, and the several lenders
party thereto. The Revolving Credit Facility is a five-year senior secured
revolving credit facility with $40.0 million of available borrowings. Proceeds
of borrowings under the Revolving Credit Facility may be used for capital
expenditures, working capital, acquisitions (with the prior approval of the
lenders) and general corporate purposes. All subsidiaries of the Company and any
future subsidiaries (other than ACME Finance Corporation) are or will be
guarantors (the 'Bank Guarantors') of the Revolving Credit Facility, which is
collateralized by a security interest in all assets of and stock of the Bank
Guarantors. Borrowings under the Revolving Credit Facility will bear interest,
payable quarterly, at LIBOR or the prime rate (as selected by the Company) plus
spreads over such rates that vary with the Company's ratio of total debt to
EBITDA.
The Revolving Credit Facility requires prepayments and concurrent
reductions of the commitment from asset sales or other transactions outside the
ordinary course of business (subject to provisions permitting the proceeds of
certain sales to be used to make approved acquisitions within stated time
periods without reducing the commitments of the lenders) and contains covenants
limiting the amounts of indebtedness that the Company may incur, requiring the
maintenance of minimum EBITDA, a ratio of EBITDA to cash interest expense and
the maintenance of a maximum amount of senior debt to EBITDA and total debt to
EBITDA and limiting capital expenditures and other restricted payments without
the express consent of the lenders. The Revolving Credit Facility also contains
other customary covenants, representations, warranties, indemnities, conditions
precedent to closing and borrowing, and events of default.
All indebtedness of the Company to any affiliate is expressly subordinated
to the repayment of all amounts owed in respect of the Revolving Credit
Facility.
CAPITAL LEASE FACILITIES
The Company intends to enter into a five-year capital lease facility with
General Electric Capital Corporation (the 'GECC Capital Lease Facility')
providing for up to $12.5 million of financing to purchase television station
tower, antenna and production equipment. The GECC Capital Lease Facility will be
amortized by sixty equal monthly payments and will contain prepayment penalties
of 5%, 4%, 3% and 2% during the first, second, third and fourth years,
respectively, after its execution date.
The Company intends to enter into a second capital lease facility on terms
substantially similar to the GECC Capital Lease Facility with NationsBank
(together with the GECC Capital Lease Facility, the 'Capital Lease Facilities')
providing for up to $7.5 million of financing at such time as such financing is
required pursuant to the Company's capital expenditure plan.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Original Notes were sold by the Issuers to the Initial Purchaser
pursuant to the Purchase Agreement. The Initial Purchaser subsequently resold
the Original Notes (i) to 'qualified institutional buyers' (as defined in Rule
144A under the Securities Act) in reliance upon the exemption from the
registration requirements of the Securities Act provided by Rule 144A, (ii) to a
limited number of institutional 'accredited investors' (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) that prior to the purchase
of any securities, executed and delivered a signed letter to the Initial
Purchaser containing certain representations and agreements and (iii) outside
the United States in compliance with Regulation S under the Securities Act.
As a condition to the Purchase Agreement, the Issuers entered into the
Registration Rights Agreement pursuant to which the Issuers agreed at their
expense, for the benefit of the holders of the Original Notes, to (i) use their
reasonable best efforts to file, within 45 days after the date of the original
issuance of the Original Notes, a registration statement (the 'Exchange Offer
Registration Statement') with the Commission with respect to a registered offer
to exchange the Original Notes for the Exchange Notes, which have terms
identical in all material respects to the Original Notes, (except that the
Exchange Notes do not contain terms with respect to transfer restrictions) and
(ii) use their reasonable best efforts to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act within 150 days
after the Issue Date. Upon the Exchange Offer Registration Statement being
declared effective, the Issuers will offer the Exchange Notes in exchange for
surrender of the Original Notes. The Issuers will keep the Exchange Offer open
for not less than 30 days (or longer if required by applicable law) after the
date notice of the Exchange Offer is mailed to the holders of the Original
Notes. For each Original Note surrendered to the Issuers pursuant to the
Exchange Offer, the holder of such Original Note will receive an Exchange Note
having a principal amount at maturity equal to that of the surrendered Original
Note, which shall be cancelled. Under existing interpretations by the Staff, the
Exchange Notes would in general be freely transferable after the Exchange Offer
without further registration under the Securities Act.
Each Holder desiring to participate in the Exchange Offer will be required
to represent, among other things, that (i) it is not an 'affiliate' (as defined
in Rule 405 of the Securities Act) of the Issuers, (ii) it is not engaged in,
and does not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of the Original Notes and (iii) it
is acquiring the Original Notes in the ordinary course of its business (a Holder
unable to make the foregoing representations is referred to as a 'Restricted
Holder'). A Restricted Holder will not be able to participate in the Exchange
Offer and may only sell its Original Notes pursuant to a registration statement
containing the selling security holder information required by Item 507 of
Regulation S-K under the Securities Act, or pursuant to an exemption from the
registration requirement of the Securities Act.
Each broker-dealer (other than a Restricted Holder) that receives Exchange
Notes for its own account pursuant to the Exchange Offer (a 'Participating
Broker-Dealer') must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. This Prospectus, as it may be amended or
supplemented, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Original Notes where such Original Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. Based upon interpretations by the staff of the
Commission, the Issuers believe that Exchange Notes issued pursuant to the
Exchange Offer to Participating Broker-Dealers may be offered for resale,
resold, and otherwise transferred by a Participating Broker-Dealer upon
compliance with the prospectus delivery requirements, but without compliance
with the registration requirements, of the Securities Act. The Issuers have
agreed that, for a period of 180 days following consummation of the Exchange
Offer, they will make this Prospectus available, for use in connection with any
such resale, to any Participating Broker-Dealer and other persons, if any, with
similar prospectus delivery requirements. Any Participating Broker-Dealer that
resells Exchange Notes may be deemed to be an 'underwriter' within the meaning
of the Securities Act and must deliver a prospectus in connection with such
resales of Exchange Notes. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to admit that it is an
'underwriter' within the meaning of the Securities Act.
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See 'Plan of Distribution.' In addition, to comply with the securities laws of
certain jurisdictions, if applicable, the Exchange Notes may not be offered or
sold unless they have been registered or such securities laws have been complied
with. The Issuers have agreed, pursuant to the Registration Rights Agreement and
subject to certain specified limitations therein, to register or qualify the
Exchange Notes for offer or sale under the securities or blue sky laws of such
jurisdictions as any holder of the Exchange Notes may request in writing.
Based upon interpretations by the Staff of the Commission, the Issuers
believe that Exchange Notes issued pursuant to the Exchange Offer may be offered
for resale, resold, and otherwise transferred by a Holder thereof (other than a
Restricted Holder or a Participating Broker-Dealer) without compliance with the
registration and prospectus delivery requirements of the Securities Act.
In the event that (a) the Exchange Offer Registration Statement is not
filed with the Commission on or prior to the 45th day following the Issue Date
or an initial Shelf Registration Statement is not filed within 30 days following
delivery of a Shelf Notice prior to the filing date, (b) the Exchange Offer
Registration has not been declared effective on or prior to the 150th day
following the Issue Date, (c) the Exchange Offer is not consummated on or prior
to the 180th day following the Issue Date, (d) a Shelf Registration Statement is
not declared effective on or prior to the 180th day following the Issue Date, or
(e) the Exchange Offer Registration Statement ceases to be effective at any time
prior to the time that the Exchange Offer is consummated, the Issuers shall pay
as liquidated damages to each holder of the Original Notes an amount (the
'Damage Amount') equal to 0.50% per annum of the average Accreted Value of the
Original Notes during the first 90 days during which any such default exists,
and the Damage Amount will be increased by an additional 0.25% per annum of the
average Accreted Value of the Original Notes for each 90-day period that any
such Damage Amount continues to accrue; provided that in no event shall the rate
at which the Damage Amount accrues be more than 2%. Upon (w) the filing of the
applicable Registration Statement in the case of clause (a) above, (x) the
effectiveness of the Exchange Offer Registration Statement in the case of clause
(b) above or resumption of effectiveness in the case of clause (e) above, (y)
the consummation of the Exchange Offer in the case of clause (c) above or (z)
the effectiveness of a Shelf Registration Statement in the case of clause (d)
above, the Damage Amount will cease to accrue from the date of such filing,
effectiveness or consummation, as the case may be.
If applicable, in the event that the Shelf Registration Statement ceases to
be effective prior to the second anniversary of the Issue Date for a period in
excess of 45 days whether or not consecutive, in any given year, then, in
addition to any liquidated damages pursuant to the foregoing paragraph, the
Issuers shall pay as additional liquidated damages to each holder of Original
Notes an amount equal to 0.50% per annum of the average Accreted Value of the
Original Notes during the first 90 days following such 46th day in the
applicable year such Shelf Registration Statement ceases to be effective. Such
additional liquidated damages will increase by an additional 0.25% per annum of
the average Accreted Value for each additional 90 days that such Shelf
Registration Statement is not effective, subject to the same aggregate maximum
increase in liquidated damages of 2.0% referred to above. Upon the filing of the
Exchange Offer Registration Statement, the effectiveness of the Exchange Offer
Registration Statement, or the consummation of the Exchange Offer, as the case
may be, liquidated damages on the Original Notes will be reduced to the extent
that such liquidated damages related to the failure of any such event to have
occurred. Upon the effectiveness of a Shelf Registration Statement, the
liquidated damages on the Original Notes shall cease unless and until started
again as described above.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the Registration Rights Agreement, a copy
of which is filed as an exhibit to the Exchange Offer Registration Statement of
which this Prospectus is a part.
Following the consummation of the Exchange Offer, holders of the Original
Notes who were eligible to participate in the Exchange Offer but who did not
tender their Original Notes or whose Original Notes were tendered but unaccepted
will not have any further registration rights and such Original Notes will
continue to be subject to certain restrictions on transfer. Accordingly, the
liquidity of the market for such Original Notes could be adversely affected.
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TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Issuers will accept any and all Original
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time,
on the Expiration Date. The Issuers will issue $1,000 principal amount of
Exchange Notes in exchange for each $1,000 principal amount of Original Notes
accepted in the Exchange Offer. Holders may tender some or all of their Original
Notes pursuant to the Exchange Offer. However, Original Notes may be tendered
only in integral multiples of $1,000.
The Issuers will keep the Exchange Offer open for not less than 30 days or
longer if required by applicable law, after the date notice of the Exchange
Offer is mailed to holders of the Original Notes.
The form and terms of the Exchange Notes will be the same as the form and
terms of the Original Notes except (i) the Exchange Notes will be registered
under the Securities Act and hence will not bear legends restricting the
transfer thereof and (ii) the holders of the Exchange Notes will not be entitled
to certain rights of the holders of the Original Notes under the Registration
Rights Agreement, which rights will terminate upon the consummation of the
Exchange Offer. The Exchange Notes will evidence the same debt as the Original
Notes. The Exchange Notes will be issued under and entitled to the benefits of
the Indenture, which also authorized the issuance of the Original Notes, such
that both series will be treated as a single class of debt securities under the
Indenture.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Original Notes being tendered for exchange.
As of the date of this Prospectus, $175,000,000 aggregate principal amount
at maturity of the Original Notes are outstanding. This Prospectus, together
with the Letter of Transmittal, is being sent to all registered holders of
Original Notes. There will be no fixed record date for determining registered
holders of Original Notes entitled to participate in the Exchange Offer.
Holders do not have any appraisal or dissenters' rights under the law or
under the Indenture in connection with the Exchange Offer. The Issuers intend to
conduct the Exchange Offer in accordance with the provisions of the Registration
Rights Agreement and the applicable requirements of the Exchange Act, and the
rules and regulations of the Commission thereunder.
Original Notes which are not tendered for exchange in the Exchange Offer
will remain outstanding and will be entitled to the rights and benefits such
holders have under the Indenture and, in certain limited circumstances, the
Registration Rights Agreement.
The Exchange Agent will act as agent for the tendering holders for the
purposes of receiving the Exchange Notes from the Issuers. The Issuers expressly
reserve the right to amend or terminate the Exchange Offer, and not to accept
for exchange any Original Notes not theretofore accepted for exchange, upon the
occurrence of any of the conditions specified below under '--Certain Conditions
to the Exchange Offer.'
If any tendered Original Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Original Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the expiration or termination of the Exchange Offer.
Holders who tender Original Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of
Original Notes pursuant to the Exchange Offer. The Issuer will pay all
reasonable expenses, other than certain applicable taxes described below, in
connection with the Exchange Offer. See '--Fees and Expenses.'
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term 'Expiration Date' shall mean 5:00 p.m., New York City time on
, 1998, unless the Issuers, in their sole discretion, extend the
Exchange Offer, in which case the term 'Expiration Date' shall mean the latest
date and time to which the Exchange Offer is extended.
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In order to extend the Exchange Offer, the Issuers will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders of Original Notes an announcement thereof, each prior to 5:00 p.m., New
York City time, on the prior business day before the then Expiration Date.
The Issuers reserve the right, in their sole discretion, (i) to delay
accepting for exchange any Original Notes, to extend the Exchange Offer or to
terminate the Exchange Offer if any of the conditions set forth below under
'--Certain Conditions to the Exchange Offer' shall not have been satisfied, by
giving oral or written notice of such delay, extension or termination to the
Exchange Agent or (ii) to amend the terms of the Exchange Offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders of Original Notes. If the Exchange Offer is amended in a
manner determined by the Issuers to constitute a material change, the Issuers
will promptly disclose such amendment by means of a prospectus supplement that
will be distributed to the registered holders, and the Issuers will extend the
Exchange Offer, depending upon the significance of the amendment and the manner
of disclosure to the registered holders, if the Exchange Offer would otherwise
expire during such period.
ORIGINAL ISSUE DISCOUNT OF ORIGINAL NOTES
A holder of Exchange Notes will be required to include the accretion of the
original issue discount at which the Original Notes were issued as gross income
for U.S. federal income tax purposes prior to the receipt of the cash payments
to which such income is attributable. See 'Certain U.S. Federal Income Tax
Considerations Relating to the Notes--U.S. Holders--Original Issue Discount on
the Original Notes.'
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Issuers will not
be required to accept for exchange, or exchange any Exchange Notes for, any
Original Notes, and may terminate the Exchange Offer as provided herein before
the acceptance of any Original Notes for exchange, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the reasonable judgment of the Issuers, might materially impair
the ability of the Issuers to proceed with the Exchange Offer or materially
impair the contemplated benefits of the Exchange Offer to the Issuers, or
any material adverse development has occurred in any existing action or
proceeding with respect to the Issuers or any of their subsidiaries;
(b) any change, or any development involving a prospective change, in
the business or financial affairs of the Issuers or any of their
subsidiaries has occurred which, in the reasonable judgment of the Issuers,
might materially impair the ability of the Issuers to proceed with the
Exchange Offer or materially impair the contemplated benefits of the
Exchange Offer to the Issuers;
(c) any law, statute, rule or regulation is proposed, adopted or
enacted, which, in the reasonable judgment of the Issuers, might materially
impair the ability of the Issuers to proceed with the Exchange Offer or
materially impair the contemplated benefits of the Exchange Offer to the
Issuers;
(d) there shall have occurred (i) any general suspension of trading
in, or general limitation on prices for securities on the New York Stock
Exchange, (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or any limitation by any
governmental agency or authority that adversely affects the extension of
credit to the Issuers or (iii) a commencement of war, armed hostilities or
other similar international calamity directly or indirectly involving the
United States; or, in the case any of the foregoing exists at the time of
commencement of the Exchange Offer, a material acceleration or worsening
thereof; or
(e) any governmental approval has not been obtained, which approval
the Issuers shall, in their reasonable judgment, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
The Issuers expressly reserve the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Original Notes, by giving oral or
written notice of such extension to the holders thereof. During any such
extensions, all Original Notes previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by the Issuers.
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Any Original Notes not accepted for exchange for any reason will be returned
without expense to the tendering holder thereof as promptly as practicable after
the expiration or termination of the Exchange Offer.
The Issuers expressly reserve the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Original Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions of the
Exchange Offer specified above under '--Certain Conditions to the Exchange
Offer.' The Issuers will give oral or written notice of any extension,
amendment, non-acceptance or termination to the holders of the Original Notes as
promptly as practicable, such notice in the case of any extension to be issued
no later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.
The foregoing conditions are for the sole benefit of the Issuers and may be
asserted by the Issuers regardless of the circumstances giving rise to any such
condition or may be waived by the Issuers in whole or in part at any time and
from time to time in their sole discretion. The failure by the Issuers at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
In addition, the Issuers will not accept for exchange any Original Notes
tendered, and no Exchange Notes will be issued in exchange for any such Original
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Exchange Offer Registration Statement of which this Prospectus
constitutes a part or the qualification of the Indenture under the Trust
Indenture Act of 1939 (the 'TIA').
PROCEDURES FOR TENDERING ORIGINAL NOTES
Only a holder of Original Notes may tender such Original Notes in the
Exchange Offer. To tender in the Exchange Offer, a holder must complete, sign
and date the Letter of Transmittal, or facsimile thereof, have the signature
thereon guaranteed, and mail or otherwise deliver such Letter of Transmittal, or
such facsimile, to the Exchange Agent prior to 5:00 p.m., New York City time, on
the Expiration Date or, in the alternative, comply with DTC's ATOP procedures
described below in '--Book-Entry Transfer; ATOP.' In addition, either (i)
Original Notes must be received by the Exchange Agent along with the Letter of
Transmittal, or (ii) a timely confirmation of book-entry transfer (a 'Book-Entry
Confirmation') of such Original Notes, if such procedure is available, into the
Exchange Agent's account at DTC (the 'Book-Entry Transfer Facility') pursuant to
the procedure for book-entry transfer described below or properly transmitted
Agent's Message (as defined) must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the holder must comply with the guaranteed delivery
procedures described below. To be tendered effectively, the Letter of
Transmittal and other required documents must be received by the Exchange Agent
at the address set forth below under '--Exchange Agent' prior to 5:00 p.m., New
York City time, on the Expiration Date. The Letter of Transmittal must be
completed, signed and delivered even if tender instruction are being transmitted
through DTC's ATOP procedures.
Holders of Original Notes that are tendering by book-entry transfer to the
Exchange Agent's account at DTC can execute the tender through ATOP, for which
the transaction will be eligible. DTC participants that are accepting the
Exchange Offer must transmit their acceptances to DTC, which will verify the
acceptance and execute a book-entry delivery to the Exchange Agent's account at
DTC. DTC will then send an Agent's Message to the Exchange Agent for its
acceptance. Each DTC participant transmitting an acceptance of the Exchange
Offer through the ATOP procedures will be deemed to have agreed to be bound by
the terms of this Letter of Transmittal. Nevertheless, in order for such
acceptance to constitute a valid tender of the DTC participant's Original Notes,
such participant must complete and sign a Letter of Transmittal and deliver it
to the Exchange Agent before the Expiration Date.
The tender by a holder which is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Issuers in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF ORIGINAL NOTES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE.
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NO LETTER OF TRANSMITTAL OR ORIGINAL NOTES SHOULD BE SENT TO THE ISSUERS.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR OTHER NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Original Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender such Original Notes should contact the registered holder promptly and
instruct such registered holder of Original Notes to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on its own behalf,
such beneficial owner must, prior to completing and executing the Letter of
Transmittal and delivering its Original Notes, either make appropriate
arrangements to register ownership of the Original Notes in such owner's name or
obtain a properly completed bond power from the registered holder of Original
Notes. The transfer of registered ownership may take considerable time and may
not be able to be completed prior to the Expiration Date.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below, as the case be, must be guaranteed by an Eligible Institution (as defined
below) unless the Original Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled 'Special Issuance
Instructions' or 'Special Delivery Instructions' on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantor must be a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an 'eligible guarantor institution' within
the meaning of Rule 17Ad-15 under the Exchange Act which is a member of one of
the recognized signature guarantee programs identified in the Letter of
Transmittal (an 'Eligible Institution').
If the Letter of Transmittal is signed by a person other than the
registered holder of any Original Notes listed therein, such Original Notes must
be endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Original
Notes with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Original Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Issuers, provide evidence satisfactory to the Issuers of their authority to so
act which must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Original Notes and withdrawal of tendered
Original Notes will be determined by the Issuers in their sole discretion, which
determination will be final and binding. The Issuers reserve the absolute right
to reject any and all Original Notes not properly tendered or any Original Notes
the Issuers' acceptance of which would, in the opinion of counsel for the
Issuers, be unlawful. The Issuers also reserve the right to waive any defects,
irregularities or conditions of tender as to particular Original Notes. The
Issuers' interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Original Notes must be cured within such time as the
Issuers shall determine. Although the Issuers intend to notify holders of
defects or irregularities with respect to tenders of Original Notes, neither the
Issuers, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Original Notes will not be deemed
to have been made until such defects or irregularities have been cured or
waived. Any Original Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering holder, unless
otherwise provided in the Letter of Transmittal, as soon as practicable after
the expiration or termination of the Exchange Offer.
In all cases, issuance of Exchange Notes for Original Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of Original Notes or a timely Book-Entry
Confirmation of such Original Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Original Notes are
not accepted for exchange for any reason set forth in the terms and conditions
of the
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Exchange Offer or if Original Notes are submitted for a greater principal amount
than the holder desires to exchange, such unaccepted or non-exchanged Original
Notes will be returned without expense to the tendering holder thereof (or, in
the case of Original Notes tendered by book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry
transfer procedures described below, such non-exchanged Notes will be credited
to an account maintained with such Book-Entry Transfer Facility) as promptly as
practicable after the expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER; ATOP
The Issuers understand that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish an account with respect to the
Original Notes at DTC for the purpose of facilitating the Exchange Offer, and
subject to the establishment thereof, any financial institution that is a
participant in DTC may make book-entry delivery of the Original Notes by causing
DTC to transfer such Original Notes into the Exchange Agent's account with
respect to the Original Notes in accordance with DTC's procedures for such
transfer. Although delivery of the Original Notes may be effected through
book-entry transfer into the Exchange Agent's account at DTC, a Letter of
Transmittal properly completed and duly executed with any required signature
guarantee and all other required documents must in each case be transmitted to
and received or confirmed by the Exchange Agent at its address set forth below
on or prior to the Expiration Date or, if the guaranteed delivery procedures
described below are complied with, within the time period provided under such
procedures. Delivery of documents to DTC does not constitute delivery to the
Exchange Agent.
The Exchange Agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may utilize DTC's ATOP to tender.
Accordingly, participants in DTC's ATOP may, in lieu of physically completing
and signing the Letter of Transmittal and delivering it to the Exchange Agent,
electronically transmit their acceptance of the Exchange Offer by causing DTC to
transfer the Original Notes to the Exchange Agent in accordance with the DTC's
ATOP procedures for transfer. The DTC will then send an Agent's Message to the
Exchange Agent.
The term 'Agent's Message' means a message transmitted by DTC, received by
the Exchange Agent and forming part of the Book-Entry Confirmation, which states
that DTC has received an express acknowledgment from a participant in DTC's ATOP
that is tendering Original Notes which are the subject of such book entry
confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal (or, in the case of an Agent's Message
relating to guaranteed delivery, that such participant has received and agrees
to be bound by the applicable Notice of Guaranteed Delivery), and that the
agreement may be enforced against such participant.
Each DTC participant transmitting an acceptance of the Exchange Offer
through the ATOP Procedures will be deemed to have agreed to be bound by the
terms of the Letter of Transmittal. Nevertheless, in order for such acceptance
to constitute a valid tender of the DTC participant's Original Notes, such
participant must complete and sign a Letter of Transmittal and deliver it to the
Exchange Agent before the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Original Notes and (i) whose Original
Notes are not immediately available or (ii) who cannot deliver their Original
Notes, the Letter of Transmittal or any other required documents to the Exchange
Agent prior to the Expiration Date or (iii) who cannot complete the procedure
for book-entry transfer on a timely basis, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the registered number(s)
of such Original Notes and the principal amount of Original Notes tendered,
stating that the tender is being made thereby and guaranteeing that, within
three (3) New York Stock Exchange trading days after the Expiration Date,
the Letter of Transmittal (or facsimile thereof) together with the Original
Notes or a Book-Entry Confirmation,
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as the case may be, and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), or properly transmitted Agent's Message as well as all
tendered Original Notes in proper form for transfer or a Book-Entry
Confirmation, as the case may be, and all other documents required by the
Letter of Transmittal, are received by the Exchange Agent within three (3)
New York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Original Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Original Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
For a withdrawal to be effective, (i) a written notice of withdrawal must
be received by the Exchange Agent at one of the addresses set forth below under
'--Exchange Agent' or (ii) holders must comply with the appropriate procedures
of DTC's ATOP system. Any such notice of withdrawal must specify the name of the
person having tendered the Original Notes to be withdrawn, identify the Original
Notes to be withdrawn (including the principal amount of such Original Notes),
and (where certificates for Original Notes have been transmitted) specify the
name in which such Original Notes were registered, if different from that of the
withdrawing holder. If certificates for Original Notes have been delivered or
otherwise identified to the Exchange Agent, then, prior to the release of such
certificates the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such holder is an
Eligible Institution. If Original Notes have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Original Notes and otherwise comply with the
procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Issuers, whose determination shall be final and binding on all parties. Any
Original Notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer. Any Original Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Original Notes tendered by book-entry transfer into the Exchange Agent's account
at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Original Notes will be credited to an account
maintained with such Book-Entry Transfer Facility for the Original Notes) as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Original Notes may be retendered by following
one of the procedures described under '--Procedures for Tendering' above at any
time on or prior to the Expiration Date.
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EXCHANGE AGENT
Wilmington Trust Company has been appointed as Exchange Agent of the
Exchange Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notice of Guaranteed Delivery should be directed to the Exchange Agent addressed
as follows:
<TABLE>
<S> <C>
BY REGISTERED OR BY HAND:
BY CERTIFIED MAIL OR
OVERNIGHT COURIER: Wilmington Trust Company
c/o Harris Trust Company of
Wilmington Trust Company New York,
Corporate Trust Administration as Agent
1100 North Market Street 88 Pine Street
Wilmington, Delaware 19890-0001 19th Floor
Wall Street Plaza
New York, New York 10005
BY FACSIMILE:
Wilmington Trust Company
Corporate Trust Administration
Facsimile: (302) 651-1079
Confirm by Telephone: (302)
651-8869
Attn. Jill Rylee
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES; INDEMNIFICATION
The expenses of soliciting tenders will be borne by the Issuers. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Issuers and its affiliates.
The Issuers have not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to broker-dealers or others
soliciting acceptances of the Exchange Offer. The Issuers, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Issuers. Such expenses include registration fees, fees and
expenses of the Exchange Agent and Trustee, accounting and legal fees and
printing costs, and related fees and expenses but exclude the fees of counsel to
the Initial Purchasers.
The Issuers have agreed to indemnify the Initial Purchasers against certain
liabilities, including liabilities under the Securities Act. In addition, the
Issuers have agreed to indemnify each Participating Broker-Dealer selling
Exchange Notes during the period of 180 days after the consummation of the
Exchange Offer, the officers and directors of each such broker-dealer, and each
person, if any, who controls any such broker-dealer within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages and liabilities including reasonable
legal fees and expenses caused by, arising out of or based upon any untrue
statement or alleged untrue statement of or any omission or alleged omission to
state therein a material fact contained in the Exchange Offer Registration
Statement or this Prospectus, subject to certain restrictions.
TRANSFER TAXES
The Issuers will pay all transfer taxes, if any, applicable to the exchange
of Original Notes pursuant to the Exchange Offer. If, however, certificates
representing Original Notes for principal amounts not tendered or accepted for
exchange are to be delivered to, or are to be issued in the name of, any person
other than the
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registered holder of Original Notes tendered, or if tendered Notes are
registered in the name of any person other than the person signing the Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Original Notes pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
Holders who tender their Original Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith, except that holders who
instruct the Issuers to register Exchange Notes in the name of, or request that
Original Notes not tendered or not accepted in the Exchange Offer be returned
to, a person other than the registered tendering holder will be responsible for
the payment of any applicable transfer tax thereon.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Original Notes, as reflected in the Issuers' accounting records on the date of
the exchange. Accordingly, no gain or loss for accounting purposes will be
recognized. The expenses of the Exchange Offer and the unamortized expenses
related to the issuance of the Original Notes will be amortized over the term of
the Notes.
REGULATORY APPROVALS
The Issuers do not believe that the receipt of any material federal or
state regulatory approvals will be necessary in connection with the Exchange
Offer, other than the effectiveness of the Exchange Offer Registration Statement
under the Securities Act.
OTHER
Participation in the Exchange Offer is voluntary and holders of Original
Notes should carefully consider whether to accept the terms and conditions
thereof. Holders of the Original Notes are urged to consult their financial and
tax advisors in making their own decision on what action to take with respect to
the Exchange Offer.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Original Notes who do not exchange their Original Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Original Notes, as set forth in the legend
thereon as a consequence of the issuance of the Original Notes pursuant to the
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Original Notes may not be offered or sold, unless registered under
the Securities Act, except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. To the
extent Original Notes are tendered and accepted in the Exchange Offer, the
trading market, if any, for the Original Notes not so tendered could be
adversely affected. Upon consummation of this Exchange Offer, the Issuers have
no further obligations to provide for the registration under the Securities Act
of the Original Notes except under certain limited circumstances. These
circumstances involve Exchange Notes provided to the Initial Purchaser for those
Original Notes having the status of an unsold allotment in the initial
distribution and Exchange Notes held by Participating Broker-Dealers. Based on
interpretations by the Staff, Exchange Notes issued pursuant to the Exchange
Offer may be offered for resale, resold or otherwise transferred by holders
thereof (other than any such holder which is an 'affiliate' of the Issuers
within the meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
holders' business and such holders have no arrangement or understanding with
respect to the distribution of the Exchange Notes to be acquired pursuant to the
Exchange Offer. Any holder who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes (i) could not rely on the
applicable interpretations of the staff of the Commission and (ii) must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale transaction. Each broker-dealer that
receives Exchange
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Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. See 'Plan of Distribution.'
DESCRIPTION OF THE NOTES
The Original Notes were issued and the Exchange Notes will be issued under
an Indenture, dated as of September 30, 1997 (the 'Indenture'), by and among the
Issuers, the Subsidiary Gruarantors and Wilmington Trust Company, as trustee
(the 'Trustee'). The form and terms of the Exchange Notes will be the same as
the form and terms of the Original Notes except that (i) the Exchange Notes will
be registered under the Securities Act and hence will not bear legends
restricting the transfer thereof and (ii) the holders of the Exchange Notes will
not be entitled to certain rights of holders of Original Notes under the
Registration Rights Agreement, which rights terminate upon consummation of the
Exchange Offer. The Exchange Notes and Original Notes are referred to herein
collectively as the 'Notes.' The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the 'TIA'), as in effect on the date of the
Indenture. The Notes are subject to all such terms, and holders of the Notes are
referred to the Indenture and the TIA for a statement of them. The following is
a summary of the material terms and provisions of the Notes. This summary does
not purport to be a complete description of the Notes and is subject to the
detailed provisions of, and qualified in its entirety by reference to, the Notes
and the Indenture (including the definitions contained therein). A copy of the
Indenture and Form of Notes are filed as exhibits to the Exchange Offer
Registration Statement of which this Prospectus is a part. As used in this
'Description of the Notes,' the 'Company' refers to ACME Television, LLC, but
not its Subsidiaries. Definitions relating to certain capitalized terms are set
forth under '--Certain Definitions'. Capitalized terms that are used but not
otherwise defined herein have the meanings ascribed to them in the Indenture and
such definitions are incorporated herein by reference.
GENERAL
The Notes are joint and several obligations of the Issuers. The Notes are
limited to $175.0 million aggregate principal amount at maturity. The Notes are
general senior unsecured obligations of the Issuers, ranking pari passu in right
of payment to all future unsubordinated indebtedness of the Issuers and senior
in right of payment to any subordinated indebtedness of the Issuers. The
Original Notes were issued at a substantial discount to their aggregate
principal amount at maturity such that the gross proceeds from the issuance of
the Original Notes were approximately $127.4 million. Based on the issue price
thereof, the yield to maturity of the Notes is 10 7/8% per annum (computed on a
semi-annual bond equivalent basis).
The Notes are guaranteed, on a senior unsecured basis, as to payment of
principal, premium, if any, and interest, jointly and severally by the
Guarantors.
MATURITY, INTEREST AND PRINCIPAL
The Notes will mature on September 30, 2004. Cash interest will not accrue
or be payable on the Notes prior to September 30, 2000. Thereafter, cash
interest on the Notes will accrue at the rate of 10 7/8% per annum and will be
payable semi-annually on each March 31 and September 30, commencing March 31,
2001, to the holders of record of Notes at the close of business on the March 15
and September 15 immediately preceding such interest payment date. Cash interest
on the Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from September 30, 2000. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
As discussed under 'Exchange Offer--Registration Rights,' pursuant to the
Registration Rights Agreement, the Issuers have agreed, at their expense, for
the benefit of the holders of the Original Notes, either (i) to effect a
registered Exchange Offer under the Securities Act to exchange the Original
Notes for Exchange Notes, which will have terms identical in all material
respects to the Original Notes (except that the Exchange Notes will not contain
terms with respect to transfer restrictions) or (ii) in the event that any
changes in law or applicable interpretations of the staff of the Commission do
not permit the Issuers to effect the Exchange Offer, or if for any other reason
the Exchange Offer is not consummated with 180 days of the Issue Date, or under
certain other circumstances, to register the Original Notes for resale under the
Securities Act through a shelf registration statement (a 'Shelf Registration
Statement'). In the event that either (a) the Exchange Offer
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Registration Statement is not filed with the Commission on or prior to the 45th
day following the Issue Date, (b) the Exchange Offer Registration Statement has
not been declared effective on or prior to the 150th day following the Issue
Date, (c) the Exchange Offer is not consummated on or prior to the 180th day
following the Issue Date or (d) a Shelf Registration Statement is not declared
effective on or prior to the 180th day following the Issue Date, the Issuers
shall pay as liquidated damages to each holder of the Original Notes an amount
(the 'Damage Amount') equal to 0.50% per annum of the average Accreted Value of
the Original Notes for the first 90 days during which any such default exists,
and the Damage Amount will be increased by an additional 0.25% per annum of the
average Accreted Value of the Original Notes for each 90-day period that any
such liquidated damages continue to accrue; provided that in no event shall the
Damage Amount be increased by more than 2.0%. Upon (w) the filing of the
Exchange Offer Registration Statement in the case of clause (a) above, (x) the
effectiveness of the Exchange Offer Registration Statement in the case of clause
(b) above, (y) the consummation of the Exchange Offer in the case of clause (c)
above or (z) the effectiveness of a Shelf Registration Statement in the case of
clause (d) above, the Damage Amount will cease to accrue from the date of such
filing, effectiveness or consummation, as the case may be. Any Damage Amounts
will be payable in cash. See 'Exchange Offer-- Registration Rights.'
Original Notes that remain outstanding after the consummation of the
Exchange Offer and Exchange Notes issued in connection with the Exchange Offer
will be treated as a single class of securities under the Indenture.
OPTIONAL REDEMPTION
The Notes will be redeemable at the option of the Issuers, in whole at any
time or in part from time to time, on or after September 30, 2001 at the
following redemption prices (expressed as percentages of the principal amount of
maturity thereof), together, in each case, with accrued and unpaid interest, if
any, to the redemption date, if redeemed during the twelve-month period
beginning on September 30 of each year listed below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------- ----------
<S> <C>
2001.............................................. 105.438%
2002.............................................. 102.719%
2003 and thereafter............................... 100.000%
</TABLE>
In addition, the Issuers may redeem in the aggregate up to 35% of the
aggregate principal amount at maturity of Notes at any time and from time to
time prior to September 30, 2000 at a redemption price equal to 110.875% of the
Accreted Value thereof, out of the Net Proceeds of one or more Public Equity
Offerings; provided that not less than 65% of the aggregate principal amount at
maturity of Notes is outstanding immediately after the occurrence of any such
redemption and that any such redemption occurs within 90 days following the
closing of any such Public Equity Offering; provided that if the Public Equity
Offering shall be Common Stock of the Parent the proceeds of such Public Equity
Offering must be contributed to the Company as common equity.
In the event of a redemption of fewer than all of the Notes, the Trustee
shall select the Notes to be redeemed in compliance with the requirements of the
principal national securities exchange, if any, or while such Notes are listed,
or if such Notes are not then listed on a national securities exchange, on a pro
rata basis, by lot or in such other manner as the Trustee shall deem fair and
equitable. The Notes will be redeemable in whole or in part upon not less than
30 nor more than 60 days' prior written notice, mailed by first class mail to a
holder's last address as it shall appear on the register maintained by the
Registrar of the Notes. On and after any redemption date, Accreted Value will
cease to accrete or interest will cease to accrue, as the case may be, on the
Notes or portions thereof called for redemption unless the Issuers shall fail to
redeem any such Note.
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CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Additional Indebtedness
The Issuers will not, and will not permit any of their Subsidiaries to,
directly or indirectly, incur (as defined) any Indebtedness (including Acquired
Indebtedness); provided that if no Default or Event of Default shall have
occurred and be continuing at the time or as a consequence of the incurrence of
such Indebtedness, the Issuers may incur Indebtedness (and the Company and its
Subsidiaries may incur Acquired Indebtedness) if after giving effect to the
incurrence of such Indebtedness and the receipt and application of the proceeds
thereof, the Issuers' Consolidated Leverage Ratio is less than 7.0 to 1. The
accretion of original issue discount (and any accruals of interest) on the Notes
shall not be deemed an incurrence of Indebtedness for purposes of this covenant.
Notwithstanding the foregoing, the Issuers and their Subsidiaries may incur
Permitted Indebtedness; provided that the Issuers will not incur any Permitted
Indebtedness that ranks junior in right of payment to the Notes that has a
maturity or mandatory sinking fund payment prior to the maturity of the Notes.
The Issuers will not, and will not permit any of their Subsidiaries to,
incur any Indebtedness which by its terms (or by the terms of any agreement
governing such Indebtedness) is subordinated in right of payment to any other
Indebtedness of the Issuers or any of their Subsidiaries unless such
Indebtedness is also by its terms (or by the terms of any agreement governing
such Indebtedness) made expressly subordinate in right of payment to the Notes
or the Guarantee of such Subsidiary, as the case may be, pursuant to
subordination provisions that are substantively identical to the subordination
provisions of such Indebtedness (or such agreement) that are most favorable to
the holders of any other Indebtedness of the Company or such Subsidiary, as the
case may be.
Limitation on Restricted Payments
The Issuers will not make, and will not permit any of their Subsidiaries
to, directly or indirectly, make, any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
(b) immediately after giving pro forma effect to such Restricted
Payment, the Issuers could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under '--Limitation on Additional
Indebtedness' above; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Issue Date
does not exceed the sum of (1) 100% of the Issuer's Cumulative EBITDA minus
1.4 times the Company's Cumulative Consolidated Interest Expense, (2) 100%
of the aggregate Net Proceeds received by the Company from the issue or
sale after the Issue Date of Capital Stock (other than Disqualified Capital
Stock or Capital Stock of the Company issued to any Subsidiary of the
Company) of the Company or any Indebtedness or other securities of the
Company convertible into or exercisable or exchangeable for Capital Stock
(other than Disqualified Capital Stock) of the Company which has been so
converted, exercised or exchanged, as the case may be, and (3) without
duplication of any amounts included in clause (c)(2) above, 100% of the
aggregate Net Proceeds received by the Company from any equity contribution
from a holder of the Company's Capital Stock, excluding, in the case of
clauses (c)(2) and (3), any Net Proceeds from a Public Equity Offering to
the extent used to redeem the Notes. For purposes of determining under this
clause (c) the amount expended for Restricted Payments, cash distributed
shall be valued at the face amount thereof and property other than cash
shall be valued at its fair market value.
The provisions of this covenant shall not prohibit (i) the payment of any
distribution within 60 days after the date of declaration thereof, if at such
date of declaration such payment would comply with the provisions of the
Indenture, (ii) the repurchase, redemption or other acquisition or retirement of
any shares of Capital Stock of the Company or Indebtedness subordinated to the
Notes by conversion into, or by or in exchange for, shares of Capital Stock of
the Company (other than Disqualified Capital Stock), or out of the Net Proceeds
of the
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substantially concurrent sale (other than to a Subsidiary of the Company) of
other shares of Capital Stock of the Company (other than Disqualified Capital
Stock), (iii) the redemption or retirement of Indebtedness of the Company
subordinated to the Notes in exchange for, by conversion into, or out of the Net
Proceeds of, a substantially concurrent sale or incurrence of Indebtedness of
the Company (other than any Indebtedness owed to a Subsidiary) that is
contractually subordinated in right of payment to the Notes to at least the same
extent as the Indebtedness being redeemed or retired, (iv) the retirement of any
shares of Disqualified Capital Stock of the Company by conversion into, or by
exchange for, shares of Disqualified Capital Stock of the Company, or out of the
Net Proceeds of the substantially concurrent sale (other than to a Subsidiary of
the Company) of other shares of Disqualified Capital Stock of the Company, (v)
Permitted Tax Distributions and (vi) the forfeit of a deposit that was a
Permitted Investment under clause (viii) of the definition of 'Permitted
Investment' at the time such deposit was made; provided that in calculating the
aggregate amount of Restricted Payments made subsequent to the Issue Date for
purposes of clause (c) of the immediately preceding paragraph, amounts expended
pursuant to clauses (i), (ii) and (vi) shall be included in such calculation.
Not later than the date of making any Restricted Payment, the Issuers shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant described above were computed, which calculations may
be based upon the Issuers' latest available financial statements, and that no
Default or Event of Default has occurred and is continuing and no Default or
Event of Default will occur immediately after giving effect to any such
Restricted Payments.
Limitation on Liens
The Issuers will not, and will not permit any of their Subsidiaries to,
create, incur or otherwise cause or suffer to exist or become effective any
Liens of any kind (other than Permitted Liens) upon any property or asset of the
Issuers or any of their Subsidiaries or any shares of Capital Stock or
Indebtedness of any Subsidiary (other than Indebtedness of a Guarantor pledged
to secure other Indebtedness incurred in accordance with the Indenture) of the
Issuers which owns property or assets, now owned or hereafter acquired, unless
(i) if such Lien secures Indebtedness which is pari passu with the Notes or the
Guarantee of a Guarantor, then the Notes or such Guarantee, as the case may be,
are secured on an equal and ratable basis with the obligations so secured until
such time as such obligation is no longer secured by a Lien or (ii) if such Lien
secures Indebtedness which is subordinated to the Notes or the Guarantee of a
Guarantor, any such Lien shall be subordinated to a Lien securing the Notes or
such Guarantee, as the case may be, to the same extent as such Indebtedness is
subordinated to
the Notes.
Limitation on Investments
The Issuers will not, and will not permit any of their Subsidiaries to,
make any Investment other than (i) a Permitted Investment or (ii) an Investment
that is made as a Restricted Payment in compliance with the 'Limitation on
Restricted Payments' covenant, after the Issue Date.
Limitation on Transactions with Affiliates
The Issuers will not, and will not permit any of their Subsidiaries to,
directly or indirectly, enter into or suffer to exist any transaction or series
of related transactions (including, without limitation, the sale, purchase,
exchange or lease of assets, property or services) with any Affiliate (each an
'Affiliate Transaction') or extend, renew, waive or otherwise modify the terms
of any Affiliate Transaction entered into prior to the Issue Date unless (i)
such Affiliate Transaction is between or among the Issuers and their Wholly
Owned Subsidiaries; or (ii) the terms of such Affiliate Transaction are fair and
reasonable to the Issuers or such Subsidiary, as the case may be, and the terms
of such Affiliate Transaction are at least as favorable as the terms which could
be obtained by the Issuers or such Subsidiary, as the case may be, in a
comparable transaction made on an arm's-length basis between unaffiliated
parties. In any Affiliate Transaction (or any series of related Affiliate
Transactions which are similar or part of a common plan) involving an amount or
having a fair market value in excess of $1 million which is not permitted under
clause (i) above, the Issuers must obtain a resolution of the Board of Directors
of the Issuers certifying that such Affiliate Transaction complies with clause
(ii) above. In any Affiliate Transaction (or any series of related Affiliate
Transactions which are similar or part of a common plan) involving an amount or
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having a fair market value in excess of $5 million which is not permitted under
clause (i) above, the Issuers must obtain a favorable written opinion as to the
fairness of such transaction or transactions, as the case may be, from an
Independent Financial Advisor.
The foregoing provisions will not apply to (i) any Restricted Payment that
is not prohibited by the provisions described under '--Limitation on Restricted
Payments' above, or (ii) reasonable fees, compensation and equity incentives in
the form of Capital Stock (other than Disqualified Capital Stock) paid to and
indemnity provided on behalf of, officers, directors or employees of the Issuers
or any Subsidiary of the Issuers as determined in good faith by the Company's
Board of Directors or senior management or (iii) any agreement as in effect as
of the Issue Date or any amendment thereto or any transaction contemplated
thereby (including pursuant to any amendment thereto) in any replacement
agreement thereto so long as any such amendment or replacement agreement is not
more disadvantageous to the holders in any material respect than the original
agreement as in effect on the Issue Date or (iv) any affiliation agreements with
the WB Television Network.
Limitation on Creation of Subsidiaries
The Issuers shall not create or acquire, nor permit any of their
Subsidiaries to create or acquire, any Subsidiary other than a Subsidiary that
is acquired or created in connection with the acquisition by the Company of a
media related business or asset; provided, however, that each Subsidiary
acquired or created shall at the time it has either assets or stockholder's
equity in excess of $5,000 have evidenced its Guarantee with such documentation
satisfactory in form and substance to the Trustee relating thereto as the
Trustee shall require, including, without limitation, a supplement or amendment
to the Indenture and opinions of counsel as to the enforceability of such
Guarantee, pursuant to which such Subsidiary shall become a Guarantor. See
'--General' and '--Guarantees.'
Limitation on Certain Asset Sales
The Issuers will not, and will not permit any of their Subsidiaries to,
consummate an Asset Sale unless (i) the Issuers or such applicable Subsidiary,
as the case may be, receives consideration at the time of such sale or other
disposition at least equal to the fair market value of the assets sold or
otherwise disposed of (as determined in good faith by the Board of Directors of
the Company, and evidenced by a board resolution); (ii) not less than 80% of the
consideration received by the Company or such applicable Subsidiary, as the case
may be, is in the form of cash or Cash Equivalents other than in the case where
the Company is undertaking a Permitted Asset Swap; and (iii) the Asset Sale
Proceeds received by the Company or such Subsidiary are applied (a) first, to
the extent the Company or any such Subsidiary, as the case may be, elects, or is
required, to prepay, repay or purchase indebtedness under the Senior Credit
Facility within 180 days following the receipt of the Asset Sale Proceeds from
any Asset Sale; provided that any such repayment shall result in a permanent
reduction of the commitments thereunder in an amount equal to the principal
amount so repaid; (b) second, to the extent of the balance of Asset Sale
Proceeds after application as described above, to the extent the Company elects,
to an investment in assets (including Capital Stock or other securities
purchased in connection with the acquisition of Capital Stock or property of
another Person) used or useful in businesses similar or ancillary to the
business of the Company or any such Subsidiary as conducted on the Issue Date;
provided that (1) such investment occurs or the Company or any such Subsidiary
enters into contractual commitments to make such investment, subject only to
customary conditions (other than the obtaining of financing), within 180 days
following receipt of such Asset Sale Proceeds and (2) Asset Sale Proceeds so
contractually committed are so applied within 270 days following the receipt of
such Asset Sale Proceeds; and (c) third, if on such 180th day in the case of
clauses (iii)(a) and (iii)(b)(1) or on such 270th day in the case of clause
(iii)(b)(2) with respect to any Asset Sale, the Available Asset Sale Proceeds
exceed $5 million, the Company shall apply an amount equal to such Available
Asset Sale Proceeds to an offer to repurchase the Notes, at a purchase price in
cash equal to 100% of the Accreted Value thereof plus accrued and unpaid
interest, if any, to the purchase date (an 'Excess Proceeds Offer'). If an
Excess Proceeds Offer is not fully subscribed, the Company may retain the
portion of the Available Asset Sale Proceeds not required to repurchase Notes.
If the Issuers are required to make an Excess Proceeds Offer, the Issuers
shall mail, within 30 days following the date specified in clause (iii)(c)
above, a notice to the holders stating, among other things: (1) that such
holders have the right to require the Issuers to apply the Available Asset Sale
Proceeds to repurchase such
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Notes at a purchase price in cash equal to (x) 100% of the Accreted Value
thereof, if the applicable purchase date is on or prior to September 30, 2000,
or (y) 100% of the principal amount at maturity thereof, plus accrued and unpaid
interest, if any, to the purchase date, if the purchase date is after September
30, 2000; (2) the purchase date, which shall be no earlier than 30 days and not
later than 45 days from the date such notice is mailed; (3) the instructions
that each holder must follow in order to have such Notes purchased; and (4) the
calculations used in determining the amount of Available Asset Sale Proceeds to
be applied to the purchase of such Notes.
In the event of the transfer of substantially all of the property and
assets of the Issuers and their Subsidiaries as an entirety to a Person in a
transaction permitted under '--Merger, Consolidation or Sale of Assets' below,
the successor Person shall be deemed to have sold the properties and assets of
the Issuers and their Subsidiaries not so transferred for purposes of this
covenant, and shall comply with the provisions of this covenant with respect to
such deemed sale as if it were an Asset Sale.
The Issuers shall comply with the requirements of Rule 14e-1 under the
Exchange Act and other securities laws and regulations thereunder to the extent
such laws and regulations are applicable in connection with the repurchase of
Notes pursuant to an Excess Proceeds Offer. To the extent that the provisions of
any securities laws or regulations conflict with the 'Asset Sale' provisions of
the Indenture, the Issuers shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under the
'Asset Sale' provisions of the Indenture by virtue thereof.
Limitation on Preferred Stock of Subsidiaries
The Issuers will not permit any of their Subsidiaries to issue any
Preferred Stock (except Preferred Stock issued to the Company or a Wholly Owned
Subsidiary of the Company) or permit any Person (other than the Company or a
Wholly Owned Subsidiary of the Company) to hold any such Preferred Stock unless
the Company or such Subsidiary would be entitled to incur or assume Indebtedness
under '--Limitation on Additional Indebtedness' above (other than Permitted
Indebtedness) in the aggregate principal amount equal to the aggregate
liquidation value of the Preferred Stock to be issued.
Limitation on Capital Stock of Subsidiaries
The Issuers will not (i) sell, pledge, hypothecate or otherwise convey or
dispose of any Capital Stock of a Subsidiary of the Company or (ii) permit any
of its direct Subsidiaries to issue any Capital Stock other than to the Issuers
or a Wholly Owned Subsidiary of the Issuers. The foregoing restrictions shall
not apply to either (x) an Asset Sale made in compliance with '--Limitation on
Certain Asset Sales' above or the issuance of Preferred Stock in compliance with
'--Limitation on Preferred Stock of Subsidiaries' above or (y) a Permitted Lien.
In no event will the Company sell, pledge, hypothecate or otherwise convey or
dispose of any Capital Stock of Finance or will Finance sell any Capital Stock.
Limitation on Sale and Lease-Back Transactions
The Issuers will not, and will not permit any of their Subsidiaries to,
enter into any Sale and Lease-Back Transaction unless (i) the consideration
received in such Sale and Lease-Back Transaction is at least equal to the fair
market value of the property sold, as determined in good faith by the Board of
Directors of the Company and evidenced by a board resolution and (ii) the
Issuers could incur the Attributable Indebtedness in respect of such Sale and
Lease-Back Transaction in compliance with '--Limitation on Additional
Indebtedness' above.
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Limitation on Conduct of Business
The Issuers and their Subsidiaries will not engage in any businesses which
are not the same, similar or related to the businesses in which the Company and
its Subsidiaries are engaged on the Issue Date.
Limitation on Conduct of Business of ACME Finance Corporation
ACME Finance Corporation ('Finance') will not own any operating assets or
other properties or conduct any business other than to serve as an Issuer and an
obligor on the Notes.
Payments for Consent
The Issuers will not, and will not permit any of their Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid or
agreed to be paid to all holders of the Notes which so consent, waive or agree
to amend in the time frame set forth in solicitation documents relating to such
consent, waiver or agreement.
CHANGE OF CONTROL OFFER
Upon the occurrence of a Change of Control, the Issuers shall be obligated
to make an offer to purchase (the 'Change of Control Offer') each holder's
outstanding Notes at a purchase price (the 'Change of Control Purchase Price')
equal to (x) 101% of the Accreted Value thereof, if the Change of Control
Payment Date (as defined) is on or prior to September 30, 2000, or (y) 101% of
the principal amount at maturity, plus accrued and unpaid interest, if any, to
the Change of Control Payment Date, if the Change of Control Payment Date is
after September 30, 2000, in each case in accordance with the procedures set
forth below.
Within 20 days of the occurrence of a Change of Control, the Issuers shall
(i) cause a notice of the Change of Control Offer to be sent at least once to
the Dow Jones News Service or similar business news service in the United States
and (ii) send by first-class mail, postage prepaid, to the Trustee and to each
holder of the Notes, at the address appearing in the register maintained by the
Registrar of the Notes, a notice stating:
(1) that the Change of Control Offer is being made pursuant to this
covenant and that all Notes tendered will be accepted for payment;
(2) the Change of Control Purchase Price and the purchase date (which
shall be a Business Day no earlier than 30 days nor later than 45 days from
the date such notice is mailed (the 'Change of Control Payment Date'));
(3) that any Note not tendered will continue to accrete Accreted Value
or accrue interest, as the case may be;
(4) that, unless the Issuers default in the payment of the Change of
Control Purchase Price, any Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrete Accreted Value or accrue
interest, as the case may be, after the Change of Control Payment Date;
(5) that holders accepting the offer to have their Notes purchased
pursuant to a Change of Control Offer will be required to surrender the
Notes to the Paying Agent at the address specified in the notice prior to
the close of business on the Business Day preceding the Change of Control
Payment Date;
(6) that holders will be entitled to withdraw their acceptance if the
Paying Agent receives, not later than the close of business on the third
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
holder, the principal amount of the Notes delivered for purchase, and a
statement that such holder is withdrawing his election to have such Notes
purchased;
(7) that holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount at maturity to the unpurchased
portion principal amount at maturity of the Notes surrendered;
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(8) any other procedures that a holder must follow to accept a Change
of Control Offer or effect withdrawal of such acceptance; and
(9) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Issuers shall, to the extent
lawful, (i) accept for payment Notes or portions thereof tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent money sufficient
to pay the purchase price of all Notes or portions thereof so tendered and (iii)
deliver or cause to be delivered to the Trustee Notes so accepted together with
an Officers' Certificate stating the Notes or portions thereof tendered to the
Issuers. The Paying Agent shall promptly mail to each holder of Notes so
accepted payment in an amount equal to the purchase price for such Notes, and
the Issuers shall execute and issue, and the Trustee shall promptly authenticate
and mail to such holder, a new Note equal in principal amount at maturity to any
unpurchased portion of the Notes surrendered; provided that each such new Note
shall be issued in an original principal amount in denominations of $1,000
principal amount at maturity and integral multiples thereof.
The Indenture provides that, (A) if either Issuer or any Subsidiary thereof
has issued any outstanding (i) indebtedness that is subordinated in right of
payment to the Notes or (ii) Preferred Stock, and such Issuer or such Subsidiary
is required to make a change of control Offer or to make a distribution with
respect to such subordinated indebtedness or Preferred Stock in the event of a
change of control, the Issuers shall not consummate any such offer or
distribution with respect to such subordinated indebtedness or Preferred Stock
until such time as the Issuers shall have paid the Change of Control Purchase
Price in full to the holders of Notes that have accepted the Issuers' Change of
Control Offer and shall otherwise have consummated the Change of Control Offer
made to holders of the Notes and (B) the Issuers will not issue Indebtedness
that is subordinated in right of payment to the Notes or Preferred Stock with
change of control provisions requiring the payment of such Indebtedness or
Preferred Stock prior to the payment of the Notes in the event of a Change in
Control under the Indenture.
The Issuers comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the repurchase of Notes
pursuant to a Change of Control Offer. To the extent that the provisions of any
securities laws or regulations conflict with the 'Change of Control' provisions
of the Indenture, the Issuers shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached their obligations under
the 'Change of Control' provisions of the Indenture by virtue thereof.
MERGER, CONSOLIDATION OR SALE OF ASSETS
Neither of the Issuers will consolidate with, merge with or into, or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its assets (as an entirety or substantially as an entirety in one transaction
or a series of related transactions), to any Person unless (in the case of the
Company): (i) the Company shall be the continuing Person, or the Person (if
other than the Company) formed by such consolidation or into which the Company
is merged or to which the properties and assets of the Company are sold,
assigned, transferred, leased, conveyed or otherwise disposed of shall be a
corporation or a limited liability company organized and existing under the laws
of the United States or any State thereof or the District of Columbia and shall
expressly assume, by a supplemental indenture, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all of the obligations of the
Company under the Indenture and the Notes and the obligations thereunder shall
remain in full force and effect; provided, that at any time the Company or its
successor is a limited liability company, there shall be a co-issuer of the
Notes that is a corporation; (ii) immediately before and immediately after
giving effect to such transaction, no Default or Event of Default shall have
occurred and be continuing; (iii) immediately after giving effect to such
transaction or series of transactions on a pro forma basis, the Consolidated Net
Worth of the Company or the surviving entity as the case may be is at least
equal to the Consolidated Net Worth of the Company immediately before such
transaction or series of transactions; and (iv) immediately after giving effect
to such transaction on a pro forma basis the Company or such Person could incur
at least $1.00 of additional Indebtedness (other than Permitted Indebtedness)
under '--Certain Covenants--Limitation on Additional Indebtedness' above.
In connection with any consolidation, merger or transfer of assets
contemplated by this provision, the Issuers shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
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Trustee, an Officers' Certificate and an opinion of counsel, each stating that
such consolidation, merger or transfer and the supplemental indenture in respect
thereto comply with this provision and that all conditions precedent herein
provided for relating to such transaction or transactions have been complied
with.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries of the
Company the Capital Stock of which constitutes all or substantially all of the
properties and assets of the Company, shall be deemed to be the transfer of all
or substantially all of the properties and assets of the Company.
No Guarantor (other than a Guarantor whose Guarantee is to be released in
accordance with the terms of the Indenture as provided under '--Guarantees')
shall consolidate or merge with or into any other Person unless (i) the Person
surviving such merger (if other than the Guarantors) is a corporation or limited
liability company organized and existing under the laws of the United States or
any State thereof or the District of Columbia and shall expressly assume, by a
supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all of the obligations of such Guarantor under the
Indenture and such Guarantee and the obligations thereunder shall remain in full
force and effect; (ii) immediately before and immediately after giving effect to
such transaction, no Default or Event of Default shall have occurred and be
continuing; and (iii) immediately after giving effect to such transaction on a
pro forma basis, the Consolidated Net Worth of the Company is at least equal to
the Consolidated Net Worth of the Company immediately before such transaction.
FULL AND UNCONDITIONAL GUARANTEES
The Notes are fully and unconditionally guaranteed (each, a 'Guarantee') on
a senior basis by the Guarantors. All payments pursuant to the Guarantees by the
Guarantors are senior in right of payment to the prior payment in full of all
subordinated indebtedness of the Guarantor, to the same extent and in the same
manner that all payments pursuant to the Notes are senior in right of payment to
the prior payment in full of all subordinated indebtedness of the Issuers.
The obligations of each Guarantor are limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Guarantee or pursuant to its contribution obligations under
the Indenture, result in the obligations of such Guarantor under the Guarantee
not constituting a fraudulent conveyance or fraudulent transfer under federal or
state law. Each Guarantor that makes a payment or distribution under a Guarantee
shall be entitled to a contribution from each other Guarantor in a pro rata
amount based on the Adjusted Net Assets of each Guarantor.
A Guarantor shall be released from all of its obligations under its
Guarantee if all or substantially all of its assets are sold or all of its
Capital Stock is sold, in each case in a transaction in compliance with the
covenant described under 'Limitation on Certain Asset Sales,' or the Guarantor
merges with or into or consolidates with, or transfers all or substantially all
of its assets to, the Company or another Guarantor in a transaction in
compliance with 'Merger, Consolidation or Sale of Assets,' and such Guarantor
has delivered to the Trustee an Officers' Certificate and an opinion of counsel,
each stating that all conditions precedent herein provided for relating to such
transaction have been complied with.
EVENTS OF DEFAULT
The following events are defined in the Indenture as 'Events of Default':
(i) default in payment of any Accreted Value, principal of, or
premium, if any, on the Notes whether at maturity, upon redemption or
otherwise;
(ii) default for 30 days in payment of any interest on the Notes;
(iii) default by the Issuers or any Subsidiary of the Company in the
observance or performance of any other covenant in the Notes or the
Indenture for 30 days after written notice from the Trustee or the holders
of not less than 25% in aggregate principal amount at maturity of the Notes
then outstanding (except in the case of a default with respect to the
'Change of Control' or 'Merger, Consolidation or Sale of Assets'
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covenant which shall constitute an Event of Default with such notice
requirement but without such passage of time requirement);
(iv) failure to pay when due principal, interest or premium in an
aggregate amount of $5 million or more with respect to any Indebtedness of
the Issuers or any Subsidiary thereof, or the acceleration of any such
Indebtedness aggregating $5 million or more which default shall not be
cured, waived or postponed pursuant to an agreement with the holders of
such Indebtedness within 60 days after written notice as provided in the
Indenture, or such acceleration shall not be rescinded or annulled within
20 days after written notice as provided in the Indenture;
(v) any final judgment or judgments which can no longer be appealed
for the payment of money in excess of $5 million shall be rendered against
the Issuers or any Subsidiary thereof, and shall not be discharged for any
period of 60 consecutive days during which a stay of enforcement shall not
be in effect; and
(vi) certain events involving bankruptcy, insolvency or reorganization
of the Issuers or any Subsidiary thereof.
The Indenture provides that the Trustee may withhold notice to the holders
of the Notes of any default (except in payment of Accreted Value or principal or
premium, if any, or interest on the Notes) if the Trustee considers it to be in
the best interest of the holders of the Notes to do so.
The Indenture provides that if an Event of Default (other than an Event of
Default resulting from certain events of bankruptcy, insolvency or
reorganization with respect to either of the Issuers) shall have occurred and be
continuing, then the Trustee or the holders of not less than 25% in aggregate
principal amount at maturity of the Notes then outstanding may declare the Notes
to be immediately due and payable in an amount equal to the Accreted Value of
the Notes, premium, if any, plus accrued and unpaid interest, if any, to the
date of acceleration and the same shall become immediately due and payable;
provided, however, that after such acceleration but before a judgment or decree
based on acceleration is obtained by the Trustee, the holders of a majority in
aggregate principal amount at maturity of outstanding Notes may, under certain
circumstances, rescind and annul such acceleration if (i) all Events of Default,
other than nonpayment of Accreted Value, principal, premium, if any, or interest
that has become due solely because of the acceleration, have been cured or
waived as provided in the Indenture, (ii) to the extent the payment of such
interest is lawful, interest on overdue installments of interest and overdue
principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (iii) if the Issuers have paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (iv) in the event of the cure or waiver of an
Event of Default of the type described in clause (vi) of the above Events of
Default, the Trustee shall have received an officers' certificate and an opinion
of counsel that such Event of Default has been cured or waived. No such
rescission shall affect any subsequent Default or impair any right consequent
thereto. In case an Event of Default resulting from certain events of
bankruptcy, insolvency or reorganization shall occur, the Accreted Value or
principal and all premium and interest with respect to all of the Notes shall be
due and payable immediately without any declaration or other act on the part of
the Trustee or the holders of the Notes.
The holders of a majority in principal amount at maturity of the Notes then
outstanding shall have the right to waive any existing default or Event of
Default and its consequences or compliance with any provision of the Indenture
or the Notes and to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, subject to certain
limitations provided for in the Indenture and under the TIA.
No holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless the holders of at least 25% in aggregate principal amount at
maturity of the outstanding Notes shall have made written request and offered
reasonable indemnity to the Trustee to institute such proceeding as Trustee, and
unless the Trustee shall not have received from the holders of a majority in
aggregate principal amount at maturity of the outstanding Notes a direction
inconsistent with such request and shall have failed to institute such
proceeding within 30 days. Notwithstanding the foregoing, such limitations do
not apply to a suit instituted on such Note on or after the respective due dates
expressed in such Note.
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DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides the Issuers may elect either (a) to defease and be
discharged from any and all of its obligations with respect to the Notes (except
for the obligations to register the transfer or exchange of such Notes, to
replace temporary or mutilated, destroyed, lost or stolen Notes, to maintain an
office or agency in respect of the Notes and to hold monies for payment in
trust) ('defeasance') or (b) to be released from its obligations with respect to
the Notes under certain covenants contained in the Indenture ('covenant
defeasance') upon the deposit with the Trustee (or other qualifying trustee), in
trust for such purpose, of money and/or non-callable U.S. government obligations
which through the payment of Accreted Value and interest in accordance with
their terms will provide money, in an amount sufficient to pay the Accreted
Value of, premium, if any, and interest on the Notes, on the scheduled due dates
therefor or on a selected date of redemption in accordance with the terms of the
Indenture. Such a trust may only be established if, among other things, (i) the
Issuers have delivered to the Trustee an opinion of counsel (as specified in the
Indenture) (A) to the effect that neither the trust nor the Trustee will be
required to register as an investment company under the Investment Company Act
of 1940, as amended, and (B) describing either a private ruling concerning the
Notes or a published ruling of the Internal Revenue Service, to the effect that
holders of the Notes or persons in their positions will not recognize income,
gain or loss for federal income tax purposes as a result of such deposit,
defeasance and discharge and will be subject to federal income tax on the same
amount and in the same manner and at the same times, as would have been the case
if such deposit, defeasance and discharge had not occurred, (ii) no Default or
Event of Default shall have occurred and be continuing on the date of such
deposit or insofar as Events of Default from bankruptcy, insolvency or
reorganization events are concerned, at any time in the period ending on the
91st day after the date of deposit; (iii) such defeasance or covenant defeasance
shall not result in a breach or violation of, or constitute a default under the
Indenture or any other material agreement or instrument to which the Issuers or
any of their Subsidiaries is a party or by which the Issuers or any of their
Subsidiaries is bound; (iv) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the Issuers with
the intent of preferring the holders of the Notes over any other creditors of
the Issuers or with the intent of defeating, hindering, delaying or defrauding
any other creditors of the Issuers or others; (v) the Issuers shall have
delivered to the Trustee an Officers' Certificate and an opinion of counsel,
each stating that all conditions precedent provided for or relating to the
defeasance or the covenant defeasance have been complied with; (vi) the Issuers
shall have delivered to the Trustee an opinion of counsel to the effect that (A)
the trust funds will not be subject to any rights of holders of Indebtedness,
including, without limitation, those arising under the Indenture and (B) after
the 91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; and (vii) certain other customary
conditions precedent are satisfied.
MODIFICATION OF INDENTURE
From time to time, the Issuers and the Trustee may, without the consent of
holders of the Notes, amend or supplement the Indenture for certain specified
purposes, including providing for uncertificated Notes in addition to
certificated Notes, and curing any ambiguity, defect or inconsistency, or making
any other change that does not materially and adversely affect the rights of any
holder. The Indenture contains provisions permitting the Issuers and the
Trustee, with the consent of holders of at least a majority in principal amount
at maturity of the outstanding Notes, to modify or supplement the Indenture,
except that no such modification shall, without
the consent of each holder affected thereby, (i) reduce the amount of Notes
whose holders must consent to an amendment, supplement, or waiver to the
Indenture, (ii) reduce the rate of or change the time for payment of interest,
including defaulted interest, on any Note, (iii) reduce the Accreted Value of or
premium on or change the stated maturity of any Note or change the date on which
any Notes may be subject to redemption or repurchase or reduce the redemption or
repurchase price therefor, (iv) make any Note payable in money other than that
stated in the Note or change the place of payment from New York, New York, (v)
waive a default on the payment of the Accreted Value of, interest on, or
redemption payment with respect to any Note, (vi) make any change in provisions
of the Indenture protecting the right of each holder of Notes to receive payment
of Accreted Value of and interest on such Note on or after the due date thereof
or to bring suit to enforce such payment, or permitting holders of a majority in
principal amount at maturity of Notes to waive Defaults or Events of Default; or
(vii) modify or change any provision of the Indenture or the related definitions
affecting the ranking of the Notes or any Guarantee in a manner which adversely
affects the holders of Notes.
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REPORTS TO HOLDERS
So long as the Issuers are subject to the periodic reporting requirements
of the Exchange Act, they will continue to furnish the information required
thereby to the Commission and to the holders of the Notes. The Indenture
provides that even if the Issuers are entitled under the Exchange Act not to
furnish such information to the Commission or to the holders of the Notes, they
will nonetheless continue to furnish such information to the Commission and
holders of the Notes.
COMPLIANCE CERTIFICATE
The Issuers will deliver to the Trustee on or before 90 days after the end
of the Issuers' fiscal year and on or before 45 days after the end of each the
first, second and third fiscal quarters in each year an Officers' Certificate
stating whether or not the signers know of any Default or Event of Default that
has occurred. If they do, the certificate will describe the Default or Event of
Default, its status and the intended method of cure, if any.
THE TRUSTEE
The Trustee under the Indenture is the Registrar and Paying Agent with
regard to the Notes. The Indenture provides that, except during the continuance
of an Event of Default, the Trustee will perform only such duties as are
specifically set forth in the Indenture. During the existence of an Event of
Default, the Trustee will exercise such rights and powers vested in it under the
Indenture and use the same degree of care and skill in its exercise as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs.
TRANSFER AND EXCHANGE
Holders of the Notes may transfer or exchange Notes in accordance with the
Indenture. The Registrar under such Indenture may require a holder, among other
things, to furnish appropriate endorsements and transfer documents, and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
is not required to transfer or exchange any Note selected for redemption and,
further, is not required to transfer or exchange any Note for a period of 15
days before selection of the Notes to be redeemed.
The Notes will be issued in a transaction exempt from registration under
the Act and will be subject to the restrictions on transfer described in 'Notice
to Investors.'
The registered holder of a Note may be treated as the owner of it for all
purposes.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms as well as any other capitalized terms used herein for which no
definition is provided.
'Accreted Value' means, as of any date prior to September 30, 2000, an
amount per $1,000 principal amount at maturity of Notes that is equal to the sum
of (a) $727.83 and (b) the portion of the excess of the principal amount at
maturity of each Note over $727.83 which shall have been amortized on a daily
basis and compounded semiannually on each March 31 and September 30 at the rate
of 10 7/8% per annum from the Issue Date through the date of determination
computed on the basis of a 360-day year of twelve 30-day months; and, as of any
date on or after September 30, 2000, the Accreted Value of each Note shall mean
the aggregate principal amount at maturity of such Note.
'Acquired Indebtedness' means Indebtedness of a Person existing at the time
such Person becomes a Subsidiary or is merged into or consolidated with any
other Person or which is assumed in connection with the acquisition of assets
from such Person and, in each case, not incurred by such Person in connection
with, or in anticipation or contemplation of, such Person becoming a Subsidiary
or such merger, consolidation or acquisition.
'Adjusted Net Assets' of a Guarantor at any date shall mean the lesser of
the amount by which (x) the fair value of the property of such Guarantor exceeds
the total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities),
but excluding liabilities
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under the Guarantee, of such Guarantor at such date and (y) the present fair
salable value of the assets of such Guarantor at such date exceeds the amount
that will be required to pay the probable liability of such Guarantor on its
debts (after giving effect to all other fixed and contingent liabilities and
after giving effect to any collection from any Subsidiary of such Guarantor in
respect of the obligations of such Subsidiary under the Guarantee), excluding
Indebtedness in respect of the Guarantee, as they become absolute and matured.
'Affiliate' means, with respect to any specific Person, any other Person
that directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. For the
purposes of this definition, 'control' (including, with correlative meanings,
the terms 'controlling,' 'controlled by,' and 'under common control with'), as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement or
otherwise; provided that, for purposes of the covenant described under
'--Certain Covenants--Limitation on Transactions with Affiliates' beneficial
ownership of at least 10% of the voting securities of a Person, either directly
or indirectly, shall be deemed to
be control.
'Asset Acquisition' means (a) an Investment by the Issuers or any
Subsidiary of the Issuers in any other Person pursuant to which such Person
shall become a Subsidiary of the Issuers or any Subsidiary of the Issuers, or
shall be merged with or into the Issuers or any Subsidiary of the Issuers or (b)
the acquisition by the Issuers or any Subsidiary of the Issuers of the assets of
any Person (other than a Subsidiary of the Issuers) which constitute all or
substantially all of the assets of such Person or comprise any division or line
of business of such Person or any other properties or assets of such Person or
any other properties or assets of such Person other than in the ordinary course
of business.
'Asset Sale' means any direct or indirect sale, issuance, conveyance,
assignment, transfer, lease or other disposition (including any Sale and
Lease-Back Transaction), other than to the Company or any of its Wholly Owned
Subsidiaries, in any single transaction or series of related transactions of (a)
any Capital Stock of or other equity interest in any Subsidiary of the Company
or (b) any other property or assets of the Company or of any Subsidiary thereof;
provided that Asset Sales shall not include (i) a transaction or series of
related transactions for which the Company or its Subsidiaries receive aggregate
consideration of less than $500,000 and (ii) the sale, lease, conveyance,
disposition or other transfer of all or substantially all of the assets of the
Company as permitted under '--Merger, Consolidation or Sale of Assets.'
'Asset Sale Proceeds' means, with respect to any Asset Sale, (i) cash
received by the Issuers or any Subsidiary of the Issuers from such Asset Sale
(including cash received as consideration for the assumption of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such Asset
Sale, (b) payment of all brokerage commissions, underwriting and other fees and
expenses related to such Asset Sale, (c) provision for minority interest holders
in any Subsidiary of the Issuers as a result of such Asset Sale, (d) repayment
of Indebtedness that is required to be repaid in connection with such Asset Sale
and (e) deduction of appropriate amounts to be provided by the Issuers or a
Subsidiary of the Issuers as a reserve, in accordance with GAAP, against any
liabilities associated with the assets sold or disposed of in such Asset Sale
and retained by the Issuers or a Subsidiary after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters or against any indemnification
obligations associated with the assets sold or disposed of in such Asset Sale,
and (ii) promissory notes and other noncash consideration received by the
Issuers or any Subsidiary of the Issuers from such Asset Sale or other
disposition upon the liquidation or conversion of such notes or noncash
consideration into cash.
'Attributable Indebtedness' in respect of a Sale and Lease-Back Transaction
means, as at the time of determination, the greater of (i) the fair value of the
property subject to such arrangement and (ii) the present value of the notes
(discounted at the rate borne by the Notes, compounded semi-annually) of the
total obligations of the lessee for rental payments during the remaining term of
the lease included in such Sale and Lease-Back Transaction (including any period
for which such lease has been extended).
'Available Asset Sale Proceeds' means, with respect to any Asset Sale, the
aggregate Asset Sale Proceeds from such Asset Sale that have not been applied in
accordance with clauses (iii)(a) or (iii)(b), and which have not
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yet been the basis for an Excess Proceeds Offer in accordance with clause
(iii)(c) of the first paragraph of '--Certain Covenants--Limitation on Certain
Asset Sales'.
'Board of Directors' means (i) in the case of a Person that is a
corporation, the board of directors of such Person and (ii) in the case of any
other Person, the board of directors, board of managers, management committee or
similar governing body or any authorized committee thereof responsible for the
management of the business and affairs of such Person.
'Capital Stock' means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated and whether
or not voting) of corporate stock, partnership or limited liability company
interests or any other participation, right or other interest in the nature of
an equity interest in such Person including, without limitation, Common Stock
and Preferred Stock of such Person, or any option, warrant or other security
convertible into any of the foregoing.
'Capitalized Lease Obligations' means with respect to any Person,
Indebtedness represented by obligations under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such Indebtedness shall be the capitalized amount of such obligations
determined in accordance with GAAP.
'Cash Equivalents' means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America 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 one of the two highest ratings
obtainable from either Standard & Poor's Corporation ('S&P') or Moody's
Investors Service, Inc. ('Moody's'); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any bank organized under the laws of
the United States of America or any state thereof or the District of Columbia or
any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $250,000,000; (v) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
A 'Change of Control' means the occurrence of any of the following: (i) the
adoption of a plan relating to the liquidation or dissolution of Holdings or the
Company or Holdings shall cease to be the managing member of the Company, (ii)
prior to the consummation of an Initial Public Offering, the Permitted Holders
cease to be the beneficial owners (as defined under Rule 13d-3 or any successor
rule or regulation promulgated under the Exchange Act) of at least a majority of
the total voting power of the Common Stock entitled to elect the Board of
Directors of Holdings, (iii) prior to the consummation of an Initial Public
Offering, the Permitted Holders shall cease collectively to control at least a
majority of the voting power of the Board of Directors of Holdings and (iv) in
connection with or after an Initial Public Offering, any Person (including a
Person's Affiliates and associates), other than a Permitted Holder, becomes the
beneficial owner of more than 20% of the total voting power of the Common Stock
of Holdings or the Company, and the Permitted Holders beneficially own, in the
aggregate, less than 30% of the total voting power of Holdings or the Company,
as the case may be.
'Common Stock' of any Person means all Capital Stock of such Person that is
generally entitled to (i) vote in the election of directors of such Person or
(ii) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control
the management and policies of such Person.
'Consolidated Interest Expense' means, with respect to any Person, for any
period, the aggregate amount of interest which, in conformity with GAAP, would
be set forth opposite the caption 'interest expense' or any like caption on an
income statement for such Person and its Subsidiaries on a consolidated basis
(including, but not limited to, (i) Redeemable Dividends, whether paid or
accrued, on Subsidiary Preferred Stock, (ii) imputed interest included in
Capitalized Lease Obligations, (iii) all commissions, discounts and other fees
and charges
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owed with respect to letters of credit and bankers' acceptance financing, (iv)
the net costs associated with Interest Rate Agreements and other hedging
obligations, (v) amortization of other financing fees and expenses, (vi) the
interest portion of any deferred payment obligation, (vii) amortization of
discount or premium, if any, and (viii) all other non-cash interest expense
(other than interest amortized to cost of sales)) plus, without duplication, all
net capitalized interest for such period and all interest incurred or paid under
any guarantee of Indebtedness (including a guarantee of principal, interest or
any combination thereof) of any Person, plus the amount of all dividends or
distributions paid on Disqualified Capital Stock (other than dividends paid or
payable in shares of Capital Stock of the Company).
'Consolidated Leverage Ratio' means, with respect to any Person, the ratio
of (i) the sum of the aggregate outstanding amount of Indebtedness of such
Person and its Subsidiaries as of the date of calculation (the 'Transaction
Date') on a consolidated basis determined in accordance with GAAP to (ii) such
Person's EBITDA for the four full fiscal quarters (the 'Four Quarter Period')
ending on or prior to the date of determination for which financial statements
are available. For purposes of this definition, 'EBITDA' shall be calculated
after giving effect on a pro forma basis to (i) the incurrence or repayment of
any Indebtedness of such Person or any of its Subsidiaries (and the application
of the proceeds thereof) giving rise to the need to make such calculation and
any incurrence or repayment of other Indebtedness (and the application of the
proceeds thereof), other than the incurrence or repayment of Indebtedness in the
ordinary course of business for working capital purposes pursuant to working
capital facilities, occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such incurrence or repayment, as the case may be (and
the application of the proceeds thereof), occurred on the first day of the Four
Quarter Period and (ii) any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Subsidiaries (including any
Person who becomes a Subsidiary as a result of the Asset Acquisition) incurring,
assuming or otherwise being liable for Acquired Indebtedness and also including
any EBITDA (provided that such EBITDA shall be included only to the extent
includable pursuant to the definition of 'Consolidated Net Income') attributable
to the assets which are the subject of the Asset Acquisition or Asset Sale
during the Four Quarter Period) occurring during the Four Quarter Period or at
any time subsequent to the last day of the Four Quarter Period and on or prior
to the Transaction Date, as if such Asset Sale or Asset Acquisition (including
the incurrence, assumption or liability for any such Acquired Indebtedness)
occurred on the first day of the Four Quarter Period; provided that if any such
Asset Acquisition relates to the acquisition of a television broadcast station
which is not an affiliate of a Network and which had a negative Net Income for
the Four Quarter Period, it may be assumed, for purposes of such pro forma
calculation, that the Net Income of such station for such period was zero. If
such Person or any of its Subsidiaries directly or indirectly guarantees
Indebtedness of a third Person, the preceding sentence shall give effect to the
incurrence of such guaranteed Indebtedness as if such Person or any Subsidiary
of such Person had directly incurred or otherwise assumed such guaranteed
Indebtedness.
'Consolidated Net Income' means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided, however, that (a) the Net Income of any Person (the 'other Person') in
which the Person in question or any of its Subsidiaries has less than a 100%
interest (which interest does not cause the Net Income of such other Person to
be consolidated into the Net Income of the Person in question in accordance with
GAAP) shall be included only to the extent of the amount of dividends or
distributions paid to the Person in question or the Subsidiary, (b) the Net
Income of any Subsidiary of the Person in question that is subject to any
restriction or limitation on the payment of dividends or the making of other
distributions shall be excluded to the extent of such restriction or limitation,
(c)(i) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition and (ii) any
net gain (but not loss) resulting from an Asset Sale by the Person in question
or any of its Subsidiaries other than in the ordinary course of business shall
be excluded, (d) extraordinary gains and losses shall be excluded, (e) income or
loss attributable to discontinued operations (including, without limitation,
operations disposed of during such period whether or not such operations were
classified as discontinued) shall be excluded, and (f) in the case of a
successor to the referent Person by consolidation or merger or as a transferee
of the referent Person's assets, any earnings of the successor corporation prior
to such consolidation, merger or transfer of assets shall be excluded.
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'Consolidated Net Worth' means with respect to any Person at any date, the
consolidated stockholders' equity or members' capital of such Person less the
amount of such stockholders' equity or members' capital attributable to
Disqualified Capital Stock of such Person and its subsidiaries, as determined in
accordance with GAAP.
'Cumulative Consolidated Interest Expense' means, with respect to any
Person, as of any date of determination, Consolidated Interest Expense from
October 1, 1997 to the end of the Company's most recently ended full fiscal
quarter prior to such date, taken as a single accounting period.
'Cumulative EBITDA' means, with respect to any Person, as of any date of
determination, EBITDA from October 1, 1997 to the end of the Company's most
recently ended full fiscal quarter prior to such date, taken as a single
accounting period.
'Disqualified Capital Stock' means any Capital Stock of a Person or a
Subsidiary thereof which, by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable at the option of the
holder), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
maturity date of the Notes, for cash or securities constituting Indebtedness.
Without limitation of the foregoing, Disqualified Capital Stock shall be deemed
to include any Preferred Stock of a Person or a Subsidiary of such Person, with
respect to either of which, under the terms of such Preferred Stock, by
agreement or otherwise, such Person or Subsidiary is obligated to pay current
dividends or distributions in cash during the period prior to the maturity date
of the Notes; provided, however, that (i) Preferred Stock of a Person or any
Subsidiary thereof that is issued with the benefit of provisions requiring a
change of control offer to be made for such Preferred Stock in the event of a
change of control of such Person or Subsidiary which provisions have
substantially the same effect as the provisions of the Indenture described under
'Change of Control,' shall not be deemed to be Disqualified Capital Stock solely
by virtue of such provisions; and (ii) Capital Stock of any limited liability
company or other pass through entity for federal income tax purposes shall not
be deemed to be Disqualified Capital Stock solely by virtue of the fact that its
holders are entitled to Permitted Tax Distributions.
'EBITDA' means, with respect to any Person and its Subsidiaries, for any
period, an amount equal to (a) the sum of (i) Consolidated Net Income for such
period, plus (ii) the provision for taxes for such period based on income or
profits to the extent such income or profits were included in computing
Consolidated Net Income and any provision for taxes utilized in computing net
loss under clause (i) hereof, plus (iii) Consolidated Interest Expense for such
period (but only including Redeemable Dividends in the calculation of such
Consolidated Interest Expense to the extent that such Redeemable Dividends have
not been excluded in the calculation of Consolidated Net Income), plus (iv)
depreciation for such period on a consolidated basis, plus (v) amortization of
intangibles and television programming obligations (net of cash payments with
respect to television programming obligations) for such period on a consolidated
basis, plus (vi) any other non-cash items reducing Consolidated Net Income for
such period, minus (b) all non-cash items increasing Consolidated Net Income for
such period, all for such Person and its Subsidiaries determined on a
consolidated basis in accordance with GAAP; provided, however, that, for
purposes of calculating EBITDA during any fiscal quarter, cash income from a
particular Investment of such Person shall be included only (x) if cash income
has been received by such Person with respect to such Investment during each of
the previous four fiscal quarters, or (y) if the cash income derived from such
Investment is attributable to Cash Equivalents.
'Exchange Act' means the Securities Exchange Act of 1934, as amended and
the rules and regulations of the Commission promulgated thereunder.
'fair market value' means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Company acting reasonably
and in good faith and shall be evidenced by a resolution of the Board of
Directors of the Company delivered to the Trustee.
'GAAP' means generally accepted accounting principles consistently applied
as in effect in the United States from time to time.
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'incur' means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other obligation on the balance sheet of such Person (and
'incurrence,' 'incurred,' 'incurrable,' and 'incurring' shall have meanings
correlative to the foregoing); provided that a change in GAAP that results in an
obligation of such Person that exists at such time becoming Indebtedness shall
not be deemed an incurrence of such Indebtedness.
'Indebtedness' means (without duplication), with respect to any Person, any
indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
property (excluding, without limitation, any balances that constitute accounts
payable or trade payables, and other accrued liabilities arising in the ordinary
course of business) if and to the extent any of the foregoing indebtedness would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP, and shall also include, to the extent not otherwise included (i) any
Capitalized Lease Obligations of such Person, (ii) obligations secured by a lien
to which the property or assets owned or held by such Person is subject, whether
or not the obligation or obligations secured thereby shall have been assumed,
(iii) guarantees of items of other Persons which would be included within this
definition for such other Persons (whether or not such items would appear upon
the balance sheet of the guarantor), (iv) all obligations for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (v) Disqualified Capital Stock of such Person or any Subsidiary
thereof, and (vi) obligations of any such Person under any currency agreement or
any Interest Rate Agreement applicable to any of the foregoing (if and to the
extent such currency agreement or Interest Rate Agreement obligations would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP). The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and, with respect to contingent obligations, the maximum liability upon
the occurrence of the contingency giving rise to the obligation; provided that
(i) the amount outstanding at any time of any Indebtedness issued with original
issue discount is the principal amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP and (ii) Indebtedness shall not
include any liability for federal, state, local or other taxes. Notwithstanding
any other provision of the foregoing definition, (i) any trade payable arising
from the purchase of goods or materials or for services obtained and (ii)
television programming obligations entered into in the ordinary course of
business shall not be deemed to be 'Indebtedness' of the Company or any of its
Subsidiaries for purposes of this definition. Furthermore, guarantees of (or
obligations with respect to letters of credit supporting) Indebtedness otherwise
included in the determination of such amount shall not also be included.
'Independent Financial Advisor' means an investment banking firm of
national reputation in the United States (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
'Initial Public Offering' means an underwritten public offering of Common
Stock of the Company or a Parent registered under the Securities Act (other than
a public offering registered on Form S-8 under the Securities Act) that results
in net proceeds of at least $25.0 million to the Company or such Parent, as the
case may be.
'Interest Rate Agreement' means, with respect to any Person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement designed to protect the party indicated therein
against fluctuations in interest rates.
'Investments' means, with respect of any Person, directly or indirectly,
any advance, account receivable (other than an account receivable arising in the
ordinary course of business of such Person), loan or capital contribution to (by
means of transfers of property to others, payments for property or services for
the account or use of others or otherwise), the purchase of any Capital Stock,
bonds, notes, debentures, partnership or joint venture interests or other
securities of, the acquisition, by purchase or otherwise, of all or
substantially all of the
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business or assets or stock or other evidence of beneficial ownership of, any
Person or the making of any investment in any Person. Investments shall exclude
(i) extensions of trade credit on commercially reasonable terms in accordance
with normal trade practices of such Person and (ii) the repurchase of securities
of any Person by such Person. For the purposes of the 'Limitation on Restricted
Payments' covenant, the amount of any Investment shall be the original cost of
such Investment plus the cost of all additional Investments by the Issuers or
any of their Subsidiaries, without any adjustments for increases or decreases in
value, or write-ups, write-downs or write-offs with respect to such Investment,
reduced by the payment of dividends or distributions in connection with such
Investment or any other amounts received in respect of such Investment; provided
that no such payment of dividends or distributions or receipt of any such other
amounts shall reduce the amount of any Investment if such payment of dividends
or distributions or receipt of any such amounts would be included in
Consolidated Net Income. If the Issuers or any Subsidiary of the Issuers sells
or otherwise disposes of any Common Stock of any direct or indirect Subsidiary
of the Issuers such that, after giving effect to any such sale or disposition,
the Issuers no longer own, directly or indirectly, greater than 50% of the
outstanding Common Stock of such Subsidiary, the Issuers shall be deemed to have
made an Investment on the date of any such sale or disposition equal to the fair
market value of the Common Stock of such Subsidiary not sold or disposed of.
'Issue Date' means the date the Original Notes were first issued by the
Issuers and authenticated by the Trustee under the Indenture.
'Lien' means, with respect to any property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
'Net Income' means, with respect to any Person, for any period, the net
income (loss) of such Person determined in accordance with GAAP.
'Net Proceeds' means (a) in the case of any sale of Capital Stock by or
equity contribution to any Person, the aggregate net proceeds received by such
Person, after payment of expenses, commissions and the like incurred in
connection therewith, whether such proceeds are in cash or in property (valued
at the fair market value thereof, as determined in good faith by the Board of
Directors of such Person, at the time of receipt) and (b) in the case of any
exchange, exercise, conversion or surrender of outstanding securities of any
kind for or into shares of Capital Stock of the Issuers which is not
Disqualified Capital Stock, the net book value of such outstanding securities on
the date of such exchange, exercise, conversion or surrender (plus any
additional amount required to be paid by the holder to such Person upon such
exchange, exercise, conversion or surrender, less any and all payments made to
the holders, e.g., on account of fractional shares and less all expenses
incurred by such Person in connection therewith).
'Network' means (i) each of the American Broadcasting Company, CBS, Inc.,
Fox Broadcasting Company, National Broadcasting Co., Inc., The WB Television
Network, United Paramount Network and (ii) any successor Person of a Person
identified in clause (i) of this definition.
'Officers' Certificate' means, with respect to any Person, a certificate
signed by the Chief Executive Officer, the President or any Vice President and
the Chief Financial Officer or any Treasurer of such Person that shall comply
with applicable provisions of the Indenture.
'Parent' means any Person which owns all or substantially all of the Common
Stock of the Company.
'Permitted Asset Swap' means any transfer of properties or assets by the
Company or any of its Subsidiaries in which 90% of the consideration received by
the transferor consists of properties or assets (other than cash) that will be
used in the business of the transferor; provided, that (i) the aggregate fair
market value (as determined in good faith by the Board of Directors of Holdings)
of the property or assets being transferred by the Company or such Subsidiary is
not greater than the aggregate fair market value (as determined in good faith by
the Board of Directors) of the property or assets received by the Company or
such Subsidiary in such exchange and (ii) the aggregate fair market value (as
determined in good faith by the Board of Directors) of all property or assets
transferred by the Company and any of its Subsidiaries in connection with
exchanges in any period of
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twelve consecutive months shall not exceed 15% of the total assets of the
Company on the last day of the preceding fiscal year.
'Permitted Holders' means (i) BancBoston Capital, (ii) Alta Communications,
Inc., Alta Communications, VI L.P., Alta-Comm S by S, LLC, Alta Subordinated
Debt Partners III, L.P., (iii) CEA Capital Partners, CEA Capital Partners USA,
L.P., (iv) Trust Company of the West, (v) any Person controlled or managed by a
Person identified in clauses (i)-(iv) of this definition, (vi) Jamie Kellner,
(vii) Douglas Gealy, (viii) Thomas Allen, (ix) ACME Parent and (x) any
partnership, corporation or other entity all of the partners, shareholders,
members or owners of which are any one or more of the foregoing.
'Permitted Indebtedness' means:
(i) Indebtedness of the Company or any Subsidiary of the Company
arising under or in connection with the Senior Credit Facility in an
aggregate principal amount not to exceed $40 million outstanding at any
time;
(ii) Indebtedness under the Notes;
(iii) Indebtedness not covered by any other clause of this definition
which is outstanding on the Issue Date;
(iv) Indebtedness of the Company to any Wholly Owned Subsidiary and
Indebtedness of any Wholly Owned Subsidiary to the Company or another
Wholly Owned Subsidiary;
(v) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire property in the ordinary course of business which
Purchase Money Indebtedness and Capitalized Lease Obligations do not in the
aggregate exceed $20 million;
(vi) Interest Rate Agreements;
(vii) Refinancing Indebtedness;
(viii) additional Indebtedness of the Company and its Subsidiaries not
to exceed $5 million in aggregate principal amount at any one time
outstanding;
(ix) fidelity and surety bonds incurred in the ordinary course of
business; and
(x) any guarantee by a Guarantor of Indebtedness of the Company
incurred in accordance with the Indenture.
'Permitted Investments' means Investments made on or after the Issue Date
consisting of:
(i) Investments by the Company, or by a Subsidiary thereof, in the
Company or a Subsidiary of the Company;
(ii) Investments by the Company, or by a Subsidiary thereof, in a
Person, if as a result of such Investment (a) such Person becomes a
Subsidiary of the Company or (b) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Subsidiary thereof;
(iii) Investments in cash and Cash Equivalents;
(iv) reasonable and customary loans made to employees in connection
with their relocation or for travel expenses or advances not to exceed $1
million in the aggregate at any one time outstanding;
(v) an Investment that is made by the Company or a Subsidiary thereof
in the form of any Capital Stock, bonds, notes, debentures, partnership or
joint venture interests or other securities that are issued by a third
party to the Company or such Subsidiary solely as partial consideration for
the consummation of an Asset Sale that is otherwise permitted under
'--Certain Covenants--Limitation on Certain Asset Sales' above;
(vi) Interest Rate Agreements entered into in the ordinary course of
the Company's or its Subsidiaries business;
(vii) options to purchase television broadcast station licenses and
related assets (or Capital Stock of Persons owning such assets) having an
exercise price of any amount not in excess of $100,000 entered into
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in connection with the execution of local marketing agreements and
Investments pursuant to local marketing agreements to operate television
broadcast stations which are combined with such an option;
(viii) deposits made pursuant to legally binding agreements to
acquire, or pursuant to local marketing agreements with options to acquire,
broadcast television station licenses and related assets (or Capital Stock
of Persons owning such assets), in an amount not to exceed 10% of the
purchase price; provided that the station to be acquired will be owned by
the Company or a Restricted Subsidiary upon consummation of the
contemplated acquisition and provided, further, that deposits made under
this clause shall cease to be treated as Permitted Investments upon forfeit
of such deposit for any reason; and
(ix) additional Investments not to exceed $1 million at any one time
outstanding.
'Permitted Liens' means the following types of Liens:
(a) Liens for taxes, assessments or governmental charges or claims
either (i) not delinquent or (ii) contested in good faith by appropriate
proceedings and as to which the Company or a Subsidiary of the Company, as
the case may be, shall have set aside on its books such reserves as may be
required pursuant to GAAP;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(c) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(d) judgment Liens not giving rise to an Event of Default;
(e) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Subsidiaries;
(f) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(g) Liens securing Purchase Money Indebtedness of the Company or any
Subsidiary; provided, however, that (i) the Purchase Money Indebtedness
shall not be secured by any property or assets of the Company or any
Subsidiary of the Company other than the property and assets so acquired
and (ii) the Lien securing such Indebtedness shall be created within 90
days of such acquisition;
(h) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(i) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company
or any of its Subsidiaries, including rights of offset and set-off;
(j) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
(k) Liens securing Indebtedness under the Senior Credit Facility;
(l) Liens securing Acquired Indebtedness incurred in accordance with
the covenant described under '--Certain Covenants--Limitation on Incurrence
of Additional Indebtedness;' provided that (i) such Liens secured such
Acquired Indebtedness at the time of and prior to the incurrence of such
Acquired Indebtedness by the Company or a Subsidiary of the Company and
were not granted in connection with, or in anticipation of, the incurrence
of such Acquired Indebtedness by the Company or a Subsidiary of the Company
and (ii) such Liens do not extend to or cover any property or assets of the
Company or of any of its Subsidiaries
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other than the property or assets that secured the Acquired Indebtedness
prior to the time such Indebtedness became Acquired Indebtedness of the
Company or a Subsidiary of the Company and are no more favorable to the
lienholders than those securing the Acquired Indebtedness prior to the
incurrence of such Acquired Indebtedness by the Company or a Subsidiary of
the Company.
'Permitted Tax Distributions' means, subject to the limitations set forth
in clause (v) of the second paragraph under 'Certain Covenants--Limitation on
Restricted Payments,' distributions by the Company to ACME Intermediate
Holdings, LLC ('ACME Intermediate') from time to time in an amount approximately
equal to the income tax liability (or interest or penalties thereon) of the
members of ACME Intermediate and ACME Television Holdings, LLC ('ACME Parent')
resulting from (i) the taxable income of the Company (after taking into account
all of the Company's prior tax losses, to the extent such losses have not
previously been deemed to reduce the taxable income of the Company), based on
the approximate highest combined tax rate that applies to any one of such
members; and (ii) any audit of such member (or the Company or ACME Parent) with
respect to a prior taxable year and paid or payable by such member during the
most recent taxable year, as and to the extent that such amounts are
attributable to the member being allocated more taxable income than was
previously reported to such member as a result of any position taken by the
Company or by ACME Parent in determining and reporting its taxable income for
the year in question.
'Person' means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government (including any agency or political subdivision
thereof).
'Preferred Stock' means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.
'Property' of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
'Public Equity Offering' means a public offering by the Company or any
Parent of shares of its Common Stock (however designated and whether voting or
non-voting) and any and all rights, warrants or options to acquire such Common
Stock.
'Purchase Money Indebtedness' means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the cost
of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
'Redeemable Dividend' means, for any dividend or distribution with regard
to Disqualified Capital Stock, the quotient of the dividend or distribution
divided by the difference between one and the maximum statutory federal income
tax rate (expressed as a decimal number between 1 and 0) then applicable to the
issuer of such Disqualified Capital Stock.
'Refinancing Indebtedness' means Indebtedness that refunds, refinances or
extends any Indebtedness of the Company outstanding on the Issue Date or other
Indebtedness permitted to be incurred by the Company pursuant to the first
paragraph of the covenant described under 'Certain Covenants--Limitation on
Additional Indebtedness' or by the Company or its Subsidiaries pursuant to
clause (ii) of the definition of 'Permitted Indebtedness,' but only to the
extent that (i) the Refinancing Indebtedness is subordinated to the Notes to at
least the same extent as the Indebtedness being refunded, refinanced or
extended, if at all, (ii) the Refinancing Indebtedness is scheduled to mature
either (a) no earlier than the Indebtedness being refunded, refinanced or
extended, or (b) after the maturity date of the Notes, (iii) the portion, if
any, of the Refinancing Indebtedness that is scheduled to mature on or prior to
the maturity date of the Notes has a weighted average life to maturity at the
time such Refinancing Indebtedness is incurred that is equal to or greater than
the weighted average life to maturity of the portion of the Indebtedness being
refunded, refinanced or extended that is scheduled to mature on or prior to the
maturity date of the Notes, (iv) such Refinancing Indebtedness is in an
aggregate principal amount that is equal to or less than the sum of (a) the
aggregate principal amount then outstanding under the Indebtedness being
refunded, refinanced or extended, (b) the amount of accrued and unpaid interest,
if any, and premiums owed, if any, not in excess of preexisting prepayment
provisions on such Indebtedness being refunded,
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refinanced or extended and (c) the amount of customary fees, expenses and costs
related to the incurrence of such Refinancing Indebtedness, and (v) such
Refinancing Indebtedness is incurred by the same Person that initially incurred
the Indebtedness being refunded, refinanced or extended, except that the Company
may incur Refinancing Indebtedness to refund, refinance or extend Indebtedness
of any Wholly Owned Subsidiary of the Company.
'Restricted Payment' means any of the following: (i) the declaration or
payment of any dividend or any other distribution or payment on Capital Stock of
the Company or any Subsidiary of the Company or any payment made to the direct
or indirect holders (in their capacities as such) of Capital Stock of the
Company or any Subsidiary of the Company (other than (x) dividends or
distributions payable solely in Capital Stock (other than Disqualified Capital
Stock) or in options, warrants or other rights to purchase such Capital Stock
(other than Disqualified Capital Stock), and (y) in the case of Subsidiaries of
the Company, dividends or distributions payable to the Company or to a Wholly
Owned Subsidiary of the Company), (ii) the purchase, redemption or other
acquisition or retirement for value of any Capital Stock of the Company or any
of its Subsidiaries (other than Capital Stock owned by the Company or a Wholly
Owned Subsidiary of the Company, excluding Disqualified Capital Stock) or any
option, warrants or other rights to purchase such Capital Stock, (iii) the
making of any principal payment on, or the purchase, defeasance, repurchase,
redemption or other acquisition or retirement for value, prior to any scheduled
maturity, scheduled repayment or scheduled sinking fund payment, of any
Indebtedness which is subordinated in right of payment to the Notes (other than
subordinated Indebtedness acquired in anticipation of satisfying a scheduled
sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of acquisition), (iv) the making of any
Investment or guarantee of any Investment in any Person other than a Permitted
Investment, and (v) forgiveness of any Indebtedness of an Affiliate of the
Company to the Company or a Subsidiary of the Company. For purposes of
determining the amount expended for Restricted Payments, cash distributed or
invested shall be valued at the face amount thereof and property other than cash
shall be valued at its fair market value.
'Sale and Lease-Back Transaction' means any arrangement with any Person
providing for the leasing by the Company or any Subsidiary of the Company of any
real or tangible personal property, which property has been or is to be sold or
transferred by the Company or such Subsidiary to such Person in contemplation of
such leasing.
'Senior Credit Facility' means the Credit Agreement to be entered into
between the Company, the lenders party thereto in their capacities as lenders
thereunder and Canadian Imperial Bank of Commerce, New York Agency, as agent,
together with the related documents thereto (including, without limitation, any
guarantee agreements and security documents), in each case as such agreements
may be amended (including any amendment and restatement thereof), supplemented
or otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available borrowings thereunder (provided that such
increase in borrowings is permitted by the 'Limitation on Additional
Indebtedness' covenant) or adding Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness under
such agreement or any successor or replacement agreement and whether by the same
or any other agent, lender or group of lenders.
'Subsidiary' of any specified Person means any corporation, partnership,
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired, (i) in the case of a corporation, of which more
than 50% of the total voting power of the Capital Stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
officers or trustees thereof is held by such first-named Person or any of its
Subsidiaries; or (ii) in the case of a partnership, joint venture, association
or other business entity, with respect to which such first-named Person or any
of its Subsidiaries has the power to direct or cause the direction of the
management and policies of such entity by contract or otherwise or if in
accordance with GAAP such entity is consolidated with the first-named Person for
financial statement purposes.
'Wholly Owned Subsidiary' means any Subsidiary, all of the outstanding
voting securities (other than directors' qualifying shares) of which are owned,
directly or indirectly, by the Company.
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BOOK-ENTRY; DELIVERY AND FORM
The Exchange Notes will be represented by single, permanent global
certificates in definitive, fully registered form (the 'Global Securities') to
be deposited with, or on behalf of, The Depository Trust Company ('DTC') and
registered in the name of a nominee of DTC.
THE GLOBAL SECURITIES
The Issuers expect that, pursuant to procedures established by DTC (i) upon
the issuance of the Global Securities, DTC or its custodian will credit, on its
internal system, the principal amount of Exchange Notes of the individual
beneficial interest represented by such Global Security to the respective
accounts for persons who have accounts with DTC and (ii) ownership of beneficial
interests in the Global Securities will be shown on, and the transfer of such
ownership will be effected only through, records maintained by DTC or its
nominee (with respect to interests of persons who have accounts with DTC
('Participants')) and the records of Participants (with respect to interests of
persons other than Participants). Ownership of beneficial interests in the
Global Securities will be limited to Participants or persons who hold interests
through Participants.
So long as DTC or its nominee is the registered owner or holder of any of
the Global Securities, DTC or such nominee, as the case may be, will be
considered the sole owner of the Exchange Notes represented by the applicable
Global Security for all purposes under the Indenture. No beneficial owner of an
interest in the Global Securities will be able to transfer that interest except
in accordance with DTC's procedures, in addition to those provided for under the
Indenture.
Payments on the Global Securities will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of the Issuers or the
Trustee will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in a
Global Security or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interest.
The Issuers expect that DTC or its nominee, upon receipt of any payment in
respect of a Global Security, will credit Participants' accounts with payments
in amounts proportionate to their respective beneficial interests in the
applicable Global Security as shown on the records of DTC or its nominee. The
Issuers also expect that payments by Participants to owners of beneficial
interests in Global Securities held through such Participants will be governed
by standing instructions and customary practice, as is now the case with
securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
Participants.
Transfers between Participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in clearinghouse funds. If a
holder requires physical delivery of a Certificated Security for any reason,
including to sell such Security to persons in states which required physical
delivery of Certificated Securities, or to pledge such securities, such holder
must transfer its interest in the applicable Global Security in accordance with
the normal procedures of DTC.
DTC has advised the Issuers that it will take any action permitted to be
taken by a holder of Exchange Notes only at the direction of one or more
Participants to whose account the DTC interests in the Global Securities are
credited and only in respect of such portion of the Securities as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the Indenture, DTC will exchange the Global
Securities representing Exchange Notes for Exchange Notes in certificated form
(the 'Certificated Securities,' which it will distribute to its Participants.
DTC has advised the Issuers as follows: DTC is a limited purpose trust
company organized under laws of the State of New York, a member of the Federal
Reserve System, a 'clearing corporation' within the meaning of the Uniform
Commercial Code and a 'clearing agency' registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for its
Participants and facilitate the clearance and settlement of securities
transactions between Participants through electronic book entry changes in
accounts of its Participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly.
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Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Securities among Participants of DTC, it is
under no obligation to perform such procedures, and such procedures may be
discontinued at any time. None of the Issuers or any other person will have any
responsibility for the performance by DTC or its Participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
CERTIFICATED SECURITIES
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Securities and a successor depositary is not appointed by the
Issuers, in the case of the Exchange Notes, within 90 days, Certificated
Securities will be issued in exchange for the Global Securities.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of certain material U.S. federal income tax
consequences of the Exchange Offer and the acquisition, ownership and
disposition of the Notes. This discussion is for general information purposes
only and does not consider all aspects of U.S. federal income taxation that may
be relevant to the purchase, ownership and disposition of the Notes by a
prospective investor in light of such investor's personal circumstances. This
discussion does not address the U.S. federal income tax consequences of the
acquisition, ownership and disposition of the Notes not held as capital assets
within the meaning of Section 1221 of the U.S. Internal Revenue Code of 1986, as
amended (the 'Code'), or the U.S. federal income tax consequences to investors
subject to special treatment under the U.S. federal income tax laws, such as
dealers in securities or foreign currency, tax-exempt entities, financial
institutions, insurance companies, persons that hold the Notes as part of a
'straddle,' 'hedge,' 'conversion transaction' or other integrated investment,
persons that have a 'functional currency' other than the U.S. dollar, and
investors in pass-through entities. In addition, this discussion does not
describe any U.S. federal alternative minimum tax consequences, and does not
describe any tax consequences arising under U.S. federal gift and estate or
other U.S. federal tax laws (except to the limited extent set forth below under
'Non-U.S. Holders') or under the tax laws of any state, local or foreign
jurisdiction.
This discussion is based upon the Code, existing regulations thereunder,
and current administrative rulings and court decisions. All of the foregoing are
subject to change, possibly on a retroactive basis, and any such change could
affect the continuing validity of this discussion.
Persons considering the Exchange Offer or the purchase of Notes should
consult their own tax advisors concerning the application of U.S. federal
income, estate and other tax laws, as well as the laws of any state, local or
foreign taxing jurisdiction, to their particular situations.
U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a holder of a Note that is (i) a citizen or resident
(as defined in Section 7701(b)(1) of the Code) of the United States, (ii) a
corporation, partnership or other entity organized under the laws of the United
States or any political subdivision thereof or therein, (iii) an estate the
income of which is subject to U.S. federal income tax regardless of the source,
or (iv) a trust if a court within the United States is able to exercise primary
supervision over the trust's administration and one or more United States
persons have the authority to control all its substantial decisions or, if the
trust was treated as a U.S. person on August 19, 1996, the trust elects to
continue to be treated as a U.S. person under regulations to be issued (a 'U.S.
Holder'). Certain U.S. federal income tax consequences relevant to a holder
other than a U.S. Holder are discussed separately below.
DEBT CHARACTERIZATION
The Company and each holder will agree to treat the Notes as indebtedness
for federal income tax purposes, and the following discussion assumes that such
treatment is correct. If the Notes were not respected as debt, they likely would
be treated as equity ownership interests in the Company. In such event, the
Company would not be entitled to claim a deduction for interest payable on the
Notes. As a result, the Company's after-tax cash flow and, consequently, its
ability to make payments with respect to the Notes could be reduced.
ORIGINAL ISSUE DISCOUNT ON THE ORIGINAL NOTES
The Original Notes were issued with original issue discount ('OID'), and
U.S. Holders of the Notes (including cash basis holders) will be required to
include such OID in income as interest income on a constant yield to maturity
method basis, generally in advance of the receipt of the cash payments to which
such income is attributable and generally in increasing amounts until September
30, 2000. However, U.S. Holders will not be required to include separately in
income cash payments received on the Notes, even if denominated as interest
(other than payments of Penalty Interest, described below).
The total amount of OID with respect to a Note will be equal to the excess
of the 'stated redemption price at maturity' of such Note over the 'issue price'
of the corresponding Original Note. The 'stated redemption price at maturity' of
a Note will be equal to the sum of all payments (other than payments of Penalty
Interest, described below), whether denominated as interest or principal,
required to be made on such Note other than
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payments of 'qualified stated interest.' Qualified stated interest is generally
stated interest that is unconditionally payable at least annually at a single
fixed rate that appropriately takes into account the length of the interval
between payments. Because interest is not payable on the Notes until September
30, 2001, none of the interest payments will be payments of qualified stated
interest and all such payments will be included in the stated redemption price
at maturity. The 'issue price' of a Note is the first price to the public (not
including bond houses, brokers, or similar persons or organizations acting in
the capacity of underwriters or wholesalers) at which a substantial portion of
the Original Notes were initially sold.
The amount of OID required to be included in a U.S. Holder's income for any
taxable year (regardless of whether the holder uses the cash or accrual method
of accounting) is the sum of the daily portions of OID with respect to the Notes
for each day during the taxable year or portion of the taxable year in which the
holder holds such Note. The daily portion is determined by allocating to each
day in any 'accrual period' a pro rata portion of the OID allocable to that
accrual period. Accrual periods with respect to a Note may be of any length
selected by the holder and may vary in length over the term of the Note as long
as (i) no accrual period is longer than one year and (ii) each scheduled payment
of interest or principal on the Note occurs on either the first or final day of
an accrual period. The amount of OID allocable to each accrual period will be
equal to the product of the adjusted issue price of the Note at the beginning of
an accrual period and the yield to maturity of such Note (determined on the
basis of a compounding assumption that reflects the length of the accrual
period). The adjusted issue price of a Note at the beginning of an accrual
period will be equal to the original issue price of the corresponding Original
Note increased by all previously accrued OID (disregarding any reduction on
account of acquisition premium, described below) and reduced by the amount of
all previous cash payments (other than payments of Penalty Interest, described
below) on the Note. The yield to maturity is that interest rate, expressed as a
constant annual interest rate, that when used in computing the present value of
all payments of principal and interest (other than payments of Penalty Interest,
described below) to be paid in connection with the Notes produces an amount
equal to the issue price of the corresponding Original Notes.
The Notes may be determined to be subject to the rules under the Code
regarding 'applicable high yield discount obligations' ('AHYDOs') because their
yield to maturity exceeds the relevant applicable Federal rate ('AFR') by more
than five percentage points. Under Section 163(e) and 163(i) of the Code, a C
corporation that is an issuer of debt obligations subject to the AHYDO rules may
not deduct any portion of OID on the obligations until such portion is actually
paid. A debt obligation is generally subject to the AHYDO rules if (i) its
maturity date is more than five years from the date of issue, (ii) its yield to
maturity equals or exceeds the sum of the AFR for the calendar month in which
the obligation is issued plus five percentage points and (iii) it has
'significant OID.' A debt obligation will have significant OID for this purpose
if, as of the close of any accrual period ending more than five years after
issuance, the total amount of income includable by a holder with respect to the
debt instrument exceeds the sum of (i) the total amount of 'interest' paid under
the obligation before the close of such accrual period and (ii) the product of
the issue price of the debt instrument and its yield to maturity. In addition,
if the yield to maturity on an AHYDO obligation exceeds the sum of the AFR plus
six percentage points, a portion of the OID, equal to the product of the total
OID times the ratio of (a) the excess of the yield to maturity over the sum of
the AFR plus six percentage points to (b) the yield to maturity, will not be
deductible by the issuer and will be treated for some purposes as dividends to
the holders of the obligations (to the extent that such amounts would have been
treated as dividends to the holders if they had been distributions with respect
to the issuer's stock). Amounts treated as dividends will be nondeductible by
the issuer, and may qualify for the dividends received deduction for corporate
U.S. Holders, but will be treated as OID and not as dividends for withholding
tax purposes. It is unclear whether the AHYDO rules would apply to an issuer
that is a limited liability company, such as the Company, and whether or how the
dividend recharacterization rule would be applied. The Issuers intend to take
the position that the Notes are not subject to the AHYDO rules because for tax
purposes the Issuer is a partnership that is not subject to such rules.
The Issuers will provide certain information to the IRS, and will furnish
annually to record holders of the Notes information with respect to OID accruing
during the calendar year. Because this information will be based upon the
adjusted issue price of the Note as if the holder were the original holder of
the instrument who purchased it at the original price, holders who purchase the
Notes for an amount other than the original issue price will be required to
determine for themselves the amount of OID.
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ACQUISITION OR BOND PREMIUM AND MARKET DISCOUNT
A U.S. Holder who purchases a Note for an amount that is greater than its
adjusted issue price as of the purchase date will be considered to have
purchased such Note at an 'acquisition premium.' The amount of OID that such
holder must include in its gross income with respect to such Note for any
taxable year is generally reduced by the portion of such acquisition premium
properly allocable to such year.
A U.S. Holder who purchases a Note at a cost in excess of its principal
amount will be considered to have purchased the Note at a premium, and may make
an election, applicable to all Notes held by such holder, to amortize such
premium, using a constant yield method, over the remaining term of the Note (or,
if a smaller amortization allowance would result, by computing such allowance
with reference to the amount payable on an earlier call date, and by amortizing
such allowance over the shorter period to such call date).
If a U.S. Holder purchases, subsequent to its original issuance, a Note for
an amount that is less than its 'revised issue price' as of the purchase date,
the amount of the difference generally will be treated as 'market discount,'
unless such difference is less than a specified de minimis amount. The Code
provides that the revised issue price of a Note equals its issue price plus the
amount of OID includable in the income of all holders for periods prior to the
purchase date (disregarding any deduction for acquisition premium) reduced by
the amount of all prior cash payments (other than payments of Penalty Interest
described below) on the Notes. Subject to a de minimis exception, a U.S. Holder
will be required to treat any gain recognized on the sale, exchange, redemption,
retirement or other disposition of the Notes as ordinary income to the extent of
the accrued market discount that has not previously been included in income. In
addition, a U.S. Holder may be required to defer, until the maturity date of the
Note or its earlier disposition in a taxable transaction, the deduction of all
or a portion of the interest expense on any indebtedness incurred or continued
to purchase or carry such Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note, unless the holder
elects to accrue market discount on a constant interest method. A U.S. Holder of
a Note may elect to include market discount in income currently as it accrues
(under either the ratable or constant interest method). This election to include
currently, once made, applies to all market discount obligations acquired in or
after the first taxable year to which the election applies and may not be
revoked without the consent of the IRS. If a U.S. Holder of Notes makes such an
election, the foregoing rules with respect to the recognition of ordinary income
on sales and other dispositions of such instruments, and with respect to the
deferral of interest deductions on debt incurred or maintained to purchase or
carry such debt instruments, would not apply.
ELECTION TO TREAT ALL INTEREST AS OID
A U.S. Holder of a Note may elect, subject to certain limitations, to
include all interest that accrues on the Note in gross income on a
constant-yield basis. For purposes of this election, interest includes stated
interest, OID, market discount, de minimis market discount and unstated
interest, as adjusted by any amortizable bond premium or acquisition premium.
In applying the constant-yield method to a Note with respect to which this
election has been made, the issue price of the Note will equal the holder's
basis in the Note immediately after its acquisition, the issue date of the Note
will be the date of its acquisition by the holder, and no payments on the Note
will be treated as payments of qualified stated interest. The election will
generally apply only to the Note with respect to which it is made and may not be
revoked without the consent of the IRS.
If the election to apply the constant-yield method to all interest on a
Note is made with respect to a Note on which there is market discount, the
electing holder will be treated as having made the election described above
under 'Acquisition or Bond Premium and Market Discount' to include market
discount in income currently over the life of all debt instruments held or
thereafter acquired by such holder.
EXCHANGE NOTES
Neither an exchange of Original Notes for Exchange Notes nor the filing of
a registration statement with respect to the resale of the Notes should be a
taxable event to holders of Original Notes, and holders should not recognize any
taxable gain or loss or any interest income as a result of such an exchange or
such a filing. Each exchanging holder will have the same adjusted tax basis and
holding period in the Exchange Notes as it had in the corresponding Original
Notes immediately prior to the exchange. The Issuers are obligated to pay
additional
99
<PAGE>
interest ('Penalty Interest') to the holder under certain circumstances
described under 'Exchange Offer-- Purpose and Effect of the Exchange Offer.' Any
such payments should be treated for tax purposes as interest, taxable to holders
as such payments become fixed and payable.
SALE, EXCHANGE AND RETIREMENT OF NOTES
A holder's adjusted tax basis in a Note will, in general, equal the
holder's cost for the Note, increased by any amounts included in income as OID,
market discount or de minimis market discount which the holder has previously
elected to accrue in gross income on an annual basis and reduced by any
amortized premium which the holder has previously elected to offset against
interest on the Notes and any cash payments (other than payments of Penalty
Interest) in respect of the Note. Upon the sale, exchange, redemption,
retirement or other disposition of a Note, a holder generally will recognize
gain or loss equal to the difference between the amount realized on such sale,
exchange, redemption or retirement and the holder's tax basis in the Note.
Except as described above regarding market discount, gain or loss recognized by
a holder on the sale, exchange, redemption or retirement of a Note will be
capital gain or loss and will, in the case of individuals, be long-term capital
gain or loss subject to a maximum rate of 20% if the Note had been held for more
than eighteen months at the time of such disposition. An individual will be
taxed on his or her net capital gain at a rate of 28% for property held for 18
months or less but more than one year. Special rules (and generally lower
maximum rates) apply for individuals in lower ax brackets. Certain limitations
exist on the deductibility of capital losses by both corporations and
individuals.
BACKUP WITHHOLDING
In general, information reporting requirements will apply to payments of
principal, the proceeds of a sale before maturity, and the accrual and payment
of OID on a Note with respect to non-corporate holders. 'Backup withholding' at
a rate of 31% will apply to such payments if the holder fails to provide an
accurate taxpayer identification number, to report all interest and dividends
required to be shown on its Federal income tax returns, or otherwise establish
an exemption. Backup withholding tax is not an additional tax and may be
credited against a U.S. Holder's regular U.S. Federal income tax liability.
NON-U.S. HOLDERS
The following discussion is limited to certain U.S. federal income and
estate tax consequences relevant to a holder of a Note that is not a U.S. Holder
(a 'Non-U.S. Holder').
This discussion does not deal with all aspects of U.S. federal income and
estate taxation that may be relevant to the purchase, ownership or disposition
of the Notes by any particular Non-U.S. Holder in light of such Holder's
personal circumstances, including holding the Notes through a partnership.
Final regulations dealing with withholding tax on income paid to foreign
persons and related matters (the 'New Withholding Regulations') were issued by
the Treasury Department on October 6, 1997. The New Withholding Regulations will
generally be effective for payments made after December 31, 1998, subject to
certain transition rules. Prospective Non-U.S. Holders are strongly urged to
consult their own tax advisors with respect to the New Withholding Regulations.
For purposes of the following discussion, interest and gain on the sale,
exchange or other disposition of the Note will be considered 'U.S. trade or
business income' if such income or gain is (i) effectively connected with the
conduct of a U.S. trade or business and (ii) in the case of a qualified resident
of a country having an applicable income tax treaty with the United States
containing a permanent establishment provision, attributable to a U.S. permanent
establishment (or to a fixed base) in the United States.
STATED INTEREST
Generally, any interest and OID paid to a Non-U.S. Holder of a Note that is
not U.S. trade or business income will not be subject to U.S. federal income tax
(or withholding of tax) if the interest qualifies as 'portfolio interest.'
Interest and OID on the Notes will qualify as portfolio interest if (i) the
Non-U.S. Holder does not actually or constructively own 10% or more of the total
voting power of all voting stock of the Company and is not a 'controlled foreign
corporation' with respect to which the Company is a 'related person' within the
meaning of Section 881(c)(3)(C) of the Code, (ii) the Non-U.S. Holder is not a
bank for purposes of Section 881(c)(3)(A) of the Code that is being paid such
interest or OID pursuant to an extension of credit made
100
<PAGE>
pursuant to a loan agreement entered into in the ordinary course of its trade or
business and (iii) the beneficial owner, under penalties of perjury, certifies
that the beneficial owner is not a U.S. person and such certificate provides the
beneficial owner's name and address.
The gross amount of payments to a Non-U.S. Holder of interest and OID, if
any, that do not qualify for the portfolio interest exception and that are not
U.S. trade or business income will be subject to U.S. withholding tax at the
rate of 30%, unless a U.S. income tax treaty applies to reduce or eliminate
withholding. U.S. trade or business income will be taxed at regular U.S. federal
income tax rates rather than the 30% gross withholding tax rate and, if the
Non-U.S. Holder is a foreign corporation, may be subject to a branch profits tax
equal to 30% of its 'effectively connected earnings and profits,' as adjusted
for certain items, unless it qualifies for a lower rate under an applicable
treaty. To claim the benefit of a tax treaty or to claim exemption from
withholding because the income is U.S. trade or business income, the Non-U.S.
Holder must provide a properly executed Form 1001 or 4224 (or such successor
forms as the IRS designates), as applicable, prior to payment of interest. These
forms must be periodically updated.
As described above, OID, if any, accruing on the Notes will be subject to
U.S. withholding tax only if (i) it is not U.S. trade or business income and
(ii) it does not qualify for the portfolio interest exception. In such an
instance, while U.S. tax will be imposed against OID on the Notes prior to
payment, such tax will only be withheld from stated interest payments on the
Notes. However, such additional withholding may result in U.S. withholding tax
on stated interest payments exceeding 30%.
SALE, EXCHANGE OR REDEMPTION OF NOTES
Except as described below and subject to the discussion concerning backup
withholding, any gain realized by a Non-U.S. Holder on the sale, exchange or
redemption of a Note, generally will not be subject to U.S. federal income tax,
unless (i) such gain is U.S. trade or business income, (ii) subject to certain
exceptions, the Non-U.S. Holder is an individual who holds the Note as a capital
asset and is present in the United States for 183 days or more in the taxable
year of the disposition or (iii) the Non-U.S. Holder is subject to certain
provisions applicable to certain U.S. expatriated persons.
FEDERAL ESTATE TAX
Notes held (or treated as held) by an individual who is a Non-U.S. Holder
at the time of his or her death will not be subject to U.S. federal estate tax,
provided that any interest on the Notes would have qualified as portfolio
interest if received by such individual at the time of his or her death.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company must report annually to the IRS and to each Non-U.S. Holder any
interest and OID, if any, that is subject to U.S. withholding tax or that is
exempt from withholding pursuant to a tax treaty or the portfolio interest
exception. Copies of these information returns may also be made available under
the provisions of a specific treaty or agreement to the tax authorities of the
country in which the Non-U.S. Holder resides.
The regulations provide that backup withholding and information reporting
will not apply to payments of principal and interest on the Notes by the Company
to a Non-U.S. Holder if the Holder certifies as to its non-U.S. status under
penalties of perjury or otherwise establishes an exemption (provided that
neither the Company nor its paying agent has actual knowledge that the Holder is
a U.S. Holder or that the conditions of any other exemption are not, in fact,
satisfied).
The payment of the proceeds from the disposition of Notes to or through the
United States office of any broker, U.S. or foreign, will be subject to
information reporting and possible backup withholding unless the owner certifies
as to its non-U.S. status under penalties of perjury or otherwise establishes an
exemption, provided that the broker does not have actual knowledge that the
holder is a U.S. Holder or that the conditions of any other exemption are not,
in fact, satisfied. The payment of the proceeds from the disposition of a Note
to or through a non-U.S. office of a non-U.S. broker that is not a 'U.S. related
person' will not be subject to information reporting or backup withholding. (For
this purpose, a 'U.S. related person' is (i) a 'controlled foreign corporation'
for U.S. federal income tax purposes or (ii) a foreign person 50% or more of
whose gross income from all sources for the three-year period ending with the
close of its taxable year preceding the payment (or for such part of the period
that the broker has been in existence) is derived from activities that are
effectively connected with the conduct of a U.S. trade or business.)
101
<PAGE>
In the case of the payment of proceeds from the disposition of Notes to or
through a non-U.S. office of a broker that is either a U.S. person or a U.S.
related person, the regulations require information reporting on the payment
unless the broker has documentary evidence in its files that the owner is a
Non-U.S. Holder and the broker has no knowledge to the contrary. Backup
withholding will not apply to payments made through foreign offices of a broker
that is a U.S. person or a U.S. related person (absent actual knowledge that the
payee is a
U.S. Holder).
The New Withholding Regulations will alter the foregoing rules in certain
respects and generally will apply to any payments (including original issue
discount) in respect of a Note or proceeds from the sale of a Note that are made
after December 31, 1998. The New Withholding Regulations provide documentation
procedures designed to simplify compliance by withholding agents. The New
Withholding Regulations generally do not affect the documentation rules
described above, but add other certification options. Under the New Withholding
Regulations, withholding of U.S. federal income tax may apply to payments on a
taxable sale or other disposition of a Note by a Non-U.S. Holder who does not
provide appropriate certification to the withholding agent with respect to such
transaction.
The New Withholding Regulations provide transition rules concerning
existing certificates, such as Internal Revenue Service Form W-8. Valid
withholding certificates that are held on December 31, 1998 will generally
remain valid until the earlier of December 31, 1999 or the date of expiration of
the certificate under the law in effect prior to January 1, 1999. Further,
certificates dated prior to January 1, 1998 will generally remain valid until
the end of 1998, irrespective of the fact that their validity would otherwise
expire during 1998. Non-U.S. Holders of the Notes should consult their tax
advisors concerning the possible application of the New Withholding Regulations
to amounts of original issue discount that they are required to include in
income as well as the possible application of such regulations to any payments
made on or with respect to the Notes.
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or a credit against such Non-U.S.
Holder's U.S. federal income tax liability, provided that the requisite
procedures are followed.
PLAN OF DISTRIBUTION
Each holder desiring to participate in the Exchange Offer will be required
to represent, among other things, that (i) it is not an 'affiliate' (as defined
in Rule 405 of the Securities Act) of the Issuers, (ii) it is not engaged in,
and does not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of the Exchange Notes and (iii) it
is acquiring the Exchange Notes in the ordinary course of its business (a Holder
unable to make the foregoing representations is referred to as a 'Restricted
Holder'). A Restricted Holder will not be able to participate in the Exchange
Offer and may only sell its Original Notes pursuant to a registration statement
containing the selling security holder information required by Item 507 of
Regulation S-K under the Securities Act, or pursuant to an exemption from the
registration requirement of the Securities Act.
Each broker-dealer (other than a Restricted Holder) that receives Exchange
Notes for its own account pursuant to the Exchange Offer (a 'Participating
Broker-Dealer') must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. This Prospectus, as it may be amended or
supplemented, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Original Notes where such Original Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. Based upon interpretations by the staff of the
Commission, the Issuers believe that Exchange Notes issued pursuant to the
Exchange Offer to Participating Broker-Dealers may be offered for resale,
resold, and otherwise transferred by a Participating Broker-Dealer upon
compliance with the prospectus delivery requirements, but without compliance
with the registration requirements, of the Securities Act. The Issuers have
agreed that, for a period of 180 days following consummation of the Exchange
Offer, they will make this Prospectus available, for use in connection with any
such resale, to any Participating Broker-Dealer and other persons, if any, with
similar prospectus delivery requirements. During this period the Issuers shall
use their best efforts to keep the Exchange Offer Registration Statement
effective and to amend and supplement this Prospectus, in order to permit such
Prospectus to be delivered by all persons subject to the prospectus delivery
requirements.
102
<PAGE>
Based upon interpretations by the Staff, the Issuers believe that Exchange
Notes issued pursuant to the Exchange Offer may be offered for resale, resold,
and otherwise transferred by a holder thereof (other than a Restricted Holder or
a Participating Broker-Dealer) without compliance with the registration and
prospectus delivery requirements of the Securities Act.
The Issuers will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by Participating Broker-Dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or at negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such Participating Broker-Dealer and/or the purchasers of
any such Exchange Notes. Any Participating Broker-Dealer that resells Exchange
Notes may be deemed to be an 'underwriter' within the meaning of the Securities
Act and must deliver a prospectus in connection with such resales of Exchange
Notes. The Letter of Transmittal states that by acknowledging that it will
deliver and by delivering a prospectus, a Participating Broker-Dealer will not
be deemed to admit that it is an 'underwriter' within the meaning of the
Securities Act.
The Issuers have agreed to pay all expenses incidental to the Exchange
Offer other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act, as set forth in the
Registration Rights Agreement.
EXPERTS
The consolidated balance sheets of Station KPLR as of December 31, 1996 and
1995 and the consolidated statements of operations, shareholders' deficit and
cash flows for each of the three years in the period ended December 31, 1996,
included in this Prospectus, have been included herein in reliance on the report
of Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing. The financial statements of
ACME Television, LLC as of September 30, 1997, and for the nine months ended
September 30, 1997 have been included herein and in the registration statement
in reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, appearing elsewhere herein, and upon the authority of said
firm as experts in accounting and auditing.
The Financial statements of Channel 32, Incorporated for the period from
December 16, 1993 (inception) to June 30, 1994, each of the years in the two
year period ended June 30, 1996 and the period from July 1, 1996 to June 17,
1997 have been included herein and in the registration statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
VALIDITY OF EXCHANGE NOTES
The validity of the Exchange Notes will be passed upon for the Company by
Dickstein Shapiro Morin & Oshinsky LLP, 2101 L Street, N.W., Washington, D.C.
20037, counsel to the Company.
AVAILABLE INFORMATION
The Issuers have filed with the Securities and Exchange Commission (the
'Commission') a Registration Statement on Form S-4 (the 'Exchange Offer
Registration Statement') under the Securities Act with respect to the Exchange
Offer. As permitted by the rules and regulations of the Commission, this
Prospectus omits certain information, exhibits and undertakings contained in the
Exchange Offer Registration Statement. For further information with respect to
the Issuers and this Exchange Offer, reference is made to the Exchange Offer
Registration Statement, including the exhibits thereto and the financial
statements, notes and schedules filed as a part thereof.
Statements contained in this Prospectus as to the contents of any contract
or document filed as an exhibit to the Exchange Offer Registration Statement are
not necessarily complete and, in each instance, reference is made
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<PAGE>
to the copy of such contract or document filed as an exhibit to the Exchange
Offer Registration Statement, each such statement being qualified by such
reference.
Copies of the Exchange Offer Registration Statement and all exhibits and
schedules thereto may be inspected without charge at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Regional Offices of the Commission at Seven World Trade
Center, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials also can be obtained from the
Public Reference Section of the Commission, Washington, D.C. 20549 at prescribed
rates. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov.
As a result of the Exchange Offer, the Issuers will become subject to the
informational requirements of the Securities and Exchange Act of 1934, as
amended (the 'Exchange Act'). In accordance therewith, the Company will file
certain reports and information with the Commission. The Issuers have also
agreed that, whether or not they are required to do so by the Commission, they
will furnish to the holders of the Notes and file with the Commission (unless
the Commission will not accept such a filing) (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Issuers were required to file such
forms, and (ii) all reports that would be required to be filed with the
Commission on Form 8-K if the Issuers were required to file such reports.
The Issuers have also agreed that, if they are not subject to the
information requirements of Sections 13 or 15(d) of the Exchange Act at any time
while the Notes constitute 'restricted securities' within the meaning of the
Securities Act, they will furnish to holders and beneficial owners of the Notes
and to prospective purchasers designated by such holders the information
required to be delivered pursuant to Rule 144(d)(4) under the Securities Act to
permit compliance with Rule 144A in connection with resales of the Notes.
104
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
ACME TELEVISION, LLC
Report of KPMG Peat Marwick LLP............................................................................ F-2
Consolidated Balance Sheet as of September 30, 1997........................................................ F-3
Consolidated Statement of Operations and Members' Capital for the nine months ended September 30, 1997..... F-4
Consolidated Statement of Cash Flows for the nine months ended September 30, 1997.......................... F-5
Notes to Consolidated Financial Statements................................................................. F-6
Financial Information of Registrant........................................................................ F-11
KOPLAR COMMUNICATIONS, INC.
Report of Coopers & Lybrand L.L.P.......................................................................... F-15
Consolidated Balance Sheets as of December 31, 1995 and 1996 and September 30, 1997 (unaudited)............ F-16
Consolidated Statements of Operations for the years ended December 31, 1994, 1995 and 1996, and the nine
months ended September 30, 1996 (unaudited) and 1997 (unaudited)......................................... F-17
Consolidated Statements of Shareholders' Deficit for the years ended December 31, 1994, 1995 and 1996 and
the nine months ended September 30, 1997 (unaudited)..................................................... F-18
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996, and the nine
months ended September 30, 1996 (unaudited) and 1997 (unaudited)......................................... F-19
Notes to Consolidated Financial Statements................................................................. F-20
CHANNEL 32, INCORPORATED
Report of KPMG Peat Marwick LLP............................................................................ F-33
Statement of Operations for the period from December 16, 1993 (inception) to June 30, 1994, and the years
ended June 30, 1995 and 1996, and the period from July 1, 1996 to June 17, 1997.......................... F-34
Statement of cash flows for the period from December 16, 1993 (inception) to June 30, 1994, and the years
ended June 30, 1995 and 1996, and the period from July 1, 1996 to June 17, 1997.......................... F-35
Notes to Financial Statements.............................................................................. F-36
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Members
ACME Television, LLC:
We have audited the accompanying consolidated balance sheet of ACME Television,
LLC and subsidiaries as of September 30, 1997, and the related consolidated
statements of operations and members' capital and cash flows for the nine month
period ended September 30, 1997. In connection with our audit of the
consolidated financial statements, we have also audited the financial statement
schedule. These consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and
financial statement schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ACME Television, LLC
and subsidiaries as of September 30, 1997 and the results of their operations
and their cash flows for the nine month period ended September 30, 1997, in
conformity with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, when considered in relation to the
basic consolidated financial statement taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KMPG PEAT MARWICK LLP
Los Angeles, California
November 12, 1997
F-2
<PAGE>
ACME TELEVISION, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
1997
--------
<S> <C>
Current assets:
Cash and cash equivalents........................................................................... $ 27,211
Accounts receivable, less allowance for doubtful accounts of $39.................................... 405
Due from affiliates................................................................................. 14,876
Current portion of programming rights............................................................... 581
Prepaid expenses and other current assets........................................................... 201
--------
Total current assets........................................................................... 43,274
--------
Property and equipment, net........................................................................... 4,177
Programming rights, net of current portion............................................................ 590
Note receivable....................................................................................... 1,811
Broadcast licenses, net of accumulated amortization of $335........................................... 22,570
Deposits.............................................................................................. 143,016
Other assets.......................................................................................... 9,961
--------
$225,399
========
LIABILITIES AND MEMBERS' CAPITAL
Current liabilities:
Accounts payable.................................................................................... $ 2,296
Accrued expenses.................................................................................... 7,776
Current portion of programming rights payable....................................................... 876
Notes payable to bank............................................................................... 3,500
Current portion of obligations under lease.......................................................... 284
--------
Total current liabilities...................................................................... 14,732
Programming rights payable, net of current portion.................................................... 597
Obligations under lease, net of current portion....................................................... 422
Senior Subordinated discount notes.................................................................... 127,370
--------
Total liabilities.............................................................................. 143,121
--------
Members' capital...................................................................................... 85,516
Accumulated deficit................................................................................... (3,238)
Total members' capital......................................................................... 82,278
--------
$225,399
========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
ACME TELEVISION, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND MEMBERS' CAPITAL
NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997
-------
<S> <C>
Broadcast revenues..................................................................................... $ 2,155
-------
Operating expenses:
Programming.......................................................................................... 1,096
Selling, general and administrative.................................................................. 3,173
Depreciation and amortization........................................................................ 551
-------
Total operating expenses..................................................................... 4,820
Operating loss............................................................................... (2,665)
Interest expense..................................................................................... (573)
-------
Net loss..................................................................................... (3,238)
Parent's contribution................................................................................ 85,516
-------
Members' capital at September 30, 1997....................................................... $82,278
=======
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
ACME TELEVISION, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997
---------
<S> <C>
Cash flows from operating activities:
Net loss........................................................................................... $ (3,238)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization................................................................... 551
Changes in assets and liabilities:
Increase in accounts receivable, net.......................................................... (405)
Increase in programming rights................................................................ (102)
Increase in prepaid expenses and other current assets......................................... (201)
Increase in notes receivable.................................................................. (1,811)
Increase in accounts payable.................................................................. 2,296
Increase in accrued expenses.................................................................. 7,776
Decrease in programming rights payable........................................................ (150)
---------
Net cash provided by operating activities.................................................. 4,716
---------
Cash flows from investing activities--
Deposit relating to acquisition agreements......................................................... (143,016)
Purchase of property and equipment................................................................. (2,963)
---------
Net cash used in investing activities......................................................... (145,979)
---------
Cash flows from financing activities:
Increase in other assets........................................................................... (9,961)
Contribution from parent........................................................................... 47,565
Notes payable to bank.............................................................................. 3,500
Issuance of Senior Discount Notes.................................................................. 127,370
---------
Net cash provided by financing activities..................................................... 168,474
---------
Net increase (decrease) in cash............................................................ 27,211
Cash at beginning of period.......................................................................... --
---------
Cash at end of period................................................................................ $ 27,211
=========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest........................................................................................ $ 540
Income taxes.................................................................................... --
=========
Non cash transactions:
Contribution of the net assets of ACME Television of Oregon, LLC from Parent in exchange for
membership units............................................................................... $ 23,075
Due from affiliates in exchange for membership units............................................ $ 14,876
=========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
ACME TELEVISION, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(1) DESCRIPTION OF BUSINESS AND FORMATION
ACME Television, LLC (the Company) was formed on August 8, 1997. Upon
formation, the Company received a contribution from ACME Television Holdings,
LLC (ACME Parent), through ACME Intermediate Holdings, LLC (ACME Intermediate),
of ACME Parent's wholly owned subsidiaries--ACME Television of Oregon, LLC (ACME
Oregon) and ACME Television of Tennessee, LLC (ACME Tennessee) and certain other
net assets. This contribution of $25,455,000, was made in exchange for
membership units in the Company and was treated as a transaction between
entities under common control, similar to a pooling of interests. Accordingly,
the transaction was recorded at historical cost and the Company has reflected
the result of operations of the entities contributed for the period presented.
In addition, on September 30, 1997, ACME Intermediate made an additional
contribution of $60,061,000 in exchange for membership units in the Company.
The Company's subsidiaries (hereinafter referred to in this paragraph
collectively as 'Subsidiary Guarantors') are fully, unconditionally, and jointly
and severally liable for the Company's senior discount notes referred to in note
6. The Subsidiary Guarantors are wholly owned and constitute all of the
Company's direct and indirect subsidiaries. The Company has not included
separate financial statements of the aforementioned subsidiaries because (1) the
Company has no assets or independent operations other than its investments in
its subsidiaries and (ii) the separate financial statements and other
disclosures concerning such subsidiaries are not deemed material to investors.
The Subsidiary Guarantors have jointly and severally guaranteed the Notes
(as defined) on a full and unconditional basis, the aggregate assets,
liabilities, earnings and equity of the Subsidiary Guarantors are substantially
equivalent to the assets, liabilities, earnings and equity of the Company on a
consolidated basis and the Company has not presented separate financial
statements and other disclosures concerning the Subsidiary Guarantors because
management has determined that such information is not material to investors.
Various agreements to which the Company and/or the Subsidiary Guarantors
are parties restrict the ability of the Subsidiary Guarantors to make
distributions to the Company. The Investment and Loan Agreement (the 'Investment
Agreement'), dated June 17, 1997, as amended, among ACME Parent, and the parties
thereto and the Limited Liability Company Agreement (the 'LLC Agreement'), dated
June 17, 1997, as amended, among ACME Parent and the parties thereto each
contain certain restrictions on the ability of the Subsidiary Guarantors to
declare or pay dividends to the Company in the absence of the consent of certain
parties thereto. The Indenture governing the Notes prevents the Subsidiary
Guarantors from declaring or paying any dividend or distribution to the Company
unless certain events have not occurred and certain financial covenants are
satisfied. The Loan Agreement (as defined) also prohibits distributions from the
Subsidiary Guarantors to the Company except for certain circumstances during
which default has not occurred thereunder.
ACME Parent owns, directly and indirectly, 92% of the outstanding members
units of ACME Intermediate. ACME Intermediate owns, directly or indirectly, 100%
of the outstanding members units of the Company.
ACME Oregon was formed on March 5, 1997 to acquire Station KWBP, serving
Portland, Oregon from Channel 32, Incorporated. Prior to the acquisition of
Station KWBP (June 17, 1997), ACME Oregon operated the station and financed its
losses, effective January 1, 1997 pursuant to a Local Marketing Agreement with
the Channel 32, Incorporated. The acquisition was completed on June 17, 1997
(see note 3). ACME Tennessee was formed on April 17, 1997 to acquire Station
WINT, serving Knoxville, Tennessee. This acquisition was completed on October 7,
1997 (See Note 4). The financial statements reflect start-up expenses associated
with WINT incurred during the quarter ended September 30, 1997.
On July 25, 1997 the Company formed ACME Television Licenses of Missouri,
Inc. (ACME Missouri) for the purpose of acquiring Station KPLR and on October
31, 1997 adopted limited liability company agreements for ACME Television of
Utah, LLC (ACME Utah) and ACME Television of New Mexico, LLC (ACME New Mexico)
for the purpose of acquiring Stations KZAR and KAOU, respectively. These
acquisitions did not occur on or prior to September 30, 1997. (See Note 4)
F-6
<PAGE>
ACME TELEVISION, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1997
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The Consolidated Financial Statements include the accounts of the Company
and its subsidiaries. All significant intercompany transactions have been
eliminated.
Revenue Recognition
Revenue from to the sale of airtime related to advertising and contracted
time is recognized at the time of broadcast.
Cash and Cash Equivalents
For purposes of reporting the statement of cash flows, the Company
considers all highly liquid debt instruments purchased with an original maturity
of three months or less to be cash equivalents.
Programming Rights
Programming rights represent costs incurred for the right to broadcast
certain features and syndicated television programs. Programming rights are
stated at the lower of amortized cost or estimated realizable value. The cost of
such programming rights and the corresponding liability are recorded when the
initial program becomes available for broadcast under the contract. Programming
rights are amortized over the life of the contract on a straight line basis
related to the usage of the program. The portion of the cost estimated to be
amortized within one year and after one year are reflected in the balance sheets
as current and noncurrent assets, respectively. The payments under these
contracts that are due within one year and after one year are similarly
classified as current and noncurrent liabilities.
Commitments for programming rights that have been executed, but which have
not been recorded in the accompanying financial statements, as the underlying
programming is not yet available for broadcast, were approximately $1,375,000 as
of September 30, 1997.
Property and Equipment
Property and equipment are stated at cost. The cost of maintenance is
expensed.
Depreciation and amortization are computed using the straight-line method
over the estimated useful lives of the respective assets. The principal lives
used in determining depreciation rates of various assets are as follows:
<TABLE>
<S> <C>
Broadcasting and other equipment............................ 3-15 years
Furniture and fixtures...................................... 5-7 years
Vehicles.................................................... 5 years
Equipment under capital leases.............................. 5-15 years
</TABLE>
Barter and Trade Transactions
Revenue and expenses associated with barter agreements in which broadcast
time is exchanged for programming rights are recorded at the average rate of the
airtime exchanged. Trade transactions, which represent the exchange of
advertising time for goods or services, are recorded at the estimated fair value
of the products or services received. Barter and trade revenue is recognized
when advertisements are broadcast. Merchandise or services received from airtime
trade sales are charged to expense or capitalized when used or received.
F-7
<PAGE>
ACME TELEVISION, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1997
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Carrying Value of Long-Lived Assets
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 121, 'Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of.' The carrying value of long-lived assets
(tangible and intangible) is reviewed if the facts and circumstances suggest
that they may be impaired. For purposes of this review, assets are grouped at
the operating company level which is the lowest level for which there are
identifiable cash flows. If this review indicates that an asset's carrying value
will not be recoverable, as determined based on future expected, undiscounted
cash flows, the carrying value is reduced to fair market value.
Income Taxes
The Company is a limited liability company, therefore, no income taxes have
been provided for its operations. Any liability or benefit from the income or
loss is the responsibility of the individual members.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. These estimates include the allowance for doubtful accounts,
net realizable value of programming rights and the evaluation of intangible
assets. Actual results could differ from those estimates.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentration of credit risk consist primarily of accounts receivable and cash.
The Company believes that concentrations of credit risk with respect to accounts
receivable, which are unsecured, are limited due to the Company's ongoing
relationship with its clients. The Company provides its estimate of
uncollectible accounts. The Company has not experienced significant losses
relating to accounts receivable.
(3) ACQUISITION
On June 17, 1997, ACME Parent acquired substantially all of the assets and
assumed certain liabilities of Channel 32, Incorporated, relating to the
operations of Station KWBP, in exchange for $18,675,000 in cash and $4,400,000
of membership units in ACME Parent. The acquisition was accounted for using the
purchase method. The excess of the purchase price over the fair value of net
assets acquired of approximately $22,767,000, has been recorded as broadcast
licenses and is being amortized over a period of 20 years.
In addition, the results of station KWBP were recorded by the Company
beginning January 1, 1997 pursuant to a Local Marketing Agreement whereby ACME
Oregon effectively operated the station and funded the stations' losses during
the period from January 1, 1997 to June 17, 1997 (the acquisition date). The
unaudited pro forma financial information reflects the net revenue and net loss
assuming the transaction occurred on January 1, 1997. This unaudited pro forma
financial information does not necessarily reflect the results of operations
that would have occurred had the acquisition occurred on January 1, 1997.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1997
-----------------
<S> <C>
Net Revenues...................................... $ 2,155,000
Net Loss.......................................... $(3,754,000)
</TABLE>
F-8
<PAGE>
ACME TELEVISION, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1997
(4) SUBSEQUENT AND PENDING ACQUISITIONS
On October 7, 1997, the Company acquired Crossville Limited Partnership,
the owners of Station WINT in exchange for $13,200,000 in cash.
On July 29, 1997, ACME Missouri entered into a stock purchase agreement to
acquire Koplar Communications, Inc. (KCI). On September 30, 1997, ACME Missouri
placed $143 million into an escrow account, classified as a deposit on the
accompanying Consolidated Balance Sheet, in connection with this acquisition,
entered into a long-term LMA with Station KPLR and filed requisition
applications with the FCC for the transfer of the Station's license to ACME
Missouri. The LMA will terminate upon completion of the sale, which is expected
to occur during the first half of 1998. Under the terms of the escrow agreement,
the sellers can elect to withdraw the escrow funds, less certain obligations of
the sellers' to be paid out of escrow, on January 2, 1998 or thereafter. Upon
doing so, the sellers must simultaneously transfer control of KCI's stock into a
separate trust account for the benefit of ACME Missouri.
Pursuant to the LMA entered into on September 30, 1997 relating to Station
KPLR, the Company will retain all revenues generated by the station, bear all
operating expenses of the station and have the right to program the station
subject to KCI's ultimate authority for programming and the station's existing
programming commitments.
On August 22, 1997, ACME Utah and ACME New Mexico entered into separate
agreements with related sellers to acquire Stations KZAR and KAOU, respectively.
These agreements call for an aggregate purchase price of $14 million for the two
stations, of which $8 million will be paid in cash and $6 million in membership
interests in ACME parent.
(5) DUE FROM AFFILIATE
The Company had $14,876,000 due from ACME Parent as of September 30, 1997.
Subsequent to September 30, 1997, ACME Parent repaid the Company's notes payable
to bank of $3,500,000 and repaid substantially all of the remaining balance to
the Company. Accordingly, the Company has recorded the due from affiliate as a
current asset.
(6) SENIOR DISCOUNT NOTES
On September 30, 1997, the Company issued Senior Discount Notes (Notes)
with a face value of $175 million and received $127,370,000 in gross proceeds
from such issuance. These Notes provide for semi-annual cash interest payments
at an annual rate of 10.875% beginning in the fourth year with the first
interest payment due on March 31, 2001. The Notes are subordinated to the
Company's bank revolver (see Note 7) and to the Company's capital equipment
finance facilities. The Notes mature on September 30, 2004 and may not be
prepaid without penalty.
The Notes contain certain covenants and restrictions including restrictions
on future indebtedness and limitations on investments, and transactions with
affiliates. ACME Television was in compliance with all such convenants and
restrictions at September 30, 1997.
Costs associated with the issuance of these notes, including the
underwriters fees and related professional fees are included in long-term other
assets and will be amortized over the term of the notes.
F-9
<PAGE>
ACME TELEVISION, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
NINE MONTHS ENDED SEPTEMBER 30, 1997
(7) BANK REVOLVER
On August 15, 1997, the Company entered into a $22.5 million revolving
credit facility (the Loan Agreement) with Canadian Imperial Bank Corporation
(CIBC), of which $3.5 million was drawn and outstanding as of September 30,
1997. Under the terms of the Loan Agreement, advances bear interest at either
the alternative base rate or the adjusted LIBOR rate, as defined in the Loan
Agreement.
On October 6, 1997, the ACME Parent paid off the outstanding principle and
accrued interest under the Loan Agreement on behalf of the Company.
(8) COMMITMENTS AND CONTINGENCIES
Obligations under Leases
The Company is obligated under noncancelable operating leases for office
space and its transmission site. Future minimum lease payments as of September
30, 1997 under noncancelable operating leases with initial or remaining terms of
one year or more are as follows:
<TABLE>
<S> <C>
Three months ended December 31, 1997......................... $ 73,000
Year ending December 31:
1998....................................................... 295,000
1999....................................................... 296,000
2000....................................................... 298,000
2001....................................................... 301,000
2002....................................................... 306,000
Thereafter................................................. 2,317,000
----------
$3,886,000
==========
</TABLE>
Total rental expense under operating leases for the nine months ended
September 30, 1997 was approximately $83,000.
Programming Rights Payable
Maturities on the Company's programming rights payables (including
commitments not recognized in the accompanying financial statements due to the
lack of current availability for broadcast) for each of the next five years are
as follows:
<TABLE>
<S> <C>
Three months ended December 31, 1997...................... $ 187,000
Year ending December 31:
1998.................................................... 833,000
1999.................................................... 687,000
2000.................................................... 471,000
2001.................................................... 315,000
Thereafter.............................................. 355,000
----------
Total.............................................. $2,848,000
==========
</TABLE>
F-10
<PAGE>
ACME TELEVISION, LLC (PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEET
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
-------------
<S> <C>
CURRENT ASSETS:
Cash & Equivalents......................................................... $ 27,178
Due from affiliates........................................................ 14,876
Prepaid expenses and other current assets.................................. 138
---------
Total Current Assets.................................................. 42,192
Property and equipment, net................................................ 9
Investment in and advances to subsidiaries................................. 170,779
Other assets:
Acquisition related costs............................................. 170
Prepaid financing costs, less current portion......................... 7,041
Other................................................................. 16
---------
Total Assets.......................................................... $ 220,207
=========
CURRENT LIABILITIES:
Accounts payable........................................................... $ 1,583
Accrued liabilities........................................................ 5,476
Current portion of long-term liabilities:
Notes payable to banks................................................ 3,500
---------
Total Current Liabilities............................................. 10,559
10 7/8% Senior Discount Notes.............................................. 127,370
---------
Total Liabilities..................................................... 137,929
---------
EQUITY:
Members' capital/Shareholders' equity...................................... 85,516
Accumulated deficit........................................................ (3,238)
---------
Total Equity.......................................................... 82,278
---------
TOTAL LIABILITIES & EQUITY............................................ $ 220,207
=========
</TABLE>
See accompanying notes to condensed financial statements.
F-11
<PAGE>
ACME TELEVISION, LLC (PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1997
-------------
<S> <C>
Revenues........................................................................ $ --
Selling, general and administrative expenses.................................... 743
-------
Operating loss............................................................. (743)
Interest income from subsidiary................................................. 871
Interest expense................................................................ (61)
-------
Net loss before equity in net loss of subsidiaries......................... 67
Equity in net loss of subsidiaries.............................................. (3,305)
-------
Net loss................................................................... ($3,238)
=======
</TABLE>
See accompanying notes to condensed financial statements.
F-12
<PAGE>
ACME TELEVISION, LLC (PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1997
-------------
<S> <C>
Net Loss........................................................................ ($ 3,238)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation and amortization................................................. 1
Equity in net loss of subsidiaries............................................ 3,305
Changes in assets and liabilities:
Increase in prepaid expenses and other current assets...................... (138)
Increase in accounts payables.............................................. 1,583
Increase in accrued expenses............................................... 5,476
---------
Net cash used in operating activities.................................... 6,989
---------
Cash flows from investing activities:
Purchase of property and equipment............................................ (10)
Investment in and advances to affiliates...................................... (151,009)
---------
Net cash used in investing activities.................................... (151,019)
---------
Cash flows from financing activities:
Increase in other assets...................................................... (7,227)
Contributions from parent..................................................... 47,565
Notes payable to bank......................................................... 3,500
Issuance of Senior Discount Notes............................................. 127,370
---------
Net cash provided from financing activities.............................. 171,208
---------
Net increase in cash.................................................. 27,178
Cash at beginning of period........................................... 0
Cash at end of period............................................... $ 27,178
=========
Supplemental disclosues of cash flow information:
Cash paid during the period for:
Interest............................................................ (31)
Income taxes........................................................ 0
Non cash transactions:
Contributions of the net assets of ACME Television of Oregon, LLC
from Parent in exchange for membership units..................... 23,075
Due from affiliates in exchange for membership units................ 14,876
=========
</TABLE>
See accompanying notes to condensed financial statements.
F-13
<PAGE>
ACME TELEVISION, LLC
NOTES TO CONDENSED FINANCIAL INFORMATION
(1) BASIS OF PRESENTATION
Pursuant to the rules and regulations of the Securities and Exchange Commission,
the Condensed Financial Statements of the Registrant do not include all of the
information and notes normally included with financial statements prepared in
accordance with generally accepted accounting principles. It is therefore
suggested that these Condensed Financial Statements be read in conjunction with
the Consolidated Financial Statements and Notes thereto included elsewhere in
this filing.
(2) CASH DIVIDENDS
There have been no cash dividends declared by the Company.
(3) LONG-TERM DEBT
There are no cash interest payments due on the Company's Senior Discount Notes
until March 31, 2001.
F-14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Koplar Communications, Inc.:
We have audited the accompanying consolidated balance sheets of Koplar
Communications, Inc. and Subsidiary as of December 31, 1996 and 1995, and the
related consolidated statements of operations, shareholders' deficit and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Koplar
Communications, Inc. and Subsidiary as of December 31, 1996 and 1995 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
St. Louis, Missouri
March 28, 1997, except for
Note 19, as to which the date is
September 30, 1997.
F-15
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND NUMBER OF SHARES)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------ -------------
1995 1996 1997
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash................................................................................... $ 244 $ 23 $ --
Receivables, less allowance for doubtful accounts of $180 and $213 at December 31, 1995
and 1996, and $252 at September 30, 1997, respectively.............................. 7,192 6,549 7,281
Current portion of programming rights.................................................. 5,000 4,700 4,889
Prepaid expenses and other current assets.............................................. 1,382 757 171
Income tax receivable.................................................................. -- 173 --
Deferred income taxes.................................................................. 330 342 1,542
------- ------- --------
Total current assets................................................................ 14,148 12,544 13,883
Property and equipment, net.............................................................. 2,653 2,638 2,394
Programming rights less current portion.................................................. 9,362 6,232 4,097
Deferred financing costs................................................................. 2,607 287 239
Other assets............................................................................. 789 1,612 1,709
------- ------- --------
Total assets........................................................................ $29,559 $23,313 $22,322
======= ======= ========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Note payable--revolver................................................................. $ 4,130 $ -- $ --
Current portion of long-term debt and obligations under capital leases................. 1,221 -- --
Current portion of programming obligations............................................. 5,500 5,300 5,089
Current portion of note payable--programmer............................................ 1,180 400 400
Accounts payable and accrued expenses.................................................. 2,055 1,494 2,552
Cash overdraft......................................................................... -- 1,244 532
Accrued interest....................................................................... 976 112 110
Income taxes payable................................................................... 600 -- --
Other liabilities...................................................................... 195 195 6,095
------- ------- --------
Total current liabilities........................................................... 15,857 8,745 14,778
Long-term obligations:
Long-term debt and obligations under capital leases, less current portion.............. 9,931 13,650 12,381
Programming obligations, less current portion.......................................... 8,932 7,047 4,542
Notes payable--officer/shareholder..................................................... 1,168 -- --
Note payable--programmer, less current portion......................................... 2,412 3,755 3,455
Deferred income taxes.................................................................. 2,101 1,940 1,940
Other liabilities...................................................................... 692 510 282
------- ------- --------
Total liabilities................................................................... 41,093 35,647 37,378
------- ------- --------
Commitments
Shareholders' deficit:
Class A preferred voting stock; $110 par value. Authorized 5,000 shares; issued and
outstanding 863 shares ($1,100 per share liquidation value)......................... 95 95 95
Common nonvoting stock; $1 par value. Authorized 25,000 shares; issued and outstanding
21,206 shares....................................................................... 21 21 21
Paid-in capital........................................................................ 1,041 1,041 1,041
Note receivable--officer/shareholder................................................... (1,111) (1,111) (1,111)
Accumulated deficit.................................................................... (11,580) (12,380) (15,102)
------- ------- --------
Net shareholders' deficit........................................................... (11,534) (12,334) (15,056)
------- ------- --------
Total liabilities and shareholders' deficit......................................... $29,559 $23,313 $22,322
======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-16
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER
YEAR ENDED DECEMBER 31, 30,
----------------------------- ----------------------------
1994 1995 1996 1996 1997
------- ------- ------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues........................................... $33,146 $27,528 $27,260 $ 19,751 $ 21,347
Operating expenses:
Programming...................................... 13,581 9,503 11,365 9,413 8,458
Selling, general and administrative.............. 12,113 11,632 11,318 7,914 13,722
Depreciation and amortization.................... 1,085 791 702 518 490
------- ------- ------- ---------- ----------
Total operating expenses................. 26,779 21,926 23,385 17,845 22,670
------- ------- ------- ---------- ----------
Operating income......................... 6,367 5,602 3,875 1,906 (1,323)
------- ------- ------- ---------- ---------
Other income (expense):
Interest expense................................. (5,777) (2,842) (2,155) (1,522) (1,117)
Gain on sale of broadcasting subsidiary.......... 11,440 -- -- -- --
Realization of amount due under Tax Sharing
Agreement..................................... 3,596 -- -- -- --
Other income..................................... 360 262 121 90 140
Other expense.................................... (2,419) (583) (820) (579) (1,453)
------- ------- ------- ---------- ----------
Other income (expense)........................... 7,200 (3,163) (2,854) (2,011) (2,430)
------- ------- ------- ---------- ----------
Income (loss) before income taxes, discontinued
operations and extraordinary items............... 13,567 2,439 1,021 (105) (3,753)
Provision (benefit) for income taxes............... 3,272 523 462 425 (1,031)
------- ------- ------- ----------- ----------
Income (loss) before discontinued
operations and extraordinary items..... 10,295 1,916 559 (530) (2,722)
Discontinued operations--income from operations of
divested subsidiaries............................ 1,262 -- -- -- --
------- ------- ------- ----------- ----------
Income (loss) before extraordinary
items.................................. 11,557 1,916 559 (530) (2,722)
Extraordinary items:
Gain on forgiveness of programming obligations,
including interest............................ 21,525 -- -- -- --
Gain on forgiveness of senior debt, including
interest...................................... 24,775 -- -- -- --
Gain on forgiveness of other obligations......... 834 -- -- -- --
Loss on early extinguishment of debt, net of
taxes of $868................................. -- -- (1,359) -- --
------- ------- ------- --------- ----------
Net income (loss)........................ $58,691 $ 1,916 $ (800) $ (530) $ (2,722)
======= ======= ======= ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-17
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS ENDED SEPTEMBER 30,
1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NOTE
CLASS A COMMON RECEIVABLE
PREFERRED NONVOTING PAID-IN OFFICER/ ACCUMULATED
VOTING STOCK STOCK CAPITAL SHAREHOLDER DEFICIT TOTAL
------------ --------- ------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994................ $ -- $70 $ -- $ -- $ (67,716) $(67,646)
Merger of Koplar Enterprises, Inc....... 95 (49) -- -- (4,471) (4,425)
--- --- ------- ----------- ----------- --------
Balance after merger.................... 95 21 -- -- (72,187) (72,071)
Spin-off of World Events Productions,
Ltd. to shareholder................... -- -- 1,041 -- -- 1,041
Sale of Koplar Properties, Inc. to
shareholder........................... -- -- -- (1,111) -- (1,111)
Net income......................... -- -- -- -- 58,691 58,691
--- --- ------- ----------- ----------- --------
Balance, December 31, 1994.............. 95 21 1,041 (1,111) (13,496) (13,450)
Net income......................... -- -- -- -- 1,916 1,916
--- --- ------- ----------- ----------- --------
Balance, December 31, 1995.............. 95 21 1,041 (1,111) (11,580) (11,534)
Net loss........................... -- -- -- -- (800) (800)
--- --- ------- ----------- ----------- --------
Balance, December 31, 1996.............. 95 21 1,041 (1,111) (12,380) (12,334)
Net (loss) (unaudited)............. -- -- -- -- (2,722) (2,722)
--- --- ------- ----------- ----------- --------
Balance, September 30, 1997
(unaudited)........................... $ 95 $21 $ 1,041 $(1,111) $ (15,102) $(15,056)
==== === ======= =========== =========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-18
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER
YEAR ENDED DECEMBER 31, 30,
-------------------------------- ------------------------------
1994 1995 1996 1996 1997
-------- -------- -------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)...................................... $ 58,691 $ 1,916 $ (800) $(3,566) $(2,722)
-------- -------- -------- ---------- ---------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Realization of amount due under Tax Sharing
Agreement........................................ (3,596) -- -- -- --
-------- -------- -------- ---------- ----------
Deferred income taxes.............................. 2,271 (500) (173) -- --
Amortization of programming rights................. 7,333 5,418 5,360 4,006 3,554
Adjustment to carrying value of programming
rights........................................... -- -- 1,500 1,500 --
Amortization of intangible assets.................... 26 -- -- -- --
Amortization of deferred financing costs............. 384 798 411 396 48
Loss on early extinguishment of debt................. -- -- 2,227 2,227 --
Redemption premium on long-term debt................. (2,365) -- -- -- --
Depreciation......................................... 1,085 791 702 518 490
Gain on sale of broadcasting subsidiary.............. (11,440) -- -- -- --
Change in net assets and liabilities of divested
subsidiaries....................................... (1,262) -- -- -- --
Gain on forgiveness of programming obligations,
including interest................................. (21,525) -- -- -- --
Gain on forgiveness of senior debt, including
interest........................................... (24,775) -- -- -- --
Gain on forgiveness of other obligations............. (834) -- -- -- --
Changes in assets and liabilities:
Receivables........................................ 377 (1,100) 643 1,603 (732)
Prepaid expenses and other current assets.......... 468 (11) (142) (109) 118
Other assets....................................... 175 (37) 44 (25) (1,297)
Accounts payable and accrued expenses.............. (2,771) 649 (561) (104) 1,058
Accrued interest................................... 3,520 350 (301) (43) (2)
Income taxes receivable/payable.................... 400 200 (773) (128) 173
Other long-term liabilities........................ (3,137) (203) (182) (169) 5,672
-------- -------- -------- ---------- ----------
Total adjustments................................ (55,666) 6,355 8,755 9,672 9,570
-------- -------- -------- ---------- ----------
Net cash provided by operating activities........ 3,025 8,271 7,955 6,106 6,848
-------- -------- -------- ---------- ----------
Cash flows from investing activities:
Purchase of property and equipment..................... (839) (1,013) (687) (580) (246)
Investment in affiliate................................ -- (250) (100) (100) (100)
Deposit for PCS auction................................ -- (1,235) (468) -- --
Return of deposits for PCS auction..................... -- -- 468 -- --
Proceeds from sale of broadcast subsidiary............. 14,656 -- -- -- --
-------- -------- -------- ---------- ----------
Net cash provided by (used in) investing
activities....................................... 13,817 (2,498) (787) (680) (346)
-------- -------- -------- ---------- ----------
Cash flows from financing activities:
Repayment of notes payable--officer/shareholder........ -- -- (1,168) (1,168) --
Payment on other debt and obligations under capital
leases............................................... (895) (124) (21) (18) (300)
Payment on programming obligations..................... (9,740) (5,230) (5,515) (4,067) (4,224)
Cash overdraft......................................... -- -- 1,244 720 (712)
Repayment of long-term debt............................ (20,000) (2,619) (11,640) (10,848) (1,269)
Proceeds from long-term debt........................... 14,000 -- 14,159 14,159 --
Proceeds from (payment on) revolver, net............... 1,766 2,364 (4,130) (4,130) --
Cash paid to shareholder upon divestiture of
subsidiaries......................................... (82) -- -- -- --
Payment on deferred financing costs.................... (3,789) -- (318) (318) --
-------- -------- -------- ---------- ----------
Net cash used in financing activities.............. (18,740) (5,609) (7,389) (5,670) (6,525)
-------- -------- -------- ---------- ----------
Net increase (decrease) in cash.................... (1,898) 164 (221) (244) (23)
Cash, beginning of period................................ 1,978 80 244 244 23
-------- -------- -------- ---------- ----------
Cash, end of period...................................... $ 80 $ 244 $ 23 $ -- $ --
======== =======- ======== ========== ==========
Interest paid............................................ $ 1,873 $ 1,725 $ 1,575 $ 1,009 $ 1,055
======== ======== ======== ========== ==========
Income taxes paid........................................ $ 1,730 $ 601 $ 120 120 --
======== ======== ======== ========== ==========
Noncash transactions:
New programming rights purchased under installment
obligations.......................................... $ 3,909 $ 5,685 $ 3,430 $ 2,044 $ 3,334
======== ======== ======== ========== ==========
Sale of KP to shareholder.............................. $ 1,111 -- -- -- --
======== ======== ======== ========== ==========
Spin-off of WEP to shareholder......................... $ 1,041 -- -- -- --
======== ======== ======== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-19
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(1) ORGANIZATION
The Company operates an independent television station in St. Louis,
Missouri (KPLR-TV) and until June 29, 1994, also operated an independent
television station in Sacramento, California (KRBK-TV). The broadcasting license
of KPLR-TV is owned by Koplar Television Co., L.L.C., a 99.9%-owned subsidiary
of Koplar Communications, Inc.
Beginning in late 1990, the television industry and, in particular, the St.
Louis television market experienced a severe decline in advertising revenues
which, coupled with a continuing rise in fixed, long-term programming costs and
sports broadcast rights fees, caused the Company to experience significant cash
flow difficulties. As a result, the Company had been in payment default on its
senior notes with its long-term lenders beginning May 16, 1991. On October 11,
1991, the lenders issued notices of acceleration to the Company of all unpaid
principal, amounting to $35,000,000, plus accrued interest. During 1991, the
Company, because of its cash flow difficulties, also began to delay programming
payments to program distributors, and was consequently in default of these
agreements based on the stated payment terms of the program contracts.
On November 16, 1993, Bankers Trust Company purchased the senior notes from
the long-term lenders. Also, during 1993, management executed an agreement with
Pappas Telecasting Companies (Pappas) to sell substantially all of the assets of
Koplar Communications of California, Inc. (KRBK-TV). In addition, the Company
entered into agreements with Pappas whereby, concurrent with the closing of the
sale, Pappas would extend a loan to the Company and provide management services
to the Company under a management services agreement for a period of seven
years. The agreements with Pappas did not prohibit the Company from seeking and
obtaining alternative sources of financing prior to the closing, in which case
the lending and management agreements could be terminated for a specified fee.
During 1994, the Company completed a refinancing with Foothill Capital
Corporation and the sale of KRBK-TV to Pappas, along with a series of related
restructuring transactions. The proceeds of the refinancing were used, along
with the proceeds from the sale of KRBK-TV, to redeem the Bankers Trust senior
notes, pay the termination fee associated with the management services
agreement, provide up-front payments related to the restructuring of the
Company's programming obligations and pay various other fees and liabilities.
In addition, during 1994, a corporate restructuring of the Company and
related entities was completed whereby Koplar Enterprises, Inc., formerly the
parent of Koplar Communications, Inc. (KCI), was merged into KCI, World Events
Productions, Ltd., a subsidiary of KCI, was spun off to a shareholder, and
Koplar Properties, Inc., a subsidiary of KCI, was sold to a shareholder.
The aforementioned transactions are more fully described in the
accompanying footnotes.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
dates of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates. In management's opinion, all adjustments necessary for a fair
presentation are reflected in the interim periods presented. All adjustments are
of a normal recurring nature.
F-20
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
The following is a summary of the significant accounting policies followed
in the preparation of these financial statements:
Basis of Consolidation
The consolidated financial statements include the accounts of Koplar
Communications, Inc. and subsidiary. Accordingly, all references herein to
Koplar Communications, Inc. include the consolidated results of its subsidiary.
All significant intercompany accounts and transactions have been eliminated in
consolidation.
Interim Financial Information
The consolidated financial statements as of September 30, 1997 and for the
nine months ended September 30, 1996 and 1997 are unaudited but reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the accompanying
consolidated financial position and results of operations and cash flows.
Operating results for the nine months ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 1997.
Cash and Credit Concentrations
The Company maintains several cash accounts, including a lockbox account,
in one financial institution. The cash balances in these accounts may at times
exceed insured limits. The majority of the Company's receivables are due from
local and national advertising agencies and are not collateralized.
The Company had a negative cash balance in its account of approximately
$1,244,000 at December 31, 1996 and $532,000 at September 30, 1997,
respectively. These amounts are included in current liabilities as a cash
overdraft.
Property and Equipment
Property and equipment are recorded at cost. Depreciation expense is
computed using the straight-line method over the estimated useful lives of the
related assets. The accelerated cost recovery system (ACRS) and modified
accelerated cost recovery system (MACRS) are used for income tax purposes.
Renewals and betterments are capitalized to the related asset accounts, while
repair and maintenance costs, which do not improve or extend the lives of the
respective assets, are charged to operations.
When assets are retired or otherwise disposed of, the assets and related
accumulated depreciation are eliminated from the accounts and any resulting gain
or loss is recorded in operations.
Programming Rights
Programming rights are recorded at cost when the program is available to
the Company for broadcasting. Agreements define the lives of the rights and the
number of showings. The cost of programming rights is charged against earnings
either on the straight-line basis over the term of the agreement or per play for
certain syndicated contracts based on the number of plays specified in the
contract.
Programming rights and related obligations are recorded at cost without
recognition of any imputed interest charges.
F-21
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Programming rights representing the cost of rights of programs available
for broadcasting at the end of each period and which management expects to be
broadcast in the succeeding fiscal year are shown as a current asset.
The Company assesses the valuation of its programming rights on an ongoing
basis by evaluating the unamortized rights and future programming rights
commitments and comparing the anticipated future number of plays and related
revenue potential with the related unamortized cost. When unamortized cost
exceeds the undiscounted estimated future revenue, the Company will recognize an
adjustment to the related carrying value. During 1996, the Company recorded an
adjustment to the carrying value of certain programming rights of $1,500,000.
Deferred Financing Costs
Financing costs incurred in connection with obtaining financing are
deferred and amortized on a straight-line basis over the term of the borrowings.
Amortization of deferred financing costs, included in interest expense, totaled
approximately $384,000, $798,000 and $411,000, for the years ended December 31,
1994, 1995 and 1996, respectively. In addition, the Company expensed
approximately $2,227,000 of deferred financing costs during 1996 as a result of
the Company's refinancing of its long-term debt (see note 6). Accordingly, the
expense related to this transaction has been reflected as an extraordinary item
in the consolidated statements of operations.
Income Taxes
Deferred income taxes are recognized for the tax consequences in future
years of temporary differences between the tax basis of assets and liabilities
and their financial reporting amounts at each year-end based on enacted tax laws
and statutory tax rates applicable to the periods in which the temporary
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized.
Interest Rate Hedge Agreements
The Company enters into interest rate hedge agreements which involve the
exchange of fixed- and floating-rate interest payments periodically over the
life of the agreement without the exchange of the underlying principal amounts.
The differential to be paid or received is accrued as interest rates change and
recognized over the life of the agreements as an adjustment to interest expense.
Revenue Recognition
Revenues from advertisements are recognized as the commercials are
broadcast.
Barter Revenues
Barter transactions in which the Company accepts products or services in
exchange for commercial air time are recorded at the estimated fair values of
the products or services received. Barter revenues are recognized when
commercials are broadcast. The assets or services received in exchange for
broadcast time are recorded when received or used. Certain of the Company's
programming agreements involve the exchange of advertising time for programming.
The Company does not record revenues and cost of revenues related to these
arrangements, which have no impact on earnings. The Company estimates that
revenues and costs associated with these agreements were approximately
$2,696,000, $2,124,000 and $2,612,000 for 1994, 1995 and 1996, respectively.
F-22
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(3) PREPAID EXPENSES AND OTHER CURRENT ASSETS
In 1995, the Company placed a refundable deposit of $1,235,000 with the FCC
in order to bid on the regional rights for a new technology, personal
communications system. This product is expected to replace cell phones, beepers
and other portable communications technology. The Company was the successful
bidder on a number of PCS licenses. During 1996, $468,000 of the initial deposit
was returned to the Company. Approximately $767,000 remains on deposit, which is
included in other long-term assets, with the FCC for the obtained licenses.
In fourth quarter 1996, another round of PCS bidding was opened by the FCC.
The Company has a deposit of $467,500 with the FCC which is included in prepaid
expenses and other current assets. The auction was concluded and the deposit was
returned in the first quarter of 1997.
(4) PROPERTY AND EQUIPMENT
A summary of property and equipment at December 31, 1995 and 1996 is as
follows (dollars in thousands):
<TABLE>
<CAPTION>
ESTIMATED
1995 1996 USEFUL LIVES
------ ------- ---------------
<S> <C> <C> <C>
Land.............................................................. $ 464 $ 464 --
Buildings and improvements........................................ 1,822 1,780 15 to 40 years
Equipment, furniture and fixtures................................. 6,854 6,463 3 to 15 years
------ -------
9,140 8,707
Less accumulated depreciation..................................... (6,487) (6,069)
------ -------
$2,653 $ 2,638
====== =======
</TABLE>
Depreciation expense for the years ended December 31, 1994, 1995 and 1996
was approximately $1,085,000, $791,000 and $702,000, respectively.
(5) NOTE PAYABLE--REVOLVER
The note payable--revolver was repaid in July 1996 as part of a debt
refinancing with Nations Bank. Outstanding checks of $1,179,229, which cleared
against the revolver, are reflected in the note payable--revolver balance at
December 31, 1995.
(6) LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES
The Company's long-term debt and obligations under capital leases at
December 31, 1995 and 1996 consist of the following (dollars in thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Long-term debt...................................... $11,131 $13,650
Obligations under capital leases.................... 21 --
------- -------
11,152 13,650
Less current portion................................ (1,221) --
------- -------
$ 9,931 $13,650
======= =======
</TABLE>
F-23
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(6) LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES--(CONTINUED)
At December 31, 1995, the Company's long-term debt consisted of a revolving
loan and a term loan to Foothill Capital Corporation. The Company used
$3,000,000 of the term loan proceeds to pay a commitment fee to Foothill for
entering into the financing arrangement. Such arrangement required the payment
of interest monthly at 12%.
On July 10, 1996, the Company refinanced the existing debt maintained by
Foothill with Boatmen's. The Company received a revolving commitment from
Nations Bank of $19,000,000 (the Loan Agreement), of which $14,266,000 was drawn
from the commitment to satisfy certain existing obligations and refinancing
costs. The maximum amount available under the revolving loan commitment is as
follows for the periods outlined:
<TABLE>
<S> <C>
July 10, 1996--June 30, 1997............................... $ 19,000,000
July 1, 1997--June 30, 1998................................ 18,000,000
July 1, 1998--June 30, 1999................................ 17,000,000
July 1, 1999--June 30, 2000................................ 15,500,000
July 1, 2000--June 30, 2001................................ 14,000,000
</TABLE>
At December 31, 1996, the Company had borrowed $13,650,000 against the
revolving commitment agreement. Under the terms of the Loan Agreement, the
Company shall repay the loan and all unpaid interest thereon on July 1, 2001.
The loan bears interest at either the alternative base rate or the adjusted
LIBOR rate, as defined in the Loan Agreement.
In order to minimize interest rate risk, the Company entered into a
five-year interest rate swap for $5,000,000 of the borrowings, which locked in
an interest rate of approximately 10%. The Company also entered into a
three-year interest rate swap for $2,000,000 of the borrowings, which locked in
an interest rate of approximately 10%. In addition, the Company entered into a
30-day interest rate swap for $5,000,000 of the outstanding borrowings, which
locked in an interest rate of approximately 8.87% at December 31, 1996. The
remaining borrowings accrue interest at the prime interest rate plus 1/4-- 3/4%
per annum based on certain criteria. Interest is payable monthly. In addition,
the Company will pay quarterly a commitment fee of .5% per annum of the unused
portion of the revolving commitment to Nations Bank. Amounts outstanding under
the Loan Agreement are collateralized by substantially all assets of the
Company.
Based upon the borrowing rates currently available to the Company for bank
loans with similar terms and average maturities, the fair value of long-term
debt approximates carrying value.
The Loan Agreement includes various restrictive covenants including
requirements that the Company maintain a specified minimum fixed charge
coverage, maximum funded debt to operating cash flow ratio and maximum funded
obligations ratio. In addition, the agreement places limitations on the amount
of capital expenditures and the amount of capital leases.
The assets and related obligations under capital leases have been recorded
at amounts equal to the present value of future minimum lease payments. Assets
held under capital leases as of December 31, 1995 are included in equipment at a
cost of approximately $114,000, less accumulated depreciation of approximately
$90,000. There is no remaining lease obligation at December 31, 1996.
On June 29, 1994, utilizing the proceeds from the sale of KRBK and
refinancing of the Company's debt with Foothill, the Company redeemed its senior
notes by making a payment to Bankers Trust Company of $20,000,000 plus a
redemption premium of $3,750,000, net of interest paid through the redemption
date of $1,385,000. Upon redemption of the senior notes, all remaining liability
for principal and interest under the senior notes was forgiven. Accordingly, the
Company has recorded a gain on forgiveness of senior debt and
F-24
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(6) LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES--(CONTINUED)
accrued interest in the amount of $24,775,000, which is reflected as an
extraordinary item in the 1994 Consolidated Statement of Operations.
(7) PROGRAMMING OBLIGATIONS
Programming obligations are generally classified as current or noncurrent
liabilities according to the payment terms of the various contracts.
During previous years, the Company was in technical default on its
programming obligations and subsequently reached restructuring agreements with
all of its program distributors in 1994. Under the restructuring agreements, all
prior defaults under the original programming agreements were waived by the
program distributors. The Company received partial forgiveness on outstanding
programming obligations, and all accrued interest on delinquent payments was
also forgiven. The total gain on forgiveness of programming obligations and
accrued interest was $21,525,000 and is reflected as an extraordinary item in
the 1994 Consolidated Statement of Operations. Several of the restructuring
agreements contain provisions under which the Company may be held liable for an
amount greater than the restructured liability amount that is currently recorded
at December 31, 1996. The Company may also be held secondarily liable for
certain of a formerly-owned subsidiary's programming obligations in the event of
that subsidiary's default on the restructured obligations in the future. Also,
certain agreements state that the entire programming obligations amount prior to
restructuring (including accrued interest) becomes payable upon default of the
restructured terms going forward. Additionally, several agreements contain
cross-default provisions whereby default by one company (the Company or KRBK)
causes the other to be in default of their restructured obligations.
At December 31, 1996, future minimum payments based on contractual
agreements are as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR,
- ------------------------------------------------
<S> <C>
1997............................................ $ 5,300
1998............................................ 4,176
1999............................................ 2,688
2000............................................ 183
---------
$ 12,347
=========
</TABLE>
(8) NOTE PAYABLE--PROGRAMMER
Note payable--programmer represents an additional amount owed to Warner
Brothers ('WB') in connection with the restructuring of certain programming
obligations in 1994 (see note 7). The Company entered into a Stock Purchase,
Option and Repurchase Agreement with WB, under which the Company has an
obligation in the amount of $3,692,000 to WB in addition to the liability
currently recorded as programming obligations.
Under this agreement, the Company issued a promissory note for $3,092,000
to WB (payable in even installments over 36 months, plus interest at 1% over the
prime rate per annum, payments to begin upon notification by WB to the Company),
and also transferred to WB stock in an entity which is partially owned by the
shareholder of the Company (see note 17). However, the agreement gives the
programmer a 'Put Right' under which the stock may be transferred by WB to the
Company at any time until either June 28, 1997 or the exercise of the First
Option (see below), at which time $600,000 is payable within thirty days. In
1995, $100,000 was paid on the Put Right. At December 31, 1995, the remaining
liability was $3,592,000.
F-25
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(8) NOTE PAYABLE--PROGRAMMER--(CONTINUED)
The Company replaced the note payable--programmer with a restructured
agreement on December 31, 1996. The previous note payable and the related
accrued interest were replaced with Note A and Note B. Note A is in the amount
of $2,000,000 and at December 31, 1996, $1,900,000 is outstanding. Interest
accrues at prime plus 1/2%. Principal of $100,000 plus accrued interest to date
are payable quarterly until the note is satisfied. There is no accrued interest
at December 31, 1996.
Note B is an option note for $2,250,000. At December 31, 1996, $2,250,000
was outstanding on Note B. The programmer has an option which can be called
between January 1, 2000 and December 31, 2001. If called, WB would receive 12%
of a related entity's stock instead of cash payments on the $2,250,000
promissory note. The Company has a 'Put Right' which can be exercised between
January 1, 1997 and December 31, 2001. If put, WB would receive 12% of the
related entity's stock instead of cash payments on the $2,250,000 promissory
note. Interest accrues at prime. There is no accrued interest at December 31,
1996.
(9) NOTE RECEIVABLE--SHAREHOLDER
One June 1, 1994, the Company divested Koplar Properties, Inc. and
Subsidiary (KP) to a shareholder of the Company. KP is primarily engaged in the
renting and operating of commercial and residential real estate in the St. Louis
area.
The common stock of KP was sold to the shareholder of the Company in
exchange for a nonrecourse promissory note receivable in an amount equal to the
appraised value of the purchased stock. The amount of this promissory note
receivable was determined based on an independent market value appraisal of the
common stock of KP. The gain on the sale of KP, amounting to $291,000 has been
deferred. The promissory note bears interest at an applicable Federal rate and
is payable in five equal annual installments beginning June 1997. The note
receivable has been classified as a contra-equity account, net of the deferred
gain, for financial statement reporting purposes.
(10) COMMITMENTS
In conjunction with obtaining new programming and other related
considerations the Company has commitments amounting to approximately $5,394,000
for future programming rights and other considerations as of December 31, 1996.
The aggregate payments for these commitments over the next five years are
as follows (in thousands):
<TABLE>
<S> <C>
1997............................................................. $ 281
1998............................................................. 1,323
1999............................................................. 1,772
2000............................................................. 1,316
2001............................................................. 702
------
$5,394
======
</TABLE>
In January 1995, the Company entered into an Affiliation Agreement with WB
Communications (Warner Brothers) under which KPLR-TV became an affiliate of the
WB Network. The term of this agreement is for five years and is noncancelable by
the Company. Under this agreement, Warner Brothers provides programming to
KPLR-TV in exchange for a specified number of advertising spots during this
programming which are to be retained and sold by Warner Brothers. With the
launch of the WB Network on January 11, 1995, KPLR-TV is
F-26
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(10) COMMITMENTS--(CONTINUED)
required to broadcast the network programming during one specified prime-time
evening in each week. Throughout the five-year term of the agreement, the
network broadcast requirements of the agreement increase until the network
programming is broadcast seven nights per week, plus a specified number of
weekday morning, afternoon and late night timeframes.
Under the Affiliation Agreement, the Company is required to make an annual
payment to Warner Brothers if the ratings and revenues in prime time broadcasts
of WB Network programming for the current year exceed ratings and revenues
achieved by the Company in the preceding year. No such payments were payable to
Warner Brothers for the years ended December 31, 1995 and 1996.
The Company has an operating lease for certain equipment that calls for
annual payments of approximately $42,000 for a remaining period of thirteen
years. Total rent expense under operating leases for the years ended December
31, 1994, 1995 and 1996 was approximately $100,000, $116,000 and $123,000,
respectively.
(11) NOTES PAYABLE--OFFICER/SHAREHOLDER
Indebtedness to the shareholder of the Company consists of a promissory
note payable for $1,023,000 and debentures payable for $145,000, totaling
$1,168,000 at December 31, 1995. Unpaid interest on these notes is included in
accrued interest at December 31, 1995. The notes and interest were repaid in
July 1996 when the Company refinanced its Foothill debt with Nations Bank (see
note 6).
(12) INCOME TAXES
The provisions for income taxes on continuing operations for the years
ended December 31 consists of the following (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
------ ----- -----
<S> <C> <C> <C>
Current:
Federal.............................................................$ 361 $ 876 $ 552
State............................................................... 640 147 83
Deferred:
Federal............................................................. 1,980 (436) (150)
State............................................................... 291 (64) (23)
------ ----- -----
Provision for income taxes.......................................$3,272 $ 523 $ 462
====== ===== =====
</TABLE>
F-27
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(12) INCOME TAXES--(CONTINUED)
The difference between the actual tax provision and the amounts obtained by
applying the statutory U.S. Federal income tax rate of 34% to income before
income taxes, discontinued operations and extraordinary items for the years
ended December 31 is as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1994 1995 1996
------- ------ ------
<S> <C> <C> <C>
Income before income taxes, discontinued operations, and extraordinary
items................................................................... $13,567 $2,439 $1,021
======= ====== ======
Tax provision computed at statutory rate.................................. $ 4,613 $ 829 $ 347
Increases (reductions) in taxes due to:
State income taxes (net of Federal tax benefit)......................... 614 55 40
Increase (decrease) in valuation allowance.............................. (2,301) 0 0
Other................................................................... 346 (361) 75
------- ------ ------
Actual tax provision...................................................... $ 3,272 $ 523 $ 462
======= ====== ======
</TABLE>
In 1994, a valuation allowance related to deferred income tax assets of
approximately $15,441,000 was reversed due primarily to the gains on forgiveness
of debt and discontinued operations. There was no valuation allowance at
December 31, 1994, 1995 and 1996. As a result of the reversal of the valuation
allowance and the exclusion from taxable income of a significant portion of the
gain on forgiveness of obligations, no tax effect has been presented related to
1994 extraordinary items and discontinued operations as the amounts are not
material.
Pursuant to an agreement (Tax Sharing Agreement) entered into by the
Company and Four Seasons Group, Inc. (Four Seasons), a former subsidiary of the
Company which was spun off in 1989, the Company had a claim against Four Seasons
for 50% of all tax deficiencies arising during the periods prior to the
spin-off. During 1994, Koplar Enterprises, Inc. (KE), formerly the parent of
Koplar Communications, Inc., executed an agreement with Four Seasons whereby
Four Seasons acquired a portion of a promissory note payable by KE (the Note),
issued in connection with a prior redemption of certain shares of KE's preferred
stock. Four Seasons exchanged such acquired portion of the Note for the amount
owing by Four Seasons pursuant to the Tax Sharing Agreement, thereby satisfying
KE's obligation to pay such portion of the Note to Four Seasons, and satisfying
Four Seasons' obligation to KE under the Tax Sharing Agreement. KE had not
recorded a benefit related to the Tax Sharing Agreement in prior years since it
was not realizable until payment of the tax obligation by KE and payment by Four
Seasons of certain of its obligations arising from the agreement. During 1994,
the Company has reflected income related to the realization of the amount due
under the Tax Sharing Agreement of approximately $3,596,000.
F-28
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(12) INCOME TAXES--(CONTINUED)
The tax effect of temporary differences between the tax basis of assets and
liabilities and their corresponding amounts for financial statement reporting
purposes at the tax rates expected to be in effect when such differences reverse
are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Current deferred income tax asset:
Allowance for doubtful accounts....................................... $ (71) (83)
Accrued vacation payable.............................................. (64) (64)
Bonus payable......................................................... (195) (195)
Noncurrent deferred income tax liability:
Book over tax basis of fixed assets................................... 76 22
Book over tax basis of programming rights............................. 2,025 1,918
------ ------
Net deferred income tax liability..................................... $1,771 1,598
====== ======
</TABLE>
During 1996, the Internal Revenue Service (IRS) initiated an audit of the
Company's 1994 Federal income tax returns. Because the IRS has not made a final
determination of any Federal tax liabilities, no estimate of any resulting
liability can be made. In the opinion of management, the proposed adjustments,
if any, from the IRS will not have a material effect on the consolidated
financial position, results of operations or liquidity of the Company.
(13) 401(K) PLAN
Substantially all employees are eligible to participate in a 401(k) Plan
sponsored by the Company. The Company may match a specified percentage of an
employee's contribution up to a defined limit at its discretion. The amount
charged to expense by the Company for the years ended December 31, 1994, 1995
and 1996 was approximately $74,000, $62,000 and $55,000, respectively.
(14) INVESTMENT IN AFFILIATE
In 1995, the Company entered into an agreement with another television
station in St. Louis which provides that the Company make annual payments of
$200,000 to the owners of the station (the Owners) for three years, in return
for programming and other considerations over a three-year period. The agreement
may be extended by the Owners for an additional two years. Under a separate
agreement, the Company has agreed to make up to $3,500,000 in capital
contributions to a limited liability company owned by the Company and the
owners, formed to acquire television stations and invest in other communications
opportunities, as approved by the Company. No such additional contributions have
been made.
(15) MERGER WITH KOPLAR ENTERPRISES, INC.
On June 21, 1994, a plan of merger was adopted whereby KE was merged into
Koplar Communications, Inc. The merger was consummated on June 30, 1994. In
connection with the merger, 862.875 shares of KE Class A Preferred Voting Stock,
par value $110 and 21,206.25 shares of KE Common Nonvoting Stock, par value $1,
were canceled and identical amounts of Class A Preferred Voting and Common
Nonvoting Stock were issued by the Company to the existing shareholders of KE.
F-29
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(15) MERGER WITH KOPLAR ENTERPRISES, INC.--(CONTINUED)
The Class A Preferred Voting Stock provides for full voting rights on a
one-vote-per-share basis and noncumulative annual dividends of $121 per share
only if, as and when declared by the Board of Directors. The stock is redeemable
at the Company's option at $1,100 per share and has a liquidation value of
$1,100 per share.
(16) DIVESTITURE OF SUBSIDIARIES--DISCONTINUED OPERATIONS
On June 1, 1994, the Company divested two of its subsidiaries, World Events
Productions, Ltd. (WEP) and Koplar Properties, Inc. and Subsidiary (KP). WEP is
primarily engaged in the business of international production and marketing of
television programming, and KP is primarily engaged in the renting and operating
of commercial and residential real estate in the St. Louis area. Both entities
were divested to the shareholder of the Company.
The common stock of WEP was distributed to the Shareholder of the Company
in a tax-free spin-off transaction. The shareholder's deficit of WEP at the date
of divesture was recorded as an increase to additional paid-in capital for the
year ended December 31, 1994, reflecting the fact that WEP's liabilities
exceeded its assets at the time of divestiture.
The common stock of KP was sold to the shareholder of the Company in
exchange for a nonrecourse promissory note receivable as described in Note 9.
Condensed financial information of World Events Productions, Ltd. and
Koplar Properties, Inc. at June 1, 1994 (the date of divestiture) and for the
five months then ended is as follows (in thousands):
<TABLE>
<CAPTION>
WEP KP
------- ------
<S> <C> <C>
Current assets................................................... $ 207 293
Noncurrent assets................................................ 351 2,912
------- ------
$ 558 3,205
======= ======
Current liabilities.............................................. $ 1,421 1,717
Noncurrent liabilities........................................... 178 377
Shareholder's equity (deficit)................................... (1,041) 1,111
------- ------
$ 558 3,205
======= ======
Revenues......................................................... $ 613 491
======= ======
Operating income................................................. $ 334 94
Interest and other............................................... -- 834
------- ------
Income from operations of divested subsidiaries.................. $ 334 928
======= ======
</TABLE>
The net income of these entities in 1994 through date of divestiture is
recorded as income from operations of divested subsidiaries in the 1994
Consolidated Statement of Operations.
(17) RELATED PARTY TRANSACTIONS
During previous years, the Company advanced funds under a loan agreement to
ISW, Inc. (ISW), a company which is partially owned by the shareholder of the
Company. The amount of the loans receivable and accrued interest amounted to
approximately $3,480,000 at December 31, 1993. Prior to 1994, WEP determined
collection of the loan and accrued interest was questionable and established an
allowance for the entire amount. In 1996, the
F-30
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(17) RELATED PARTY TRANSACTIONS--(CONTINUED)
Company advanced $443,210 to ISW. This amount was included in a loan receivable
balance which is fully reserved.
In 1994, prior to its divestiture, WEP transferred these loans and accrued
interest to the Company. Pursuant to a Debt Conversion Agreement dated June 29,
1994, approximately $600,000 of the total receivable was converted by the
Company into ISW common stock. This common stock was then transferred by the
Company to a program distributor pursuant to a programming restructuring
agreement, as described in Note 8. At December 31, 1995 and 1996, the remaining
balance of loans and interest receivable by the Company from ISW is
approximately $2,808,000 and $3,251,000 with a corresponding allowance.
The Company was charged approximately $70,000, $139,200 and $139,200 in
1994, 1995 and 1996, respectively, in rent and parking charges by KP.
(18) SALE OF BROADCAST SUBSIDIARY--KRBK-TV
On November 11, 1993, the Company had entered into an agreement with Pappas
Telecasting Companies (Pappas) to sell substantially all of the assets and
assign specified liabilities of KRBK-TV to Pappas for $22,000,000 plus certain
working capital adjustments as defined in the agreement, payable in cash at
closing. The agreement and transaction was contingent upon successful
restructuring of the programming obligations, among other things. As part of the
arrangement with Pappas, the Company and Pappas had entered into a management
services agreement, as well as a lending agreement which would have been
effective at the time of closing of the sale of KRBK-TV. The Company was seeking
alternative financing at the time these agreements with Pappas were completed.
During 1994, the Company completed restructuring agreements with its
program distributors, as discussed in Note 7. The sale of the assets and
liabilities of KRBK-TV to Pappas took place on June 29, 1994, for a net sale
price of $22,356,000.
Concurrent with the sale transaction, the Company obtained alternative
financing to the proposed Pappas lending agreement, as discussed in Notes 5 and
6. Upon closing of this alternative financing, the lending agreement and
management services agreement were terminated by the Company. As required under
the management services agreement, a total of $7,000,000 plus liquidated damages
and expenses of $700,000 was owed to Pappas, which was applied against the
purchase price for KRBK-TV resulting in net proceeds of $14,656,000.
F-31
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(18) SALE OF BROADCAST SUBSIDIARY--KRBK-TV--(CONTINUED)
The assets and liabilities of KRBK-TV that were sold to Pappas on June 29,
1994 are reflected below (in thousands):
<TABLE>
<S> <C>
Assets:
Accounts receivable.............................................. $ 3,224
Prepaid expenses and deposits.................................... 163
Programming rights............................................... 8,011
Property, plant and equipment.................................... 11,149
Accumulated depreciation......................................... (7,283)
FCC license...................................................... 1,481
-------
Total assets sold............................................. $16,745
=======
Liabilities:
Accounts payable and accrued expenses............................ $ 1,211
Capital leases payable........................................... 133
Programming obligations.......................................... 12,185
-------
Total liabilities transferred or assigned..................... $13,529
=======
</TABLE>
The following summarizes the revenues and expenses included in the 1994
Consolidated Statement of Operations (in thousands):
<TABLE>
<S> <C>
Revenues............................................................ $ 7,108
Programming costs................................................... (3,986)
Selling, general and administrative................................. (2,974)
Other, net.......................................................... (1,153)
-------
Net loss.......................................................... $(1,005)
========
</TABLE>
The Company recorded a gain on the sale of these assets and liabilities in
the amount of $11,440,000, which has been reflected in the accompanying 1994
Consolidated Statement of Operations.
(19) SALE OF COMPANY
On July 29, 1997, the shareholders of the Company (Owners) agreed to sell
all of their shares of the Company's common and preferred stock to ACME
Television Holdings, LLC (ACME) for $146,000,000. On September 30, 1997,
pursuant to the stock purchase agreement between ACME and the Owners, ACME
placed $143,000,000 into an escrow account and ACME and the Owners filed with
the FCC a request to transfer the Company's broadcast license. The Company has
also entered into a local marketing agreement with ACME under the terms of which
ACME receives the economic benefit of the Company's earnings, effective October
1, 1997. In connection with the ACME transaction, the Company has recorded at
September 30, 1997 approximately $5.9 million in non-recurring bonus expense to
certain executive and other employees of the Company. This amount is included in
other current liabilities as of September 30, 1997.
F-32
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Channel 32, Incorporated:
We have audited the accompanying statements of operations and cash flows of
Channel 32, Incorporated (a wholly owned subsidiary of Peregrine Communications,
Ltd. effective as of July 1, 1995) for the period from December 16, 1993
(inception) to June 30, 1994 (Predecessor) and the years ended June 30, 1995
(Predecessor) and 1996 (Successor). These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of Channel 32, Incorporated's operations
and its cash flows for the period from December 16, 1993 (inception) to June 30,
1994 (Predecessor) and the years ended June 30, 1995 (Predecessor) and 1996
(Successor) in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Los Angeles, California
November 13, 1997
F-33
<PAGE>
CHANNEL 32, INCORPORATED (NOTE 1)
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 16, PERIOD FROM
1993 (INCEPTION) JUNE 30, JUNE 30, JULY 1, 1996
TO JUNE 30, 1994 1995 1996 TO JUNE 17, 1997
---------------- ------------- ----------- ----------------
(PREDECESSOR) (PREDECESSOR) (SUCCESSOR) (SUCCESSOR)
(UNAUDITED)
<S> <C> <C> <C> <C>
Broadcast revenues, net.......................... $ -- $ 288,178 $2,728,857 $ 1,305,886
-------- ------------- ----------- -----------
Operating expenses:
Programming and production..................... 6,676 622,688 3,273,608 1,303,808
Selling, general and administrative............ 10,950 273,422 1,462,360 1,060,497
Depreciation and amortization.................. -- 234,498 541,878 346,469
-------- ------------- ----------- ------------
Total operating expenses............... 17,626 1,130,608 5,277,846 2,710,774
-------- ------------- ----------- ------------
Operating loss......................... (17,626) (842,430) (2,548,989) (1,404,888)
-------- ------------- ----------- -------------
Other income (expense):
Interest expense............................... (4,691) (200,112) (3,252,202) (2,221,688)
Interest income................................ -- -- 44,821 --
Write-off of due from parent................... -- -- (188,586) --
Other expenses, net............................ -- -- (70,254) (10,181)
-------- ------------- ----------- ------------
Other expense, net..................... (4,691) (200,112) (3,466,221) (2,231,869)
Loss before income taxes......................... (22,317) (1,042,542) (6,015,210) (3,636,757)
Income taxes..................................... -- -- -- --
-------- ------------- ----------- ------------
Net loss............................... $(22,317) $ (1,042,542) $(6,015,210) $ (3,636,757)
======== ============= =========== ============
</TABLE>
See accompanying notes to financial statements
F-34
<PAGE>
CHANNEL 32, INCORPORATED (NOTE 1)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 16, JUNE 30, JUNE 30, PERIOD FROM
1993 (INCEPTION) ------------- ----------- JULY 1, 1997
TO JUNE 30, 1994 1995 1996 TO JUNE 17, 1997
---------------- ------------- ----------- ----------------
(PREDECESSOR) (SUCCESSOR)
(PREDECESSOR) (SUCCESSOR) (UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss............................................ $(22,317) $(1,042,542) $(6,015,210) $ (3,636,757)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization..................... -- 288,083 951,377 1,322,513
Changes in assets and liabilities:
(Increase) decrease in programming rights....... -- (122,500) (401,559) (380,400)
(Increase) decrease in accounts receivable,
net.......................................... -- (59,470) (167,353) 23,242
Increase (decrease) in due from related party... -- -- 14,700 (692,301)
(Increase) decrease in other assets............. (3,494) (5,000) (82,646) (357,606)
Increase (decrease) in due to related party..... 63,887 (63,887)
Increase (decrease) in accounts payable......... -- 252,704 (56,523) 651,014
Increase (decrease) in accrued expenses......... 4,691 179,117 184,414 182,932
Increase (decrease) in programming rights
payable...................................... -- 97,437 249,377 308,612
-------- ----------- ---------- ------------
Net cash used in operating activities........ (21,120) (412,171) (5,259,536) (2,642,638)
-------- ----------- ---------- ------------
Cash flows from investing activities:
Acquisition of property and equipment............... (138,297) (978,711) (998,429) (355,717)
Disposal of property and equipment.................. -- -- 236,910 --
Increase in broadcast licenses...................... -- (243,785) (315,000) --
-------- ----------- ---------- ------------
Net cash used in investing activities........ (138,297) (1,222,496) (1,076,519) (355,717)
-------- ----------- ---------- ------------
Cash flows from financing activities:
Proceeds from borrowings............................ 159,417 1,793,519 8,038,056 3,110,138
Payment of borrowings............................... -- (159,417) (1,793,519) (2,635)
Payments of obligations under capital lease......... -- -- -- (10,217)
Proceeds from issuance of common stock.............. -- 1,600 100,108 --
-------- ----------- ---------- -------------
Net cash provided by financing activities.... 159,417 1,635,702 6,344,645 3,097,286
-------- ----------- ---------- ------------
Net increase in cash......................... -- 1,035 8,590 98,931
Cash at beginning of year............................. -- -- 1,035 9,625
-------- ----------- ---------- ------------
Cash at end of year................................... $ -- $ 1,035 $ 9,625 $ 108,556
======== =========== ========== ============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest.......................................... $ -- $ 51,845 $ 732,582 $ 370,095
Income taxes...................................... $ -- $ -- $ -- $ --
======== =========== =========== ============
Noncash transactions:
Acquisition of property and equipment in exchange
for capital lease obligations..................... $ -- $ 650,000 $ 185,000 $ --
======== =========== =========== ============
</TABLE>
See accompanying notes to financial statements.
F-35
<PAGE>
CHANNEL 32, INCORPORATED (NOTE 1)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1996
(INFORMATION RELATING TO THE PERIOD FROM
JULY 1, 1996 TO JUNE 17, 1997 IS UNAUDITED)
(1) DESCRIPTION OF BUSINESS AND FORMATION
Channel 32, Incorporated was incorporated under the laws of the state of
Oregon on December 16, 1993. Channel 32, Incorporated (the Company) owns and
operates KWBP-TV Channel 32, a television station (and The WB Network affiliate)
in Portland, Oregon. The Company is a wholly owned subsidiary of Peregrine
Communications, Ltd. (Peregrine) subsequent to Peregrine's acquisition of the
Company effective July 1, 1995.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Effective July 1, 1995, Peregrine acquired Channel 32, Incorporated, for
approximately $350,000. The Company paid $315,000 of this amount on behalf of
Peregrine. The acquisition was accounted for using the purchase method of
accounting. The Company has applied push-down accounting reflecting the full
acquisition cost and resulting equity in the accompanying financial statements
subsequent to the acquisition date. As a result of the acquisition, the
financial information for periods after the acquisition (Successor) is presented
on a different cost basis than for the periods prior to the acquisition
(Predecessor) and, therefore, is not comparable. The purchase price has been
allocated to the tangible assets of the Company acquired and liabilities assumed
based on their estimated fair market value at the acquisition date. The net
liabilities assumed plus the purchase price totaled approximately $1,400,000 and
was allocated to broadcast licenses.
The financial statements are presented as if the acquisition occurred on
July 1, 1995, rather than the actual purchase dates which occurred between March
and November 1995. The impact of recording the purchase as of July 1, 1995,
instead of the actual acquisition dates, is not material to the accompanying
financial statements
Local Marketing Agreement
Effective January 1, 1997, the operations of KWBP-TV were transferred to
ACME Television of Oregon, LLC pursuant to a Local Marketing Agreement (LMA).
Accordingly, the Company's financial statements subsequent to December 31, 1996
only include the Company's net activity pursuant to such LMA.
Revenue Recognition
Revenue related to the sale of airtime related to advertising and
contracted time is recognized at the time of broadcast.
Cash and Cash Equivalents
For purposes of reporting the statements of cash flows, the Company
considers all highly liquid debt instruments purchased with an original maturity
of three months or less to be cash equivalents.
Programming Rights
Programming rights represent costs incurred for the right to broadcast
certain features and syndicated television programs. Programming rights are
stated at the lower of amortized cost or estimated realizable value. The cost of
such programming rights and the corresponding liability are recorded when the
initial program becomes available for broadcast under the contract. Programming
rights are amortized over the life of the contract on an accelerated basis
related to the usage of the program. Programming rights expected to be amortized
during the next fiscal year are classified as current in the balance sheets. The
payments under these contracts that are due within one year and after one year
are reflected in the balance sheets as current and noncurrent liabilities,
respectively.
F-36
<PAGE>
CHANNEL 32, INCORPORATED (NOTE 1)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1995 AND 1996
(INFORMATION RELATING TO THE PERIOD FROM
JULY 1, 1996 TO JUNE 17, 1997 IS UNAUDITED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Commitments for programming rights that have been executed, but which have
not been recorded in the accompanying financial statements, as the underlying
programming is not available for broadcast, were approximately $0, $222,249 and
$262,500 as of June 30, 1995, 1996 and March 31, 1997, respectively.
Property and Equipment
Property and equipment are stated at cost. The cost of maintenance is
expensed.
Depreciation and amortization is computed using the straight-line method
over the estimated useful lives of the respective assets. The principal lives
used in determining depreciation and amortization rates of various assets are as
follows:
<TABLE>
<S> <C>
Buildings........................................... 39 years
Broadcasting equipment.............................. 5-15 years
Furniture and fixtures.............................. 5-7 years
Vehicles............................................ 5 years
Equipment under capital leases...................... 5-15 years
</TABLE>
Barter Transactions
Revenue and expenses associated with barter agreements in which broadcast
time is exchanged for programming rights are recorded at the average rate of the
airtime exchanged. Barter transactions, which represent the exchange of
advertising time for goods or services, are recorded at the estimated fair value
of the products or services received. Barter revenue is recognized when
advertisements are broadcast. Merchandise or services received from airtime
trade sales are charged to expense or capitalized when used or received.
Revenues and expenses include approximately $1,267,600 of barter
transaction for the year ended June 30, 1996. The Company did not record
revenues and expenses associated with barter transactions for the year ended
June 30, 1995. The Company does not believe the omission of such barter
transactions for the year ended June 30, 1995 is material to the Financial
Statements taken as a whole.
Carrying Value of Long-Lived Assets
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 121, 'Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of.' The carrying value of long-lived assets
(tangible and intangible) is reviewed if the facts and circumstances suggest
that they may be impaired. If this review indicates that an asset's carrying
value will not be recoverable, as determined based on future expected
undiscounted cash flows, the carrying value is reduced to fair market value.
Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109 (SFAS 109), Accounting for Income Taxes. Under SFAS
No. 109 deferred income taxes are recognized for tax consequences of temporary
differences by applying enacted statutory tax rates applicable to future years
to differences between financial statement carrying amounts and the tax basis of
existing assets and liabilities.
F-37
<PAGE>
CHANNEL 32, INCORPORATED (NOTE 1)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1995 AND 1996
(INFORMATION RELATING TO THE PERIOD FROM
JULY 1, 1996 TO JUNE 17, 1997 IS UNAUDITED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentration of credit risk consist primarily of accounts receivable. The
Company believes that concentrations of credit risk with respect to accounts
receivable, which are unsecured, are limited due to the Company's ongoing
relationship with its clients. The Company provides for its estimate of
uncollectible accounts on a periodic basis. The Company has not experienced
significant losses relating to accounts receivable. For periods ended June 30,
1994, 1995, 1996 and March 31, 1997 and 1996 no customer accounted for more than
10% of revenues.
(3) INTANGIBLE ASSETS
Intangible assets are stated at cost, less accumulated amortization, and
are comprised of broadcast licenses. Broadcast licenses are being amortized on a
straight-line basis over 15 years. The amount of amortization related to
broadcast licenses was approximately $0, $11,000, $97,567, and $93,000 for the
periods ended June 30, 1994, 1995 and 1996 and June 17, 1997, respectively.
(4) STOCKHOLDERS' EQUITY
At June 30, 1995, the Company had 2,000 shares of authorized common stock
with 1,000 shares issued to its 4 original shareholders and an option to
purchase 818 shares representing 45% of the Company, with an exercise price of
$452,000 held by Peregrine (Peregrine Option).
In November 1995, the shareholders approved an increase in the number of
authorized shares to 4,000 shares of common stock. The Company sold 250 shares
of common stock for $100,000 to Aspen TV, LLC and sold an option for $108 to
purchase 51% of the outstanding common stock, or 791 shares, for an exercise
price of $150,000. This option is automatically cancelled and the Company will
be obligated to repurchase the stock sold to Aspen TV, LLC for the sale price
plus interest upon the Company's timely repayment of its debt obligation to
Aspen TV, LLC. The Peregrine Option was cancelled at this time.
(5) RELATED PARTY TRANSACTIONS
Due (to) from related party represent temporary advances in the form of
expenses paid by or on behalf of the Company by Peregrine. The following is a
summary of these amounts:
<TABLE>
<CAPTION>
JUNE 30,
------------------- MARCH 31,
1995 1996 1997
------- -------- ---------
<S> <C> <C> <C>
Due from related party--Peregrine.................................... $14,700 $ -- $ --
Due from related party--ACME Television of Oregon.................... -- -- 692,301
Due to related party--Peregrine...................................... -- (63,887) --
------- -------- ---------
Total.............................................................. $14,700 $(63,887) $ 692,301
======= ======== =========
</TABLE>
F-38
<PAGE>
CHANNEL 32, INCORPORATED (NOTE 1)
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
JUNE 30, 1995 AND 1996
(INFORMATION RELATING TO THE PERIOD FROM
JULY 1, 1996 TO JUNE 17, 1997 IS UNAUDITED)
(5) RELATED PARTY TRANSACTIONS--(CONTINUED)
Due from related party, ACME Television of Oregon, LLC relates to the
balance due to the Company pursuant to the LMA agreement effective January 1,
1997.
(6) INCOME TAXES
The Company did not record any tax benefit during the period from December
16, 1993 (inception) to June 30, 1994, the years ended June 30, 1995 and 1996
and the nine months ended March 31, 1996 and 1997.
The provision for income taxes differs from the amount computed by applying
the Federal statutory income tax rate of 34% to income before income taxes as
shown below:
<TABLE>
<CAPTION>
1994 1995 1996
------- --------- -----------
<S> <C> <C> <C>
Computed 'expected' income tax benefit...................... $(8,000) $(355,000) $(2,100,000)
Increase in valuation allowance............................. 8,000 355,000 2,100,000
------- --------- -----------
Income tax expense (benefit).............................. $ -- $ -- $ --
======= ========= ===========
</TABLE>
Deferred income tax assets and liabilities result from temporary
differences. Temporary differences are differences in the recognition of income
and expenses for income tax and financial reporting purposes that will result in
taxable or deductible amounts in future years. At June 30, 1996 and March 31,
1997, the net deferred income tax assets, related primarily to net operating
loss carryforwards, were approximately $1,158,000 and $6,117,000, respectively.
In 1995, the Company experienced an ownership change as defined in Section 382
of the Internal Revenue Code. This change in ownership restricts the utilization
of the Company's net operating loss (NOL) carryforwards to offset future taxable
income. NOL carryforwards arising subsequent to the change in control are not
subject to the limitation. The amount of NOL carryforwards subject to the
limitation is approximately $1,000,000 with an annual limitation of $75,000. The
carryforwards available at June 30, 1996 expire in 2011.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers
projected future taxable income and tax planning strategies in making this
assessment. At June 30, 1995, 1996 and March 31, 1997, based on the level of
historical taxable income and projections for future taxable losses over the
periods in which the level of deferred tax assets are deductible, management
believes that it is not more likely than not that the Company will not realize
the benefits of these deductible differences.
(7) SALE
On June 17, 1997, ACME Television Holdings, LLC (ACME) acquired certain of
the Company's assets, including the broadcast license of KWBP-TV and assumed
certain liabilities, including all of the Company's programming commitments and
the Company's equipment leases, in exchange for $18,675,000 in cash and
$4,400,000 in ACME Parent membership interests.
In addition, pursuant to a local marketing agreement, ACME effectively
operated the station and funded the losses from January 1, 1997 through June 17,
1997 (the acquisition date). Accordingly, there were no operating revenues or
expenses incurred by the Company subsequent to January 1, 1997.
F-39
<PAGE>
================================================================================
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER CONTAINED HEREIN OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
ISSUERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THOSE TO WHICH IT
RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN
OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUERS SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certain Definitions and Market and Industry Data......... iv
Prospectus Summary....................................... 1
Risk Factors............................................. 12
Projected Financial Data................................. 20
The Transactions......................................... 21
Use of Proceeds.......................................... 24
Capitalization........................................... 25
Pro Forma Consolidated Financial Information............. 26
Selected Historical Consolidated Financial Data.......... 31
Management's Discussion and Analysis of Results of
Operations and Financial Condition..................... 34
Business................................................. 41
Management............................................... 53
Certain Relationships and Related Transactions........... 56
Security Ownership of Certain Beneficial Owners and
Executive Officers..................................... 57
Description of ACME Parent............................... 60
Description of Certain Indebtedness...................... 62
The Exchange Offer....................................... 63
Description of the Notes................................. 73
Book-Entry; Delivery and Form............................ 95
Certain U.S. Federal Income Tax Considerations........... 97
Plan of Distribution..................................... 102
Experts.................................................. 103
Validity of Exchange Notes............................... 103
Available Information.................................... 103
Index to Financial Statements............................ F-1
</TABLE>
UNTIL , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
ACME TELEVISION, LLC
ACME FINANCE CORPORATION
OFFER TO EXCHANGE
10 7/8% SENIOR DISCOUNT NOTES
DUE 2004, SERIES A AND FULL AND
UNCONDITIONAL GUARANTEES THEREOF
FOR
10 7/8% SENIOR DISCOUNT NOTES
DUE 2004, SERIES B AND FULL AND
UNCONDITIONAL GUARANTEES THEREOF
----------------
PROSPECTUS
----------------
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
WILMINGTON TRUST COMPANY
BY FACSIMILE:
(302) 651-1079
CONFIRMATION BY TELEPHONE:
(302) 651-8869
BY HAND:
88 PINE STREET
19TH FLOOR
WALL STREET PLAZA
NEW YORK, NEW YORK 10004
C/O HARRIS TRUST COMPANY OF NEW YORK,
AS AGENT
BY REGISTERED OR BY CERTIFIED
MAIL OR BY OVERNIGHT COURIER:
1100 NORTH MARKET STREET
WILMINGTON, DELAWARE 10890
ATTENTION: CORPORATE TRUST ADMINISTRATION
, 1998
================================================================================
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
Capitalized terms used but not defined in Part II have the meanings
ascribed to them in the Prospectus contained in this Registration Statement.
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
ACME Television, LLC (the 'Company') is a limited liability company
organized under the laws of the State of Delaware. Section 18-108 of the
Delaware Limited Liability Company Act provides that, subject to such standards
and restrictions, if any, as are set forth in its limited liability company
agreement, a limited liability company may, and shall have the power to,
indemnify and hold harmless any member or manager or other person from and
against any and all claims and demands whatsoever.
Article VII of the Company's Limited Liability Company Agreement (the 'LLC
Agreement') provides, among other things, that the Company shall indemnify each
Indemnified Party from and against any and all Losses in any way related to or
arising out of the LLC Agreement, the business of the Company or the action or
inaction of such person hereunder (including, without limitation, the actions or
inactions of the Indemnified Parties upon dissolution of the Company), which may
be imposed on, incurred by or asserted at any time against any such Indemnified
Party, except that no indemnification shall be provided for any Indemnified
Party regarding any matter as to which it shall be finally determined that such
Indemnified Party did not act in good faith and in the reasonable belief that
its action was in the best interests of the Company, or with respect to a
criminal matter, that it had reasonable cause to believe that its conduct was
unlawful. The LLC Agreement defines 'Indemnified Parties' as members of the
Company, any affiliate of the members and each person serving as an officer,
employee or other agent of the Company (including persons who serve at the
Company's request as directors, managers, officers, employees, agents or
trustees of another organization in which the Company has any interest as a
shareholder, creditor or otherwise) and their respective successors and assigns.
The LLC Agreement defines 'Losses' as liabilities, judgments, obligations,
losses, damages, taxes and interest and penalties thereon (other than (i) income
taxes due on income allocated to membership units of the Company; and (ii) taxes
based on fees, compensation or commissions received by an Indemnified Party in
connection with the administration of the Company or the Company's property),
claims, actions, suits or other proceedings (whether civil or criminal, pending
or threatened, before any court of administrative or legislative body, and as
the same are accrued, in which an Indemnified Party may be or may have been
involved as a party or otherwise or with which he or she may be or may have been
threatened, while in office or thereafter), costs, expenses and disbursements
(including, without limitation, legal and accounting fees and expenses) of any
kind and nature whatsoever.
The indemnification provided by the LLC Agreement shall inure to the
benefit of the heirs and personal representatives of the Indemnified Parties.
The determination of whether the Company is authorized to indemnify any
Indemnified Party hereunder and any award of indemnification shall be made in
each instance by its members; provided, however, that as to any matter disposed
of by a compromise payment, pursuant to a consent decree or otherwise, no
indemnification, either for said payment or for any other Losses, shall be
provided unless there has been obtained an opinion in writing of legal counsel
to the effect that the person subject to indemnification hereunder appears to
have acted in good faith and that such indemnification would not protect such
person against any liability to the Company or its members to which he, she or
it would otherwise be subject by reason of gross negligence, willful malfeasance
or fraud in the conduct of his, her or its office or actions not taken in good
faith by such person. Notwithstanding such provisions, if any Indemnified Party
has been wholly successful on the merits in the defense of any action, suit or
proceeding in which it was involved by reason of its position with the Company
or as a result of serving in such capacity, such Indemnified Party shall be
indemnified by the Company against all Losses incurred by such Indemnified Party
in connection therewith. According to the LLC Agreement, the Company shall have
power to purchase and maintain insurance on behalf of any Indemnified Party
against any liability or cost incurred by such Person in any such capacity or
arising out of its status as such, whether or not the Company would have power
to indemnify against such liability or cost.
ACME Finance Corporation (the 'Corporation') is a Delaware corporation.
Section 145 of the General Corporation Law of the State of Delaware provides
that a Delaware corporation may indemnify any persons who
II-1
<PAGE>
were, are or are threatened to be made, parties to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person is or was an officer, director, employee or
agent of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided such
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's best interests and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was illegal. A Delaware corporation may indemnify any persons who are,
were or are threatened to be made, a party to any threatened, pending or
completed action or suit by or in the right of the corporation by reasons of the
fact that such person was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit, provided such person acted in good faith and in a manner
he reasonably believed to be in or not opposed to the corporation's best
interests, provided that no indemnification is permitted without judicial
approval if the officer, director, employee or agent is adjudged to be liable to
the corporation. Where an officer, director, employee or agent is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director has actually and reasonably incurred.
The Certificate of Incorporation of the Corporation provides that no
director shall be personally liable to the Corporation or its stockholders for
monetary damages for any breach of fiduciary duty by such director as a director
except that a director shall be liable to the extent provided by applicable law
(i) for any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to Section
174 of the Delaware General Corporation Law or (iv) for any transaction from
which the director derived an improper personal benefit.
Article VIII of the Bylaws of the Corporation provides that the Corporation
shall indemnify and hold harmless each director and officer of the Corporation,
and each person serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, to the fullest extent permitted by the laws of
Delaware, as from time to time in effect the same exists or may hereafter be
amended, against all expense, liability and loss reasonably incurred or suffered
in connection therewith. The Corporation may, by action of its Board of
Directors, indemnify employees or agents of the Corporation with the same scope
and effect. The indemnification obligations set forth in Article VIII shall
inure to the benefit of heirs, executors and administrators of those entitled to
indemnification provided that such proceeding was authorized by the board of
directors. The Board of Directors may also provide any other rights of indemnity
which it may deem appropriate.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnity him under Section 145. The
Corporation's bylaws provide for the maintenance of insurance under the
circumstances described in Section 145.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
registrants pursuant to the foregoing provisions, the registrants have been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933 and is therefore unenforceable.
II-2
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
*3.1 -- Certificate of Formation of ACME Television, LLC
*3.2 -- Limited Liability Company Agreement of ACME Television, LLC
*3.3 -- Articles of Incorporation of ACME Finance Corporation
*3.4 -- Bylaws of ACME Finance Corporation
3.5 -- Articles of Incorporation of ACME Television Licenses of Missouri, Inc.
3.6 -- Bylaws of ACME Television Licenses of Missouri, Inc.
3.7 -- Certificate of Formation of ACME Television Holdings of Oregon, LLC
**3.8 -- Limited Liability Company Agreement of ACME Television Holdings of Oregon, LLC
3.9 -- Certificate of Formation of ACME Television Holdings of Tennessee, LLC
**3.10 -- Limited Liability Company Agreement of ACME Television Holdings of Tennessee, LLC
3.11 -- Certificate of Formation of ACME Television Holdings of Utah, LLC
3.12 -- Limited Liability Company Agreement of ACME Television Holdings of Utah, LLC
3.13 -- Certificate of Formation of ACME Television Holdings of New Mexico, LLC
3.14 -- Limited Liability Company Agreement of ACME Television Holdings of New Mexico, LLC
3.15 -- Certificate of Formation of ACME Television Licenses of Oregon, LLC
**3.16 -- Limited Liability Company Agreement of ACME Television Licenses of Oregon, LLC
3.17 -- Certificate of Formation of ACME Television Licenses of Tennessee, LLC
**3.18 -- Limited Liability Company Agreement of ACME Television Licenses of Tennessee, LLC
3.19 -- Certificate of Formation of ACME Television Licenses of New Mexico, LLC
3.20 -- Limited Liability Company Agreement of ACME Television Licenses of New Mexico, LLC
3.21 -- Certificate of Formation of ACME Television of Oregon, LLC
**3.22 -- Limited Liability Company Agreement of ACME Television of Oregon, LLC
3.23 -- Certificate of Formation of ACME Television of Tennessee, LLC
**3.24 -- Limited Liability Company Agreement of ACME Television of Tennessee, LLC
3.25 -- Certificate of Formation of ACME Subsidiary Holdings III, LLC
3.26 -- Limited Liability Company Agreement of ACME Subsidiary Holdings III, LLC
3.27 -- Certificate of Formation of ACME Television of Utah, LLC
3.28 -- Limited Liability Company Agreement of ACME Television of Utah, LLC
3.29 -- Certificate of Formation of ACME Television of New Mexico, LLC
3.30 -- Limited Liability Company Agreement of ACME Television of New Mexico, LLC
3.31 -- Certificate of Formation of ACME Television Licenses of Utah, LLC
3.32 -- Limited Liability Company Agreement of ACME Television Licenses of Utah, LLC
*4.1 -- Indenture, dated September 30, 1997, by and among ACME Television, LLC and ACME Finance
Corporation, as Issuers, the Guarantors named therein, and Wilmington Trust Company
*4.2 -- Form of Securities (included in Exhibit 4.1)
*5.1 -- Opinion of Dickstein Shapiro Morin & Oshinsky, LLP regarding the legality of the securities being
registered
*10.1 -- Stock Purchase Agreement, dated July 29, 1997, by and among ACME Television Holdings, LLC, Koplar
Communications, Inc. and the shareholders of Koplar Communications, Inc.
*10.2 -- Escrow Agreement, dated September 8, 1997, by and among ACME Television Holdings, LLC, ACME
Television Licenses of Missouri, Inc., Koplar Communications, Inc. the shareholders of Koplar
Communications, Inc. and NationsBank, N.A.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
*10.3 -- Time Brokerage Agreement for KPLR-TV, dated September 8, 1997, by and among ACME Television
Licenses of Missouri, Inc., ACME Television Holdings, LLC, Koplar Communications Television, LLC
and Koplar Communications, Inc.
*10.4 -- Membership Contribution Agreement, dated August 22, 1997, by and among ACME Television Holdings,
LLC, Roberts Broadcasting of Salt Lake City, LLC, Michael V. Roberts and Steven C. Roberts
*10.5 -- Asset Purchase Agreement, dated August 22, 1997, by and between ACME Television Licenses of New
Mexico, LLC and Minority Broadcasters of Santa Fe, Inc.
*10.6 -- Purchase Agreement, dated May 28, 1997, by and among ACME Television Licenses of Tennessee, LLC,
ACME Television of Tennessee, LLC, Crossville TV Limited Partnership and the Sellers named therein
*10.7 -- Asset Purchase Agreement, dated January 31, 1997, by and between NewCo of Oregon, Inc. and Channel
32 Incorporated
*10.8 -- Amendment, dated April 25, 1997, to Asset Purchase Agreement, by and between ACME Television
Holdings of Oregon, LLC and Channel 32 Incorporated
*10.9 -- Amendment, dated June 2, 1997, to Asset Purchase Agreement, by and between ACME Television
Holdings of Oregon, LLC and Channel 32 Incorporated
*10.10 -- Management Agreement, dated February 6, 1997, by and between NewCo of Oregon, Inc. and Channel 32
Incorporated
*10.11 -- Amendment, dated June 17, 1997, to Management Agreement by and between NewCo of Oregon, Inc. and
Channel 32 Incorporated
*10.12 -- Noncompetition Agreement, dated June 17, 1997, by and among ACME Television Holdings of Oregon,
LLC, Peregrine Communications, Ltd., Peregrine Holdings, Ltd., and Channel 32 Incorporated
*10.13 -- Management Agreement, dated August 22, 1997, by and between Roberts Broadcasting of Salt Lake
City, LLC and ACME Television of Utah, LLC
*10.14 -- Management Agreement, dated August 22, 1997, by and between Minority Broadcasters of Santa Fe,
Inc. and ACME Television of New Mexico, LLC
*10.15 -- Escrow Agreement, dated May 28, 1997, by and among Acme Television Licenses of Tennessee, LLC,
Acme Television of Tennessee, LLC, Crossville TV Limited Partnership, the Sellers names therein
and NationsBank, N.A., as escrow agent
10.16 -- Station Affiliation Agreement, dated August 18, 1997, by and between ACME Holdings of Knoxville,
LLC and The WB Television Network Partners, L.P.
10.17 -- Station Affiliation Agreement, dated September 24, 1997, by and between ACME Holdings of St.
Louis, LLC and The WB Television Network Partners, L.P.
*10.18 -- Station Affiliation Agreement, dated June 10, 1997, by and between ACME Holdings of Oregon, LLC
and The WB Television Network Partners, L.P.
*10.19 -- Letter dated August 21, 1997, to ACME Television Holdings from The WB Television Network
*10.20 -- Employment Agreement, dated June 17, 1997, by and between ACME Television Holdings, LLC and
Douglas E. Gealy
*10.21 -- Employment Agreement, dated June 17, 1997, by and between ACME Television Holdings, LLC and Tom
Allen
*10.22 -- Consulting Agreement, dated June 17, 1997, by and between ACME Television Holdings, LLC and Jamie
Kellner
*10.23 -- Commercial Building Lease, dated June 17, 1997, by and between Peregrine Communications, Ltd. and
ACME Television Holdings of Oregon, LLC
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
*10.24 -- Amended and Restated Lease Agreement, dated July 1, 1996, by and between KKSN, Inc. and Channel 32
Incorporated
*10.25 -- Lease Agreement, dated July 14, 1997, by and between Richardson V. Turner and ACME Television of
Tennessee, LLC
*10.26 -- Agreement of Lease, dated March 20, 1997, by and between Don D. Collins d/b/a Tennessee Valley
Communications and Crossville TV Limited Partnership
*10.27 -- First Modification, dated May 23, 1997, to Agreement of Lease by and between Don D. Collins d/b/a
Tennessee Valley Communications and Crossville TV Limited Partnership
10.28 -- Studio Lease Agreement by and between Roberts Broadcasting of Salt Lake City, LLC and ACME
Television Holdings, LLC
10.29 -- Tower Lease Agreement by and between Roberts Broadcasting of Salt Lake City, LLC and ACME
Television Holdings, LLC
*10.30 -- Commercial Lease, dated January 1, 1994, by and between Koplar Properties Inc. and Koplar
Communications, Inc.
*10.31 -- Agreement of Lease, dated May 16, 1986, by and between CBS Inc. and Koplar Communications Inc.
*10.32 -- Amendment, dated September 2, 1986, to Agreement of Lease by and between Viacom Broadcasting of
Missouri Inc., as successor-in-interest to CBS Inc. and Koplar Communications Inc.
*10.33 -- Agreement, dated June 1, 1995 by and among Koplar Communications, Inc., Roberts Broadcasting
Company, Michael V. Roberts and Steven C. Roberts
10.34 -- First Amended and Restated Credit Agreement by and among ACME Television, LLC, the Lenders named
therein and Canadian Imperial Bank of Commerce, New York Agency, as agent for the Lenders
10.35 -- Registration Rights Agreement, dated September 30, 1997, by and among ACME Television, LLC, ACME
Finance Corporation, CIBC Wood Gundy Securities Corp. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
*10.36 -- Purchase Agreement, dated September 24, 1997, by and among ACME Television, LLC, ACME Finance
Corporation, CIBC Wood Gundy Securities Corp. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
10.37 -- Limited Liability Company Agreement of ACME Television Holdings, LLC
10.38 -- Management Agreement between Edward J. Kopler and ACME Television Licenses of Missouri, Inc.
10.39 -- First Amendment to Limited Liability Company Agreement of ACME Television Holdings, LLC
10.40 -- Form of Guaranty by and among ACME subsidiaries, Canadian Imperial Bank of Commerce, as agent, and
the Lenders under the First Amended and Restated Credit Agreement
10.41 -- Form of Security and Pledge Agreement by and among ACME subsidiaries, Canadian Imperial Bank of
Commerce, as agent, and the Lenders under the First Amended and Restated Credit Agreement
10.42 -- Amendment to Tower Lease Agreement by and between Roberts Broadcasting of Salt Lake City, LLC and
ACME Television Holdings, LLC
*23.1 -- Consent of Dickstein Shapiro Morin & Oshinsky LLP (included in Exhibit 5.1)
23.2 -- Consent of KPMG Peat Marwick LLP regarding ACME Television, LLC
23.3 -- Consent of Coopers & Lybrand L.L.P.
23.4 -- Consent of KPMG Peat Marwick LLP regarding Channel 32, Incorporated
*24.1 -- Power of attorney from Thomas Allen
*24.2 -- Power of attorney from Douglas Gealy
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
*24.3 -- Power of attorney from Jamie Kellner
*25.1 -- Statement of Eligibility of Wilmington Trust Company
*27.1 -- Financial Data Schedule
*99.1 -- Form of Letter of Transmittal for Tender of Series A 10 7/8% Senior Discount Notes due 2004 in
exchange for Series B 10 7/8% Senior Discount Notes due 2004
*99.2 -- Form of Notice of Guaranteed Delivery for Tender of Series A 10 7/8% Senior Discount Notes due
2004 in exchange for Series B 10 7/8% Senior Discount Notes due 2004
*99.3 -- Letter to Brokers for Tender of Series A 10 7/8% Senior Discount Notes due 2004 in exchange for
Series B 10 7/8% Senior Discount Notes due 2004
*99.4 -- Letter to Clients for Tender of Series A 10 7/8% Senior Discount Notes due 2004 in exchange for
Series B 10 7/8% Senior Discount Notes due 2004
*99.5 -- Instruction to Registered Holder and/or Book Entry Transfer Participant from Beneficial Owner for
Tender of Series A 10 7/8% Senior Discount Notes due 2004 in exchange for Series B 10 7/8% Senior
Discount Notes due 2004
*99.6 -- Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
*99.7 -- Consent to be appointed member of Board of Advisors from Edward J. Koplar
*99.8 -- Consent to be appointed member of Board of Advisors from Michael V. Roberts
</TABLE>
* filed previously
** to be filed by amendment
(b) Financial Statement Schedules:
None.
ITEM 22. UNDERTAKINGS.
Each undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the 'Calculation of Registration Fee' table in
the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II-6
<PAGE>
(4) If the registrant is a foreign private issuer, to file a post-effective
amendment to the registration statement to include any financial statements
required by Rule 3-19 of this chapter at the start of any delayed offering or
throughout a continuous offering. Financial statements and information otherwise
required by Section 10(a)(3) of the Act need not be furnished, provided, that
the registrant includes in the prospectus, by means of a post-effective
amendment, financial statements required pursuant to this paragraph (a)(4) and
other information necessary to ensure that all other information in the
prospectus is at least as current as the date of those financial statements.
Notwithstanding the foregoing, with respect to registration statements on Form
F-3, a post-effective amendment need not be filed to include financial
statements and information required by Section 10(a)(3) of the Act or Rule 3-19
of this chapter if such financial statements and information are contained in
periodic reports filed with or furnished to the Commission by the registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the Form F-3.
(5) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issues.
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COSTA MESA,
STATE OF CALIFORNIA, AS OF JANUARY 16, 1998.
ACME TELEVISION, LLC
By: /s/ THOMAS ALLEN
-----------------------------
Thomas Allen
Executive Vice President and
Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND AS OF THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------ ------------------------------------------- -----------------
<C> <S> <C>
* Chairman and Chief Executive Officer January 16, 1998
- ------------------------------------------------
Jamie Kellner
* President and Chief Operating Officer January 16, 1998
- ------------------------------------------------
Douglas Gealy
/s/ THOMAS ALLEN Executive Vice President and Chief January 16, 1998
- ------------------------------------------------ Financial Officer
Thomas Allen
/s/ THOMAS ALLEN Majority Member January 16, 1998
- ------------------------------------------------
ACME INTERMEDIATE HOLDINGS, LLC
By: Thomas Allen
Title: Executive Vice President and Chief
Financial Officer
*By: /s/ THOMAS ALLEN
---------------------------------------
Thomas Allen
Attorney-in-Fact
</TABLE>
II-8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COSTA MESA,
STATE OF CALIFORNIA, AS OF JANUARY 16, 1998.
ACME FINANCE CORPORATION
By: /s/ THOMAS ALLEN
----------------------------------
Thomas Allen
Executive Vice President,
Chief Financial Officer and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND AS OF THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------------------------- -----------------
<C> <S> <C>
* Chairman of the Board and Chief Executive January 16, 1998
- ------------------------------------------ Officer
Jamie Kellner
* President, Chief Operating Officer, Secretary January 16, 1998
- ------------------------------------------ and Director
Douglas Gealy
/s/ THOMAS ALLEN Executive Vice President, Chief Financial January 16, 1998
- ------------------------------------------ Officer and Director
Thomas Allen
*By: /s/ THOMAS ALLEN
-----------------------------------
Thomas Allen
Attorney-in-Fact
</TABLE>
II-9
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COSTA MESA,
STATE OF CALIFORNIA, AS OF JANUARY 16, 1998.
ACME TELEVISION LICENSES OF MISSOURI,
INC.
By: /s/ THOMAS ALLEN
----------------------------------
Thomas Allen
Executive Vice President,
Chief Financial Officer and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND AS OF THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------------------------- -----------------
<C> <S> <C>
* Chairman of the Board January 16, 1998
- ------------------------------------------
Jamie Kellner
* President, Chief Operating Officer, Secretary January 16, 1998
- ------------------------------------------ and Director
Douglas Gealy
/s/ THOMAS ALLEN Executive Vice President, Chief Financial January 16, 1998
- ------------------------------------------ Officer and Director
Thomas Allen
/s/ EDWARD J. KOPLAR Chief Executive Officer and Director January 16, 1998
- ------------------------------------------
Edward J. Koplar
*By: /s/ THOMAS ALLEN
-----------------------------------
Thomas Allen
Attorney-in-Fact
</TABLE>
II-10
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COSTA MESA,
STATE OF CALIFORNIA, AS OF JANUARY 16, 1998.
ACME TELEVISION HOLDINGS OF OREGON,
L.L.C.
By: /s/ THOMAS ALLEN
--------------------------------
Thomas Allen
Executive Vice President,
Chief Financial Officer and
Member of Board of Managers
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND AS OF THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------------------------- -----------------
<C> <S> <C>
* Chairman and Chief Executive Officer January 16, 1998
- ------------------------------------------
Jamie Kellner
* President, Chief Operating Officer and Member January 16, 1998
- ------------------------------------------ of Board of Managers
Douglas Gealy
/s/ THOMAS ALLEN Executive Vice President, Chief Financial January 16, 1998
- ------------------------------------------ Officer and Member of Board of Managers
Thomas Allen
*By: /s/ THOMAS ALLEN
-----------------------------------
Thomas Allen
Attorney-in-Fact
</TABLE>
II-11
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COSTA MESA,
STATE OF CALIFORNIA, AS OF JANUARY 16, 1998.
ACME TELEVISION HOLDINGS OF TENNESSEE,
L.L.C.
By: /s/ THOMAS ALLEN
--------------------------------
Thomas Allen
Executive Vice President,
Chief Financial Officer and
Member of Board of Governors
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND AS OF THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------------------------- -----------------
<C> <S> <C>
* Chairman and Chief Executive Officer January 16, 1998
- ------------------------------------------
Jamie Kellner
* President, Chief Operating Officer and Member January 16, 1998
- ------------------------------------------ of Board of Governors
Douglas Gealy
/s/ THOMAS ALLEN Executive Vice President, Chief Financial January 16, 1998
- ------------------------------------------ Officer and Member of Board of Governors
Thomas Allen
*By: /s/ THOMAS ALLEN
-----------------------------------
Thomas Allen
Attorney-in-Fact
</TABLE>
II-12
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COSTA MESA,
STATE OF CALIFORNIA, AS OF JANUARY 16, 1998.
ACME TELEVISION HOLDINGS OF UTAH,
L.L.C.
By: /s/ THOMAS ALLEN
-------------------------------
Thomas Allen
Executive Vice President and
Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND AS OF THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------------------------- -----------------
<C> <S> <C>
* Chairman and Chief Executive Officer January 16, 1998
- ------------------------------------------
Jamie Kellner
* President and Chief Operating Officer January 16, 1998
- ------------------------------------------
Douglas Gealy
/s/ THOMAS ALLEN Executive Vice President, Chief Financial January 16, 1998
- ------------------------------------------ Officer and Director
Thomas Allen
/s/ THOMAS ALLEN Majority Member January 16, 1998
- ------------------------------------------
ACME TELEVISION, LLC
By: Thomas Allen
Title: Executive Vice President and Chief
Financial Officer
*By: /s/ THOMAS ALLEN
-----------------------------------
Thomas Allen
Attorney-in-Fact
</TABLE>
II-13
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COSTA MESA,
STATE OF CALIFORNIA, AS OF JANUARY 16, 1998.
ACME TELEVISION HOLDINGS OF NEW
MEXICO, L.L.C.
By: /s/ THOMAS ALLEN
----------------------------------
Thomas Allen
Executive Vice President and
Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND AS OF THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------------------------- -----------------
<C> <S> <C>
* Chairman of the Board and Chief Executive January 16, 1998
- ------------------------------------------ Officer
Jamie Kellner
* President and Chief Operating Officer January 16, 1998
- ------------------------------------------
Douglas Gealy
/s/ THOMAS ALLEN Executive Vice President and Chief Financial January 16, 1998
- ------------------------------------------ Officer
Thomas Allen
/s/ THOMAS ALLEN Majority Member January 16, 1998
- ------------------------------------------
ACME TELEVISION, LLC
By: Thomas Allen
Title: Executive Vice President and Chief
Financial Officer
*By: /s/ THOMAS ALLEN
-----------------------------------
Thomas Allen
Attorney-in-Fact
</TABLE>
II-14
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COSTA MESA,
STATE OF CALIFORNIA, AS OF JANUARY 16, 1998.
ACME TELEVISION LICENSES OF OREGON,
L.L.C.
By: /s/ THOMAS ALLEN
----------------------------------
Thomas Allen
Executive Vice President,
Chief Financial Officer and
Member of Board of Managers
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND AS OF THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------------------------- -----------------
<C> <S> <C>
* Chairman and Chief Executive Officer January 16, 1998
- ------------------------------------------
Jamie Kellner
* President, Chief Operating Officer and Member January 16, 1998
- ------------------------------------------ of Board of Managers
Douglas Gealy
/s/ THOMAS ALLEN Executive Vice President, Chief Financial January 16, 1998
- ------------------------------------------ Officer and Member of Board of Managers
Thomas Allen
*By: /s/ THOMAS ALLEN
-----------------------------------
Thomas Allen
Attorney-in-Fact
</TABLE>
II-15
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COSTA MESA,
STATE OF CALIFORNIA, AS OF JANUARY 16, 1998.
ACME TELEVISION LICENSES OF TENNESSEE,
L.L.C.
By: /s/ THOMAS ALLEN
----------------------------------
Thomas Allen
Executive Vice President,
Chief Financial Officer and
Member of Board of Governors
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND AS OF THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------------------------- -----------------
<C> <S> <C>
* Chairman and Chief Executive Officer January 16, 1998
- ------------------------------------------
Jamie Kellner
* President, Chief Operating Officer and Member January 16, 1998
- ------------------------------------------ of Board of Governors
Douglas Gealy
/s/ THOMAS ALLEN Executive Vice President, Chief Financial January 16, 1998
- ------------------------------------------ Officer and Member of Board of Governors
Thomas Allen
*By: /s/ THOMAS ALLEN
-----------------------------------
Thomas Allen
Attorney-in-Fact
</TABLE>
II-16
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COSTA MESA,
STATE OF CALIFORNIA, AS OF JANUARY 16, 1998.
ACME TELEVISION LICENSES OF NEW
MEXICO, L.L.C.
By: /s/ THOMAS ALLEN
----------------------------------
Thomas Allen
Executive Vice President and
Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND AS OF THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------------------------- -----------------
<C> <S> <C>
* Chairman and Chief Executive Officer January 16, 1998
- ------------------------------------------
Jamie Kellner
* President and Chief Operating Officer January 16, 1998
- ------------------------------------------
Douglas Gealy
/s/ THOMAS ALLEN Executive Vice President and Chief Financial January 16, 1998
- ------------------------------------------ Officer
Thomas Allen
/s/ THOMAS ALLEN Majority Member January 16, 1998
- ------------------------------------------
ACME TELEVISION HOLDINGS OF NEW MEXICO,
L.L.C.
By: Thomas Allen
Title: Executive Vice President and Chief
Financial Officer
*By: /s/ THOMAS ALLEN
-----------------------------------
Thomas Allen
Attorney-in-Fact
</TABLE>
II-17
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COSTA MESA,
STATE OF CALIFORNIA, AS OF JANUARY 16, 1998.
ACME TELEVISION OF OREGON, L.L.C.
By: /s/ THOMAS ALLEN
----------------------------------
Thomas Allen
Executive Vice President,
Chief Financial Officer and
Member of Board of Managers
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND AS OF THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------------------------- -----------------
<C> <S> <C>
* Chairman and Chief Executive Officer January 16, 1998
- ------------------------------------------
Jamie Kellner
* President, Chief Operating Officer and Member January 16, 1998
- ------------------------------------------ of Board of Managers
Douglas Gealy
/s/ THOMAS ALLEN Executive Vice President, Chief Financial January 16, 1998
- ------------------------------------------ Officer and Member of Board of Managers
Thomas Allen
*By: /s/ THOMAS ALLEN
-----------------------------------
Thomas Allen
Attorney-in-Fact
</TABLE>
II-18
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COSTA MESA,
STATE OF CALIFORNIA, AS OF JANUARY 16, 1998.
ACME TELEVISION OF TENNESSEE, L.L.C.
By: /s/ THOMAS ALLEN
----------------------------------
Thomas Allen
Executive Vice President,
Chief Financial Officer and
Member of Board of Governors
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND AS OF THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------------------------- -----------------
<C> <S> <C>
* Chairman and Chief Executive Officer January 16, 1998
- ------------------------------------------
Jamie Kellner
* President, Chief Operating Officer and Member January 16, 1998
- ------------------------------------------ of Board of Governors
Douglas Gealy
/s/ THOMAS ALLEN Executive Vice President, Chief Financial January 16, 1998
- ------------------------------------------ Officer and Member of Board of Governors
Thomas Allen
*By: /s/ THOMAS ALLEN
-----------------------------------
Thomas Allen
Attorney-in-Fact
</TABLE>
II-19
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COSTA MESA,
STATE OF CALIFORNIA, AS OF JANUARY 16, 1998.
ACME SUBSIDIARY HOLDINGS III, LLC
By: /s/ THOMAS ALLEN
---------------------------------
Thomas Allen
Executive Vice President,
Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND AS OF THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------------------------- -----------------
<C> <S> <C>
* Chairman and Chief Executive Officer January 16, 1998
- ------------------------------------------
Jamie Kellner
* President and Chief Operating Officer January 16, 1998
- ------------------------------------------
Douglas Gealy
/s/ THOMAS ALLEN Executive Vice President and Chief Financial January 16, 1998
- ------------------------------------------ Officer
Thomas Allen
/s/ THOMAS ALLEN Majority Member January 16, 1998
- ------------------------------------------
ACME TELEVISION, LLC
By: Thomas Allen
Title: Executive Vice President and Chief
Financial Officer
*By: /s/ THOMAS ALLEN
-----------------------------------
Thomas Allen
Attorney-in-Fact
</TABLE>
II-20
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COSTA MESA,
STATE OF CALIFORNIA, AS OF JANUARY 16, 1998.
ACME TELEVISION OF UTAH, L.L.C.
By: /s/ THOMAS ALLEN
---------------------------------
Thomas Allen
Executive Vice President and
Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND AS OF THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------------------------- -----------------
<C> <S> <C>
* Chairman and Chief Executive Officer January 16, 1998
- ------------------------------------------
Jamie Kellner
* President and Chief Operating Officer January 16, 1998
- ------------------------------------------
Douglas Gealy
/s/ THOMAS ALLEN Executive Vice President and Chief Financial January 16, 1998
- ------------------------------------------ Officer
Thomas Allen
/s/ THOMAS ALLEN Majority Member January 16, 1998
- ------------------------------------------
ACME TELEVISION HOLDINGS OF UTAH, L.L.C.
By: Thomas Allen
Title: Executive Vice President and Chief
Financial Officer
*By: /s/ THOMAS ALLEN
-----------------------------------
Thomas Allen
Attorney-in-Fact
</TABLE>
II-21
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COSTA MESA,
STATE OF CALIFORNIA, AS OF JANUARY 16, 1998.
ACME TELEVISION OF NEW MEXICO, L.L.C.
By: /s/ THOMAS ALLEN
----------------------------------
Thomas Allen
Executive Vice President and
Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND AS OF THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------------------------- -----------------
<C> <S> <C>
* Chairman and Chief Executive Officer January 16, 1998
- ------------------------------------------
Jamie Kellner
* President and Chief Operating Officer January 16, 1998
- ------------------------------------------
Douglas Gealy
/s/ THOMAS ALLEN Executive Vice President and Chief Financial January 16, 1998
- ------------------------------------------ Officer
Thomas Allen
/s/ THOMAS ALLEN Majority Member January 16, 1998
- ------------------------------------------
ACME TELEVISION HOLDINGS OF NEW MEXICO,
L.L.C.
By: Thomas Allen
Title: Executive Vice President and Chief
Financial Officer
*By: /s/ THOMAS ALLEN
-----------------------------------
Thomas Allen
Attorney-in-Fact
</TABLE>
II-22
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COSTA MESA,
STATE OF CALIFORNIA, AS OF JANUARY 16, 1998.
ACME TELEVISION LICENSES OF UTAH,
L.L.C.
By: /s/ THOMAS ALLEN
----------------------------------
Thomas Allen
Executive Vice President and
Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND AS OF THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------------------------- -----------------
<C> <S> <C>
* Chairman and Chief Executive Officer January 16, 1998
- ------------------------------------------
Jamie Kellner
* President and Chief Operating Officer January 16, 1998
- ------------------------------------------
Douglas Gealy
/s/ THOMAS ALLEN Executive Vice President and Chief Financial January 16, 1998
- ------------------------------------------ Officer
Thomas Allen
/s/ THOMAS ALLEN Majority Member January 16, 1998
- ------------------------------------------
ACME TELEVISION HOLDINGS OF UTAH, L.L.C.
By: Thomas Allen
Title: Executive Vice President and Chief
Financial Officer
*By: /s/ THOMAS ALLEN
-----------------------------------
Thomas Allen
Attorney-in-Fact
</TABLE>
II-23
ARTICLES OF INCORPORATION
OF
ACME TELEVISION LICENSES OF MISSOURI, INC.
The following Articles of Incorporation are adopted by the undersigned
natural person of the age of eighteen (18) years or more for the purpose of
forming a Corporation under The General and Business Corporation Law of
Missouri:
ARTICLE ONE
The name of the Corporation is Acme Television Licenses of Missouri, Inc.
ARTICLE TWO
The address, including street and number, of the Corporation's initial
registered office in this State is 10 S. Broadway, Suite 2000, St. Louis,
Missouri 63102, and the name of its initial Registered Agent at said address is
Joseph D. Lehrer.
ARTICLE THREE
The aggregate number, class, and par value of shares which the Corporation
has authority to issue is as follows:
Thirty Thousand (30,000) shares of Common Stock at One Dollar ($1.00) par
value.
ARTICLE FOUR
No holder of shares of stock of the Corporation shall be entitled as such
as a matter of right to subscribe for or purchase any part of any new or
additional issue of stock, or securities convertible into stock, of any class
whatsoever, whether now or hereafter authorized, and whether issued for cash,
property, services, by way of dividends, or otherwise.
1
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ARTICLE FIVE
The name and place of residence of the Sole Incorporator is as follows:
Nancy A. Marshall
5636 Finkman Street
St. Louis, Missouri 63109
ARTICLE SIX
The number of Directors to constitute the first Board of Directors shall be
four (4). Thereafter, the number of Directors to constitute the Board of
Directors of the Corporation shall be as fixed by, or as determined in the
manner provided in, the Bylaws of the Corporation. Any change in such number
shall be reported to the Secretary of State of Missouri within thirty (30) days
after such change becomes effective.
ARTICLE SEVEN
The duration of the Corporation is perpetual.
ARTICLE EIGHT
The corporation is formed for the following purpose:
To engage in any lawful activity for which a corporation may be
organized under The General and Business Corporation Law of Missouri.
ARTICLE NINE
The Board of Directors shall have power to adopt, repeal, or amend the
Bylaws of the Corporation and to adopt new or additional Bylaws, subject to the
paramount right of the shareholders to limit or divest such power and to assume
such power to the exclusion of the Board of Directors as the shareholders may
determine.
2
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ARTICLE TEN
The Corporation shall indemnify all its directors and officers as permitted
by The General and Business Corporation Law of Missouri, as amended.
IN WITNESS WHEREOF, these Articles of Incorporation have been signed the
25th day of July, 1997.
/s/ Nancy A. Marshall
----------------------------------
Nancy A. Marshall, Incorporator
3
<PAGE>
STATE OF MISSOURI )
)ss.
COUNTY OF ST. LOUIS )
I, Debra J. Spaethe, a notary public, do hereby certify that on the 25th
day of July, 1997, before me personally appeared Nancy A. Marshall; and who,
being by me first duly sworn, declared that she is the person who signed the
foregoing document as incorporator, and that the statements therein contained
are true.
/s/ Debra J. Spaethe
-----------------------------------
Notary Public
(SEAL)
Debra J. Spaethe
Notary Public-Notary Seal
St. Louis, Missouri
St. Louis County
My Commission Expires June 5, 1999
4
BY-LAWS
OF
ACME TELEVISION LICENSES OF MISSOURI, INC.
* * * * *
ARTICLE I
Offices
The principal office of the corporation in the State of Missouri
shall be located in St. Louis County, St. Louis, Missouri. The corporation may
have such other offices, either within or without the State of Missouri, as the
business of the corporation may require from time to time.
The registered office of the corporation required by The General and
Business Corporation Law of Missouri to be maintained in the State of Missouri
may be, but need not be, identical with the principal office in the State of
Missouri, and the address of the registered office may be changed from time to
time by the Board of Directors.
ARTICLE II
Shareholders
SECTION 1. ANNUAL MEETINGS: The annual meetings of the shareholders
shall be held at such time as shall be set by the Board of Directors, for the
purpose of electing directors and for the transaction of such other business as
may come before the meeting. If
<PAGE>
the day fixed for the annual meeting shall be a legal holiday, such meeting
shall be held on the next succeeding business day. If the election of directors
shall not be held on the day designated herein for any annual meeting, or at any
adjournment thereof, the Board of Directors shall cause the election to be held
at a special meeting of the shareholders as soon thereafter as conveniently may
be.
SECTION 2. SPECIAL MEETINGS: Special meetings of the shareholders may
be called by the Chairman and Chief Executive Officer, by the Board of Directors
or by the holders of not less than one-fifth of all the outstanding shares of
the corporation.
SECTION 3. PLACE OF MEETING: The Board of Directors may designate any
place, either within or without the State of Missouri, as the place of meeting
for any annual meeting of the shareholders or for any special meeting of the
shareholders called by the Board of Directors. The shareholders may designate
any place, either within or without the State of Missouri, as the place for the
holding of such meeting, and may include the same in a waiver of notice of any
meeting. If no designation is made, or if a special meeting be otherwise called,
the place of meeting shall be the registered office of the corporation in the
State of Missouri, except as otherwise provided in Section 5 of this article.
SECTION 4. NOTICE OF MEETINGS: Written or printed notice stating the
place, day and hour of the meeting and, in case of a special meeting, the
purpose or purposes for
2
<PAGE>
which the meeting is called, shall be delivered not less than ten nor more than
fifty (50) days before the date of the meeting, either personally or by mail, by
or at the direction of the Chairman and Chief Executive Officer, or the
Secretary, or the officer or persons calling the meeting, to each shareholder of
record entitled to vote at such meeting.
If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail in a sealed envelope addressed to the shareholder at
his address as it appears on the records of the corporation, with postage
thereon prepaid.
SECTION 5. MEETINGS OF ALL SHAREHOLDERS: If all of the shareholders
shall meet at any time and place, either within or without the State of
Missouri, and consent to the holding of a meeting, such meeting shall be valid,
without call or notice, and at such meeting any corporate action may be taken.
SECTION 6. Closing of Transfer Books or Fixing of Record Date: The
Board of Directors of the corporation may close its stock transfer books for a
period not exceeding fifty (50) days preceding the date of any meeting of
shareholders, or the date for the payment of any dividend or for the allotment
of rights, or the date when any change or conversion or exchange of shares shall
be effective; or, in lieu thereof, may fix in advance a date, not exceeding
fifty (50) days preceding the date of any meeting of shareholders, or the date
for the payment of any dividend or for the allotment of rights, or the date when
3
<PAGE>
any change or reconversion or exchange of shares shall be effective, as the
record date for the determination of shareholders entitled to notice of, or to
vote at, such meeting, or shareholders entitled to receive payment of any such
dividend or to receive any such allotment of rights, or to exercise rights in
respect of any such change, conversion or exchange or shares; and the
shareholders of record on such date of closing the transfer books, or on the
record date so fixed, shall be the shareholders entitled to notice of and to
vote at, such meeting, or to receive payment of such dividend, or to receive
such allotment of rights, or to exercise such rights, as the case may be. If the
Board of Directors shall not have closed the transfer books or set a record date
for the determination of its shareholders entitled to notice of, and to vote at,
a meeting of shareholders, only the shareholders who are shareholders of record
at the close of business on the 20th day preceding the date of the meeting shall
be entitled to notice of, and to vote at, the meeting, and any adjournment of
the meeting; except that, if prior to the meeting written waivers of notice of
the meeting are signed and delivered to the corporation by all of the
shareholders of record at the time the meeting is convened, only the
shareholders who are shareholders of record at the time the meeting is convened
shall be entitled to vote at the meeting, and any adjournment of the meeting.
SECTION 7. VOTINGS LISTS: At least ten days before each meeting of
shareholders, the officer or agent having charge of the transfer book for shares
of the corporation shall
4
<PAGE>
make a complete list of the shareholders entitled to vote at such meeting,
arranged in alphabetical order with the address of, and the number of shares
held by, each shareholder, which list, for a period of ten days prior to such
meeting, shall be kept on file at the registered office of the corporation and
shall be subject to inspection by any shareholder at any time during usual
business hours. Such list shall also be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting. The original share ledger or transfer
book, or a duplicate thereof kept in this state, shall be prima facie evidence
as to who are the shareholders entitled to examine such list or share ledger or
transfer book or to vote at any meeting of shareholders.
SECTION 8. QUORUM: A majority of the outstanding shares of the
corporation, represented in person or by proxy, shall constitute a quorum at any
meeting of the shareholders; provided, that if less than a majority of the
outstanding shares are represented at said meeting, a majority of the shares so
represented may adjourn the meeting, from time to time, without further notice,
to a date not longer than ninety (90) days from the date originally set for such
meeting.
SECTION 9. PROXIES: At all meeting of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the Secretary of the
corporation before or at the time of the
5
<PAGE>
meeting. No proxy shall be valid after eleven (11) months from the date of its
execution, unless otherwise provided in the proxy.
SECTION 10. VOTING OF SHARES: Subject to the provisions of Section
12, each outstanding share of capital stock having voting rights shall be
entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders.
SECTION 11. VOTING OF SHARES BY CERTAIN HOLDERS: Shares standing in
the name of another corporation, domestic or foreign, may be voted by such
officer, agent, or proxy as the by-laws of such corporation may prescribe, or,
in the absence of such provision, as the Board of Directors of such corporation
may determine.
Shares standing in the name of a deceased person may be voted by his
administrator or executor, either in person or by proxy. Shares standing in the
name of a guardian, curator, or trustee may be voted by such fiduciary, either
in person or by proxy, but no guardian, curator, or trustee shall be entitled,
as such fiduciary, to vote shares held by him without a transfer of such shares
into his name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority so to do
be contained in an appropriate order of the court by which such receiver was
appointed.
6
<PAGE>
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
SECTION 12. CUMULATIVE VOTING: In all elections for directors, every
shareholder shall have the right to vote, in person or by proxy, the number of
shares owned by him, for as many persons as there are directors to be elected,
or to cumulate said shares, and give one candidate as many votes as the number
of directors multiplied by the number of his shares shall equal, or to
distribute them on the same principle among as many candidates as he shall see
fit.
SECTION 13. INFORMAL ACTION BY SHAREHOLDERS: Any action which may be
taken at a meeting of the shareholders may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all of
the shareholders entitled to vote with respect to the subject matter thereof.
ARTICLE III
Directors
SECTION 1. GENERAL POWERS: The business and affairs of the
corporation shall be managed by or under the direction of its Board of
Directors.
7
<PAGE>
SECTION 2. NUMBER, ELECTION AND TERM: The number of directors of the
first Board of Directors shall be four (4). Thereafter the number of directors
shall be fixed from time to time by resolution of the Board of Directors. Each
director shall be elected at the first annual meeting of the shareholders, and
annually thereafter, for a term of one year, and each of whom shall hold office
until his successor has been elected and has qualified.
SECTION 3. REGULAR MEETINGS: A regular meeting of the Board of
Directors shall be held without other notice than this by-law, immediately
after, and at the same place as, the annual meeting of shareholders. The Board
of Directors may provide, by resolution, the time and place, either within or
without the State of Missouri, for the holding of additional regular meetings
with notice of such resolution to all directors.
SECTION 4. SPECIAL MEETINGS: Special meetings of the Board of
Directors may be called by or at the request of the Chairman and Chief Executive
Officer or by any two directors.
The person or persons authorized to call special meetings of the
Board of Directors may fix any place in the United States, either within or
without the State of Missouri, as the place for holding any special meeting of
the Board of Directors called by them.
8
<PAGE>
SECTION 5. NOTICE: Notice of any special meeting shall be given at
least five days previously thereto by written notice delivered personally or
mailed to each director at his business address, or by telegram provided,
however, that if the designated meeting place is without the State of Missouri,
an additional five days' notice shall be given. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail in a sealed
envelope so addressed, with postage thereon prepaid. If notice be given by
telegram, such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company. Any director may waive notice of any
meeting. The attendance of a director at any meeting shall constitute a waiver
of notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting.
SECTION 6. QUORUM: A majority of the Board of Directors shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors, provided that if less than a majority of the directors are present
at said meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice.
9
<PAGE>
SECTION 7. MANNER OF ACTING: The act of the majority of the directors
present at a meeting of the directors at which a quorum is present shall be the
act of the Board of Directors.
SECTION 8. VACANCIES: In case of the death or resignation or
disqualification of one or more of the directors, a majority of the survivors or
remaining directors may fill such vacancy or vacancies until the successor or
successors are elected at the next annual meeting of the shareholders. A
director elected to fill a vacancy shall serve as such until the next annual
meeting of the shareholders.
SECTION 9. COMPENSATION: Directors as such shall not receive any
stated salaries for their services, but by resolution of the Board of Directors,
a fixed sum and expenses of attendance, if any, may be allowed for attendance at
each regular or special meeting of the Board of Directors; provided, that
nothing herein contained shall be construed to preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor.
ARTICLE IV
Officers
SECTION 1. NUMBER: The officers of the corporation shall be a
Chairman and Chief Executive Officer, a Vice-Chairman, a President, one or more
Vice Presidents (the
10
<PAGE>
number thereof to be determined by the Board of Directors), a Treasurer, a
Secretary and such other officers as may be elected in accordance with the
provisions of this article. The Chairman and Chief Executive Officer shall be
chosen from the members of the Board of Directors. The remaining officers of the
corporation need not be chosen from the members of the Board, but they may be so
chosen. The Board of Directors, by resolution, may create the offices of one or
more assistant Treasurers and assistant Secretaries, all of whom shall be
elected by the Board of Directors. Any two or more offices may be held by the
same person, except the offices of President and Secretary.
All officers and agents of the corporation, as between themselves and
the corporation, shall have such authority and perform such duties in the
management of the property and affairs of the corporation as may be provided in
the by-laws, or, in the absence of such provision, as may be determined by
resolution of the Board of Directors.
SECTION 2. ELECTION AND TERM OF OFFICE: The officers of the
corporation shall be elected annually by the Board of Directors at the first
meeting of the Board of Directors held after each annual meeting of
shareholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as conveniently may be. Vacancies
may be filled or new offices created and filled at any meeting of the Board of
Directors. Each officer shall hold office until his successor shall have been
duly elected and
11
<PAGE>
shall have qualified or until his death or until he shall resign or shall have
been removed in the manner hereinafter provided.
SECTION 3. REMOVAL: Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board of Directors whenever in its
judgment the best interests of the corporation would be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed.
SECTION 4. VACANCIES: A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
SECTION 5. CHAIRMAN AND CHIEF EXECUTIVE OFFICER: The Chairman and
Chief Executive Officer shall be the chief executive officer of the corporation.
It shall be his duty to preside at all meetings of the shareholders and
directors; to have general and active management of the business of the
corporation; to see that all orders and resolutions of the Board of Directors
are carried into effect; to execute all contracts, agreements, deeds, bonds,
mortgages, and other obligations and instruments, in the name of the
corporation, and to affix the corporate seal thereto when authorized by the
Board. The Chairman and Chief Executive Officer shall:
12
<PAGE>
(i) have the general supervision and direction of the other
officers of the corporation and shall see that their
duties are properly performed;
(ii) submit a report of the operations of the corporation
for the year to the directors at their next meeting
preceding the annual meeting of the shareholders and
to the shareholders at their annual meeting; and
(iii) be ex-officio a member of all standing committees and
shall have the general duties and powers of supervision
and management usually vested in the office of chairman
of a corporation.
SECTION 6. THE VICE CHAIRMAN: The Vice-Chairman shall act under the
direction of the chairman and Chief Executive Officer and shall perform such
other duties and exercise such other powers as the Chairman and Chief Executive
Officer or the Board of Directors may from time to time prescribe.
SECTION 7. PRESIDENT: The President shall be vested with all the
powers and shall be required to perform all of the duties of the Chairman and
Chief Executive Officer in his absence or disability, or in the event of any
vacancy in the office of Chairman and Chief Executive Officer, and shall perform
such other duties as may be prescribed by the
13
<PAGE>
Board of Directors and/or the Chairman and Chief Executive Officer. In the
absence or disability of the President, or in the event that the office of
President shall be vacant, the Chairman and Chief Executive Officer shall assume
any duties expressly assigned by the Board of Directors to the President.
SECTION 8. THE TREASURER: If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the Board of Directors shall determine. He
shall: (a) have charge and custody of and be responsible for all funds and
securities of the corporation; receive and give receipts for moneys due and
payable to the corporation from any source whatsoever, and deposit all such
moneys in the name of the corporation in such banks, trust companies or other
depositories as shall be selected in accordance with the provisions of Article V
of these by-laws; (b) in general perform all the duties incident to the office
of Treasurer and such other duties as from time to time may be assigned to him
by the President or by the Board of Directors.
SECTION 9. THE SECRETARY: The Secretary shall: (a) keep the minutes of
the shareholders' and of the Board of Directors' meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these by-laws or as required by law; (c) be custodian of
the corporate records and of the seal of the corporation and see that the seal
of the corporation is affixed to all certificates
14
<PAGE>
for shares prior to the issue thereof and to all documents, the execution of
which on behalf of the corporation under its seal is duly authorized in
accordance with the provisions of these by-laws; (d) keep a register of the post
office address of each shareholder which shall be furnished to the Secretary by
such shareholder; (e) sign with the President, or a Vice-President, certificates
for shares of the corporation, the issue of which shall have been authorized by
resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the corporation; (g) in general perform all duties incident to
the office of Secretary and such other duties as from time to time may be
assigned to him by the President or by the Board of Directors.
SECTION 10. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES: The
Assistant Treasurers shall respectively, if required by the Board of Directors,
give bonds for the faithful discharge of their duties in such sums and with such
sureties as the Board of Directors shall determine. Assistant Secretaries and
Treasurers, as thereunto authorized by the Board of Directors, may sign with the
President or a Vice-President certificates for shares of the corporation, the
issue of which shall have been authorized by a resolution of the Board of
Directors. The Assistant Treasurers and Assistant Secretaries, in general, shall
perform such duties as shall be assigned to them by the Treasurer or the
Secretary, respectively, or by the President or the Board of Directors.
15
<PAGE>
SECTION 11. SALARIES: The salaries of the officers shall be fixed
from time to time by the Board of Directors and no officer shall be prevented
from receiving such salary by reason of the fact that he is also a director of
the corporation.
ARTICLE V
Contracts, Loans, Checks and Deposits
SECTION 1. CONTRACTS: The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
SECTION 2. LOANS: No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC.: All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
16
<PAGE>
SECTION 4. DEPOSITS: All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositories as the Board of Directors
may select.
ARTICLE VI
Certificates for Shares and Their Transfer
SECTION 1. CERTIFICATES FOR SHARES: Certificates representing shares
of the corporation shall be in such form as may be determined by the Board of
Directors. Such certificates shall be signed by the Chairman and Chief Executive
Officer, the President or any Vice President and by the Secretary, the
Treasurer, or an Assistant Secretary or Treasurer, and shall be sealed with the
seal of the corporation.
All certificates for shares shall be consecutively numbered. The name
of the person owning the shares represented thereby with the number of shares
and date of issue shall be entered on the books of the corporation. All
certificates surrendered to the corporation for transfer shall be canceled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and canceled, except that in case
of a lost, destroyed or mutilated certificate a new one may be issued therefor
upon such terms and indemnity to the corporation as the Board of Directors may
prescribe.
17
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SECTION 2. TRANSFERS OF SHARES: Transfers of shares of the corporation
shall be made only on the books of the corporation by the registered holder
thereof or by his attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary of the corporation, and on surrender for
cancellation of the certificate for such shares. The person in whose name shares
stand on the books of the corporation shall be deemed the owner thereof for all
purposes as regards the corporation.
The corporation, with the consent of all of its shareholders, has
elected pursuant to Section 1362(a) of the Internal Revenue Code, to be an "S
corporation", as defined in Section 1361(a)(1) of such Code. The corporation's
shareholders are all parties to the Stockholder Agreement in which they have
agreed not to transfer any of the shares of the corporation to any person or
entity which would disqualify the Corporation as an "S corporation".
ARTICLE VII
Fiscal Year
The fiscal year of the corporation shall begin on the first day of
January in each year and end on the last day of December in each year.
18
<PAGE>
ARTICLE VIII
Dividends
The Board of Directors may from time to time, declare, and the
corporation may pay, dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law and its articles of incorporation.
ARTICLE IX
Seal
The Board of Directors shall provide a corporate seal which shall be
in the form of a circle and shall have inscribed thereon the name of the
corporation and the words, "Corporate Seal, Missouri."
ARTICLE X
Waiver of Notice
Whenever any notice whatever is required to be given under the
provisions of these by-laws or under the provisions of the articles of
incorporation or under the provisions of The General and Business Corporation
Act of Missouri, waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice.
19
<PAGE>
ARTICLE XI
Indemnification of Officers and Directors against
Liabilities and Expenses in Actions
SECTION 1. A corporation created under the laws of this state may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit, or proceeding, whether
civil, criminal, administrative or investigative, other than action by or in the
right of the corporation, by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and if, with respect to any criminal action or proceeding, he had
no reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement or conviction, or upon
a plea of nolo contenders or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and that, with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
20
<PAGE>
SECTION 2. The corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or complete
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employer or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses,
including attorneys' fees, and amounts paid in settlement actually and
reasonably incurred by him in connection with the defense or settlement of the
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation; except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation unless and only to
the extent that the court in which the action or suit was brought determines
upon application that, despite the adjudication of liability and in view of all
the circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court shall deem proper.
SECTION 3. To the extent that a director, officer, employee or agent
of the corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections 1 and 2 of this
section, or in defense of any claim,
21
<PAGE>
issue or matter therein, he shall be indemnified against expenses, including
attorney's fees, actually and reasonably incurred by him in connection with the
action suit, or proceeding.
SECTION 4. Any indemnification under subsections 1 and 2 of this
section, unless ordered by a court, shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in this section. The
determination shall be made by the Board of Directors by a majority vote of a
quorum consisting of directors who were not parties to the action, suit or
proceeding, or if such a quorum is not obtainable, or even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or by the shareholders.
SECTION 5. Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the corporation in advance of the final
disposition of the action, suit, or proceeding as authorized by the Board of
Directors in the specific case upon receipt of an undertaking by or on behalf of
the director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation as authorized in this section.
22
<PAGE>
SECTION 6. The indemnification provided by this section shall not be
deemed exclusive of any other rights to which a person seeking indemnification
may be entitled under the articles of incorporation or by-laws or any agreement,
vote of shareholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 7. A corporation created under the laws of this state shall
have the power to give any further indemnity, in addition to the indemnity
authorized or contemplated under other sections of this article, including
section 6, to any person who is or was a director, officer, employee or agent,
or to any person who is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, provided such further indemnity is either
(i) authorized, directed, or provided for in the articles of incorporation of
the corporation or any duly adopted amendment thereof or (ii) is authorized,
directed, or provided for in any by-law or agreement of the corporation which
has been adopted by a vote of the shareholders of the corporation, and provided
further that no such indemnity shall indemnify any person from or on account of
such person's conduct which was finally adjudged to have been knowingly
fraudulent, deliberately dishonest or willful misconduct.
23
<PAGE>
Nothing in this section 7 shall be deemed to limit the power of the corporation
under subsection 6 of this article to enact by-laws or to enter into agreements
without shareholder adoption of the same.
SECTION 8. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this section.
ARTICLE XII
Amendments
These by-laws may be altered, amended or repealed and new by-laws may
be adopted at any annual meeting of the shareholders or at any special meeting
of the shareholders called for that purpose. The Board of Directors may adopt
emergency by-laws as provided by law.
24
CERTIFICATE OF FORMATION
OF
ACME TELEVISION HOLDINGS OF OREGON, LLC
A LIMITED LIABILITY COMPANY
FIRST: The name of the limited liability company is:
ACME TELEVISION HOLDINGS OF OREGON, LLC
SECOND: Its registered office in the State of Delaware is to be located at 1013
Centre Road, in the City of Wilmington, County of New Castle, 19805, and its
registered agent at such address is CORPORATION SERVICE COMPANY.
IN WITNESS WHEREOF, the undersigned, being the individual forming the Company,
has executed, signed and acknowledged this Certificate of Formation this
twenty-second day of September, A.D. 1997.
/s/ Jonathan P. Levi
- -------------------------------
Authorized Person
Jonathan P. Levi
CERTIFICATE OF FORMATION
OF
ACME TELEVISION HOLDINGS OF TENNESSEE, LLC
A LIMITED LIABILITY COMPANY
FIRST: The name of the limited liability company is:
ACME TELEVISION HOLDINGS OF TENNESSEE, LLC
SECOND: Its registered office in the State of Delaware is to be located at 1013
Centre Road, in the City of Wilmington, County of New Castle, 19805, and its
registered agent at such address is CORPORATION SERVICE COMPANY.
IN WITNESS WHEREOF, the undersigned, being the individual forming the Company,
has executed, signed and acknowledged this Certificate of Formation this
twenty-second day of September, A.D. 1997.
/s/ Jonathan P. Levi
- ----------------------------
Authorized Person
Jonathan P. Levi
CERTIFICATE OF FORMATION
OF
ACME TELEVISION HOLDINGS OF UTAH, L.L.C.
A LIMITED LIABILITY COMPANY
FIRST: The name of the limited liability company is:
ACME TELEVISION HOLDINGS OF UTAH, L.L.C.
SECOND: Its registered office in the State of Delaware is to be
located at 1013 Centre Road, in the City of Wilmington, County of
New Castle, 19805, and its registered agent at such address is
CORPORATION SERVICE COMPANY.
IN WITNESS WHEREOF, the undersigned, being the individual forming
the Company, has executed, signed and acknowledged this
Certificate of Formation this nineteenth day of September, A.D.
1997.
/s/ Jonathan P. Levi
--------------------------
Authorized Person
Jonathan P. Levi
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ACME TELEVISION HOLDINGS OF UTAH, LLC
a Delaware limited liability company
LIMITED LIABILITY COMPANY AGREEMENT
Dated September 24, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - DEFINED TERMS 1
ARTICLE II - ORGANIZATION AND POWERS 5
2.1 Organization 5
2.2 Purposes and Powers 5
2.3 Principal Place of Business 6
2.4 Qualification in Other Jurisdictions 6
2.5 Fiscal Year 6
ARTICLE III - MEMBERS 6
3.1 Membership Units 6
3.2 Issuance of Membership Units;
Admission of New Members 7
3.3 Voting Rights 8
3.4 Restrictions 8
3.5 Limitation on Liability of Members 9
3.6 Authority 9
3.7 Withdrawals; Termination 9
3.8 No Appraisal Rights 10
3.9 Compliance with Securities Laws and
Other Laws and Obligations 10
ARTICLE IV - MANAGEMENT 10
4.1 Management 10
4.2 Reliance by Third Parties 11
4.3 Officers 11
ARTICLE V - CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS AND
ALLOCATIONS AND DISTRIBUTIONS 12
5.1 Capital Contributions 12
5.2 Capital Accounts and Allocations 12
5.3 Distributions 14
5.4 Distributions Upon Dissolution 14
5.5 Distribution Upon Withdrawal 15
5.6 Tax Matters Partner 15
ARTICLE VI - TRANSFERS OF INTERESTS 16
6.1 Restrictions on Transfers 16
6.2 Substitute Members 17
6.3 Allocation of Distributions Between
Assignor and Assignee 17
6.4 Permitted Transfers 18
<PAGE>
ARTICLE VII - INDEMNIFICATION 18
7.1 Right to Indemnification 18
7.2 Award of Indemnification 18
7.3 Successful Defense 19
7.4 Advance Payments 19
7.5 Insurance 19
7.6 Heirs and Personal Representatives 19
7.7 Non-Exclusivity 19
7.8 Amendment 20
ARTICLE VIII - CONFLICTS OF INTEREST 20
8.1 Transactions with Interested Persons; Conflicts 20
8.2 Business Opportunities 20
ARTICLE IX - DISSOLUTION, LIQUIDATION, AND TERMINATION 21
9.1 No Dissolution 21
9.2 Events Causing Dissolution 21
9.3 Notice of Dissolution 21
9.4 Liquidation 21
9.5 Certificate of Cancellation 22
ARTICLE XI - GENERAL PROVISIONS 22
10.1 Offset 22
10.2 Notices 22
10.3 Entire Agreement 22
10.4 Amendment or Modification; Terms 23
10.5 Binding Effect 23
10.6 Governing Law; Severability 23
10.7 Further Assurances 23
10.8 Waiver of Certain Rights 23
10.9 Third-Party Beneficiaries 23
10.10 Failure to Pursue Remedies 23
10.11 Cumulative Remedies 24
10.12 Notice of Members of Provisions of
this Agreement 24
10.13 Interpretation 24
10.14 Counterparts 24
Schedule A - Membership Units
<PAGE>
ACME Television Holdings of Utah, LLC
Limited Liability Company Agreement
This Limited Liability Company Agreement is made as of September __, 1997
by and among ACME Television Holdings of Utah, LLC (the "Company") and each of
the Members listed on Schedule A hereto, and those Persons who become Members of
the Company in accordance with the provisions hereof and whose names are set
forth as such in the record books of the Company.
WHEREAS, the Company has been formed as a limited liability company under
the Delaware Limited Liability Company Act, Del. Code Ann. tit. 6, Section
18.101 et seq. (as am time to time, the "Act"), by filing a Certificate of
Formation of the Company with the office of the Secretary of State of the State
of Delaware on August , 1997; and
WHEREAS, the Members desire to set out fully their respective rights,
obligations and duties regarding the Company and its assets and liabilities as
set forth herein.
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Members hereby
agree as follows:
ARTICLE I - DEFINED TERMS
Unless the context otherwise requires, the terms defined in this Article I
shall, for the purposes of this Agreement, have the meanings herein specified
(each such meaning to be equally applicable to both the singular and plural
forms of the respective terms so defined). Defined terms which are not defined
in this Article I or elsewhere in this Agreement shall have the meaning ascribed
to them in the Investment Agreement.
"Affiliate" shall mean, with respect to a specified Person, any Person that
directly or indirectly controls, is controlled by or is under common control
with, the specified Person. As used in this definition, the term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise.
"Agreement" shall mean this Limited Liability Company Agreement, as
amended, modified, supplemented or restated from time to time.
"Bankruptcy" means, with respect to a Person, that either (i) an
involuntary petition under any bankruptcy or insolvency or other debtor relief
law or under the
<PAGE>
reorganization provisions of any such law has been filed with respect to such
Person or a receiver of or for the property of such Person has been appointed
without the acquiescence of such Person, which petition or appointment remains
undischarged or unstayed for an aggregate period of sixty (60) days (whether or
not consecutive) or (ii) a voluntary petition under any bankruptcy or insolvency
or other debtor relief law or under the reorganization provisions of any such
law has been filed by such Person, a voluntary assignment of such Person's
property for the benefit of creditors has been made, a written admission by such
Person of its inability to pay its debts as they mature has been made, a
receiver of or for the property of such Person has been appointed with the
acquiescence of such Person or such Person has done any similar act of like
import.
"Capital Contribution" shall mean with respect to any Initial Member the
amount set forth opposite its name on Schedule A and with respect to any New
Member the amount set forth opposite its name on Schedule A, as amended.
"Certificate" shall mean the Certificate of Formation and any and all
amendments thereto and restatements thereof filed on behalf of the Company with
the Secretary of State of the State of Delaware pursuant to the Act.
"Common Members" shall mean those persons listed on Schedule A hereto as
Common Members.
"Common Units" shall mean those Membership Units designated as Common
Units, as described in Section 3.1 hereof.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any corresponding federal tax statute enacted after the date of this
Agreement. A reference to a specific section of the Code refers not only to such
specific section but also to any corresponding provision of any federal tax
statute enacted after the date of this Agreement, as such specific section or
corresponding provision is in effect on the date of application of the
provisions of this Agreement containing such reference.
"Distribution Percentage" shall mean a percentage determined for each
holder of Common Units by dividing the aggregate Common Units of such holder by
the aggregate Common Units of all holders of Common Units entitled to
distributions at the time of such determination.
"FCC" means the Federal Communications Commission.
"Indemnified Parties" shall mean the Members, any Affiliate of the Members
and each Person serving as an Officer, employee or other agent of the Company
(including Persons who serve at the Company's request as directors, managers,
officers, employees, agents or trustees of another organization in which the
Company has any interest as a shareholder, creditor or otherwise) and their
respective successors and assigns.
2
<PAGE>
"Initial Capital Contribution" shall mean with respect to any Initial
Member the amount set forth opposite its name on Schedule A hereto.
"Initial Members" shall mean those Persons listed on Schedule A hereto as
Initial Members as of the date hereof.
"Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time, together with any successor statute, and the rules
and regulations promulgated thereunder.
"Losses" shall mean all liabilities, judgments, obligations, losses,
damages, taxes and interest and penalties thereon (other than (i) income taxes
due on income allocated to Membership Units; and (ii) taxes based on fees,
compensation or commissions received by an Indemnified Party in connection with
the administration of the Company or the Company's property), claims, actions,
suits or other proceedings (whether civil or criminal, pending or threatened,
before any-court or administrative or legislative body, and as the same are
accrued, in which an Indemnified Party may be or may have been involved as a
party or otherwise or with which he or she may be or may have been threatened,
while in office or thereafter), costs, expenses and disbursements (including,
without limitation, legal and accounting fees and expenses) of any kind and
nature whatsoever.
"Member" shall mean the Initial Members and any Person admitted as a Member
in accordance with the terms of this Agreement and named as a Member in the
record books of the Company, and includes any Person admitted pursuant to the
provisions of this Agreement when acting in his, her or its capacity as a Member
of the Company, and "Members" shall mean two (2) or more of such Persons when
acting in their capacities as Members of the Company.
"New Member" shall mean any Member who is not an Initial Member.
"Person" shall mean an individual, corporation, association, partnership
(general or limited), joint venture, trust, unincorporated organization, limited
liability company, any other entity or organization of any kind or a government
or any department, agency, authority, instrumentality or political subdivision
thereof.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time, together with any successor statute, and the rules and regulations
promulgated thereunder.
"Subscription Agreement" shall mean a subscription agreement for the
purchase of a Membership Unit in the Company, in a form acceptable to the
Members or the Majority Member, as applicable.
3
<PAGE>
"Tax Rate" means, for any taxable year of a Member, the sum of the Federal
Rate and the State Rate, with (a) the "Federal Rate" defined to mean the highest
effective federal income tax rate applicable to any individual for such year and
(b) the "State Rate" defined as the product of (i) the highest effective state
income tax rate applicable to an individual Member for such year multiplied by
(ii) a percentage equal to the difference between one hundred percent (100%) and
the Federal Rate.
"Taxable Income" and "Taxable Loss" mean, for any taxable year, the taxable
income or loss attributable to such Member's distributive share of taxable
income or loss of the Company, as determined for federal income tax purposes;
provided that in making such determination all separately stated items of
income, gain, loss and deduction (other than tax-exempt income) shall be
included; and provided further, that in calculating Taxable Income and Taxable
Loss, items of income, gain, loss and deduction attributable to the sale or
exchange of all or substantially all of the assets of the Company shall be
excluded from such calculation.
"Transfer" shall mean any sale, assignment, transfer, exchange, charge,
pledge, gift, hypothecation, conveyance or encumbrance (such meaning to be
equally applicable to verb forms of such term).
"Treasury Regulations" means the income tax regulations, including
temporary regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
The following terms shall have the meanings set forth in the indicated
Sections hereof:
Defined Term Section Number
------------ --------------
"Act" Preamble
"Capital Account" 5.02
"Company" Preamble
"Consolidated Group Securities" 3.04(a)
"Holdings" 5.03(a)
"Liquidating Trustee" 9.03
"Majority Member" 4.01(b)
"Membership Unit" 3.01
"Senior Executive Offices" 4.06
"Tax Distributions" 5.03
"Tax Matters Partner" 5.06
4
<PAGE>
ARTICLE II - ORGANIZATION AND POWERS
2.1 Organization. The name of the Company is ACME Television Holdings of
Utah, LLC. The Company has been formed by the filing of its Certificate with the
Delaware Secretary of State pursuant to the Act. The Certificate may be restated
or amended by the Members or the Majority Member, as applicable, from time to
time in accordance with the Act and subject to the terms of this Agreement. The
Company shall deliver a copy of the Certificate and any amendment thereto to any
Member who so requests.
2.2 Purposes and Powers. The principal business activity and purposes of
the Company shall initially be to acquire, develop, own and operate television
broadcast stations and to conduct any business related thereto or useful in
connection therewith. However, the business and purposes of the Company shall
not be limited to its initial principal business activity, and the Company
shall, subject to the terms of this Agreement, have authority to engage in any
other lawful business, purpose or activity permitted by the Act. Except as
otherwise provided in this Agreement, the Company, and the Members or the
Majority Member, as applicable, acting on behalf of the Company in accordance
with this Agreement, shall possess and may exercise all of the powers and
privileges granted by the Act or which may be exercised by any Person, together
with any powers incidental thereto, so far as such powers or privileges are
necessary, appropriate, proper, advisable, incidental or convenient to the
conduct, promotion or attainment of the business purposes or activities of the
Company, including without limitation the following powers:
(a) to conduct its business and operations in any state, territory or
possession of the United States or in any foreign country or jurisdiction;
(b) to purchase, receive, take, lease or otherwise acquire, own, hold,
improve, maintain, use or otherwise deal in and with, sell, convey, lease,
exchange, transfer or otherwise dispose of, mortgage, pledge, encumber or create
a security interest in all or any of its real or personal property, or any
interest therein, wherever situated;
(c) to borrow or lend money or obtain or extend credit and other financial
accommodations, to invest and reinvest its funds in any type of security or
obligation of or interest in any public, private or governmental entity, and to
give and receive interests in real and personal property as security for the
payment of funds so borrowed, loaned or invested;
(d) to make and modify contracts, including contracts of insurance, incur
liabilities and give guaranties, whether or not such guaranties are in
furtherance of the business and purposes of the Company, including without
limitation, guaranties of
5
<PAGE>
obligations of other Persons who are interested in the Company or in whom the
Company has an interest;
(e) to employ and terminate Officers, employees, agents and other Persons,
to organize committees of the Company, to delegate to such Persons and/or
committees such power and authority, the performance of such duties and the
execution of such instruments in the name of the Company, to fix the
compensation and define the duties and obligations of such personnel, to
establish and carry out retirement, incentive and benefit plans for such
personnel, and to indemnify such personnel to the extent permitted by this
Agreement and the Act;
(f) to form and maintain subsidiaries and to merge with, or consolidate
into, another Delaware limited liability company or other business entity (as
defined in Section 18-209 of the Act); and
(g) to institute, prosecute, and defend any legal action or arbitration
proceeding involving the Company, and to pay, adjust, compromise, settle, or
refer to arbitration any claim by or against the Company or any of its assets.
2.3 Principal Place of Business. The principal office and place of business
of the Company shall initially be Suite 850, 650 Town Center Drive, Costa Mesa,
California 92626. The Members or the Majority Member, as applicable, may change
the principal office or place of business of the Company at any time and may
cause the Company to establish other offices or places of business in various
jurisdictions and appoint agents for service of process in such jurisdictions.
2.4 Qualification in Other Jurisdictions. The Members or the Majority
Member, as applicable, shall cause the Company to be qualified or registered
under applicable laws of any jurisdiction in which the Company transacts
business and shall be authorized to execute, deliver and file any certificates
and documents necessary to effect such qualification or registration.
2.5 Fiscal Year. The fiscal year of the Company shall end on December 31 of
each year.
ARTICLE III - MEMBERS
3.1 Membership Units. The Members shall have no rights or powers in respect
of the Company (including, without limitation, any rights in respect of
allocations of profit and loss or distributions) other than the rights conferred
by this Agreement represented by issued and outstanding units of membership
interest (the "Membership Units"), which shall be deemed to be personal property
giving only the rights provided in
6
<PAGE>
this Agreement and which shall consist of one class ("Common Units"), which
shall have rights and privileges, including voting rights as expressly set forth
in this Agreement. Every Member by virtue of having become a Member shall be
held to have expressly assented and agreed to the terms hereof and to have
become a party hereto. Ownership of a Membership Unit shall not entitle a Member
to any title in or to the whole or any part of the property of the Company or
right to call for a partition or division of the same or for an accounting. The
Initial Members of the Company, their addresses, and the respective classes and
denominations of Membership Units held by them shall be as set forth on Schedule
A hereto, and said schedule shall be amended from time to time by the Members or
the Majority Member, as applicable, in accordance with the terms hereof to
reflect the withdrawal of Members or the admission of additional Members
pursuant to this Agreement.
The Company hereby authorizes for issuance 200 Common Units. As of the date
hereof, the Company shall have issued 200 Common Units to the Initial Members,
as set forth on Schedule A hereto. Except for the Common Units issued on the
date hereof, none of the Common Units may be issued by the Company without the
prior written consent of a majority in interest of the Members.
3.2 Issuance of Membership Units: Admission of New Members.
(a) The Company is not authorized to offer and sell, or cause to be offered
and sold, additional Membership Units or to admit additional Persons as Members
except with the approval of the Members holding more than fifty percent (50%) in
interest of the Common Units.
(b) The Members or the Majority Member, as applicable, may establish
eligibility requirements for admission of a subscriber as a New Member after the
date hereof and may refuse to admit any subscriber that fails to satisfy such
eligibility requirements. The Members or the Majority Member, as applicable,
shall have the responsibility for determining whether a person or entity is
eligible for admission as a New Member. Each Person who first subscribes for a
Membership Unit in the Company after the date hereof shall be admitted as a New
Member of the Company at the time (i) such Person executes a Subscription
Agreement agreeing to be bound by the provisions hereof, (ii) the Members or the
Majority Member, as applicable, at their sole discretion, accepts such
Subscription Agreement on behalf of the Company and (iii) the subscriber makes
the Capital Contribution(s) required pursuant to the terms of this Agreement and
its Subscription Agreement. None of the existing Members shall have any
preemptive or similar right to subscribe to the issuance of new Membership Units
in the Company, and each of the Members acknowledges that its membership
interest is subject to adjustment (downward and upward) in the event of the
admission of New Members to the Company pursuant hereto or the withdrawal of any
Member from the Company.
7
<PAGE>
3.3 Voting Rights.
(a) Except as otherwise provided in this Agreement, no Member or
holder of a Membership Unit shall have the right to amend or terminate this
Agreement.
3.4 Restrictions. Notwithstanding anything in this Agreement to the
contrary, the following matters shall require the prior written consent of
holders of more than fifty percent (50%) in interest of the Common Units:
(a) the redemption, purchase or other acquisition for value (or
payment into or set aside for a sinking fund for such purpose) of any Membership
Unit, or other type of equity interest of the Company or any of its
Subsidiaries, or security convertible into or exchangeable or exercisable for
such Membership Units or equity interests (which are hereinafter reflected to as
"Consolidated Group Securities");
(b) the authorization or issuance (or the incurrence of any obligation
to authorize or issue) of any additional Membership Units or other Consolidated
Group Securities;
(c) the increase or decrease of the total number of authorized
Membership Units or other Consolidated Group Securities;
(d) the payment or declaration of any dividend or distribution (other
than Tax Distributions pursuant to Section 5.3) with respect to any Membership
Units or other Consolidated Group Securities;
(e) the authorization of any merger or consolidation of the Company or
any of its Subsidiaries with or into any other entity (except for mergers among
wholly-owned Subsidiaries);
(f) the authorization of the reorganization or sale of the Company or
any of its Subsidiaries or the sale of any material assets of the Company or any
of its Subsidiaries;
(g) the authorization of any reclassification or recapitalization of
the outstanding Membership Units of the Company or any other Consolidated Group
Securities;
(h) engagement by the Company or any of its Subsidiaries in any
business other than the business now conducted or contemplated by the Company or
a business or businesses similar thereto or reasonably compatible therewith;
8
<PAGE>
(i) the alteration, modification or amendment of this Agreement; or
(j) the application by the Company for or consent by it to the
appointment of a receiver, trustee, custodian or liquidator of it or any of its
property, (ii) the admission in writing by the Company of its inability to pay
its debts as they mature, (iii) the making by the Company of a general
assignment for the benefit of creditors, or (iv) the filing by the Company of a
voluntary petition in bankruptcy, or a petition or an answer seeking
reorganization or an arrangement with creditors, or any other action by the
Company to take advantage of any bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation laws or statutes, or an answer
from the Company admitting the material allegations of a petition filed against
it in any proceeding under any such law.
3.5 Limitation on Liability of Members. Except as otherwise provided in the
Act, no Member of the Company shall be obligated personally for any debt,
obligation or liability of the Company or of any other Member or otherwise have
any personal recourse hereunder, whether arising in contract, tort or otherwise,
solely by reason of being a Member. Except as expressly set forth in this
Agreement, no Member shall have any fiduciary or other duty to another Member
with respect to the business and affairs of the Company, and no Member shall be
liable to the Company or any other Member for acting in good faith reliance upon
the provisions of this Agreement. No Member shall have any responsibility to
restore any negative balance in its Capital Account or to contribute to or in
respect of the liabilities or obligations of the Company or return distributions
made by the Company except as required by this Agreement, the Act or other
applicable law; provided, however, that Members are responsible for their
failure to make required Capital Contributions in accordance with Section 5.1.
3.6 Authority. Except as otherwise expressly provided herein, in all
matters relating to or arising out of the conduct or the operation of the
Company, the decision of the Members (acting by vote of holders of more than
fifty percent (50%) in interest of the Common Units) or the Majority Member, as
applicable, shall be the decision of the Company. The Company may employ one or
more Persons from time to time, and such Persons, in their capacity as Officers
or employees of the Company, may take part in the control and management of the
business of the Company to the extent such authority and power to act for or on
behalf of the Company has been delegated to them by the Members or the Majority
Member, as applicable.
3.7 Withdrawals; Termination. No Member shall have any right to resign or
withdraw from the Company without the consent of the Members or the Majority
Member, as applicable, or to receive any distribution on its Membership Units or
the repayment of its Capital Contributions except as provided in Article V
hereof.
9
<PAGE>
3.8 No Appraisal Rights. No Member shall have any right to have its
interest in the Company appraised and paid out under the circumstances provided
in Section 18-210 of the Act or any other circumstances.
3.9 Compliance with Securities Laws and Other Laws and Obligations. Each
Member hereby represents and warrants to the Company and acknowledges that (a)
it has such knowledge and experience in financial and business matters that it
is capable of evaluating the merits and risks of an investment in the Company
and making an informed investment decision with respect thereto, (b) it is able
to bear the economic and financial risk of an investment in the Company for an
indefinite period of time and understands that it has no right to withdraw and
have its interest repurchased by the Company, (c) it is acquiring an interest in
the Company for investment only and not with a view to, or for resale in
connection with, any distribution to the public or public offering thereof, and
(d) it understands that the interests in the Company have not been registered
under the securities laws of any jurisdiction and cannot be disposed of unless
they are subsequently registered and/or qualified under applicable securities
laws or pursuant to valid exemptions from such registration/qualification
requirements and the provisions of this Agreement have been complied with.
ARTICLE IV - MANAGEMENT
4.1 Management.
(a) Except as provided in Section 4.1(b) hereof, the Company shall be
managed by the Members. No action may be taken by any Member to bind the Company
without the prior consent of Members holding more than fifty percent (50%) in
interest of the Common Units.
(b) If any Member shall own more than fifty percent (50%) in interest
of the Common Units of the Company (the "Majority Member"), management and
control of the business of the Company shall be vested exclusively in the
Majority Member for so long as such Member holds more that fifty percent (50%)
in interest of the Common Units, and such Majority Member shall have exclusive
power and authority, in the name of and on behalf of the Company, to perform all
acts and do all things which, in its sole discretion, it deems necessary or
desirable to conduct the business of the Company.
The Majority Member shall, subject to all applicable provisions of this
Agreement, be authorized in the name and on behalf of the Company: (i) to enter
into, execute, amend, supplement, acknowledge and deliver any and all contracts,
agreements, leases or other instruments for the operation of the Company's
business; and (ii) in general to do all things and execute all documents
determined by it to be necessary or appropriate to conduct the business of the
Company as more fully set forth in Section 2.2 hereof or as
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provided by law, or to protect and preserve the Company's assets. The Majority
Member may delegate any or all of the foregoing powers. The Majority Member is
an agent of the Company for the purpose of the Company's business. Any action
taken by the Majority Member, and the signature of the Majority Member on any
agreement, contract, instrument or other document on behalf of the Company,
shall be sufficient to bind the Company and shall conclusively evidence the
authority of the Majority Member and the Company with respect thereto.
(c) The Members acting pursuant to Section 4.1(a) or the Majority
Member, as applicable, shall be the "manager" (within the meaning of the Act) of
the Company, and each shall have the benefits and protections accorded
"managers" under the Act. The Members acting pursuant to Section 4.1(a) or the
Majority Member, as applicable, shall devote such time to the business and
affairs of the Company as is reasonably necessary for the performance of their
duties, but shall not be required to devote full time to the performance of such
duties and may delegate their responsibilities as provided in this Agreement.
The Majority Member shall not be personally liable to the Company or to its
Members for breach of any duty that does not involve: (i) a breach of the duty
of loyalty to the Company or its Members; (ii) an act or omission not in good
faith or which involves intentional misconduct or a knowing violation of law; or
(iii) a transaction from which the Majority Member derived an improper personal
benefit.
4.2 Reliance by Third Parties. Any person dealing with the Company or any
Member may rely upon a certificate signed by the Majority Member or any Officer
as to (i) the identity of any other Member; (ii) any factual matters relevant to
the affairs of the Company; (iii) the persons who are authorized to execute and
deliver any document on behalf of the Company; or (iv) any action taken or
omitted by the Company or any Member. The Majority Member shall not be
personally liable to the Company or to its Members for breach of any duty that
does not involve: (i) a breach of the duty of loyalty to the Company or its
other Members; (ii) an act or omission not in good faith or which involves
intentional misconduct or a knowing violation of law; or (iii) a transaction
from which the Majority Member derived an improper personal benefit.
4.3 Officers. The Members or the Majority Member, as applicable, may
designate employees of the Company as officers of the Company (the "Officers")
as they deem necessary or desirable to carry on the business of the Company and
the Members or the Majority Member, as applicable, may delegate to such Officers
such power and authority as the Members or the Majority Member, as applicable,
deem advisable. Any Officer may hold two or more offices of the Company. The
initial Officers of the Company shall be Jamie Kellner (Chairman and Chief
Executive Officer), Douglas Gealy (President and Chief Operating Officer) and
Thomas Allen (Executive Vice President and Chief Financial Officer). New offices
may be created and filled by the Members or the Majority Member, as applicable.
Each Officer shall hold office until his or her successor is designated by the
Members or the Majority Member, as applicable, or until his or her
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earlier death, resignation or removal. Any Officer may resign at any time upon
written notice to the Members or the Majority Member, as applicable. Any Officer
may be removed by the Members or the Majority Member, as applicable, with or
without cause at any time. A vacancy in any office occurring because of death,
resignation, removal or otherwise, may, but need not, be filled by the Members
or the Majority Member, as applicable. The Officers are not "managers" (within
the meaning of the Act) of the Company.
ARTICLE V - CAPITAL CONTRIBUTIONS; CAPITAL
ACCOUNTS AND ALLOCATIONS AND DISTRIBUTIONS
5.1 Capital Contributions. The Initial Member has made as of the date
hereof the Capital Contribution to the Company specified on Schedule A attached
hereto. Each New Member shall make the Capital Contribution to the Company
specified in such Member's Subscription Agreement as of the date of admission of
such New Member as a Member of the Company. Except as approved by the Members or
the Majority Member, as applicable, or as set forth on Schedule A or in a
Member's Subscription Agreement, no Member shall be entitled or required to make
any Capital Contribution or loan or advance to the Company; provided, however,
that the Company may, subject to the other terms of this Agreement, borrow from
its Members as well as from banks or other lending institutions to finance its
working capital or the acquisition of assets upon such terms and conditions as
shall be approved by the Members or the Majority Member, as applicable, and any
such loans by Members shall not be considered Capital Contributions or reflected
in their Capital Accounts. The agreed value of all non-cash Capital
Contributions made by Members shall be set forth on Schedule A or in such
Member's Subscription Agreement. No Member shall be entitled to any interest or
compensation with respect to its Capital Contributions or any services rendered
on behalf of the Company except as specifically provided in this Agreement. No
Member shall have any liability for the repayment of the Capital Contributions
of any other Member and shall look only to the assets to the Company for return
of its Capital Contributions.
5.2 Capital Accounts and Allocations.
(a) Capital Accounts. A separate capital account (a "Capital Account")
shall be established and maintained for each Member, which shall initially be
equal to the Capital Contribution of such Member as set forth on Schedule A
hereto. Such Capital Accounts shall be maintained in accordance with Section
1.704-1(b)(2)(iv) of the Treasury Regulations, and this Section 5.2 shall be
interpreted and applied in a manner consistent with said Section of the Treasury
Regulations. The Capital Accounts shall be maintained for the sole purpose of
allocating items of income, gain, loss and deduction among the Members and shall
have no effect on the amount of any distributions to any Members in liquidation
or otherwise. The amount of all distributions to Members shall be determined
pursuant to Sections 5.3, 5.4 and 5.5.
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(b) Allocation of Profits and Losses. All items of income, gain, loss
and deduction as determined for book purposes shall be allocated among the
Members and credited or debited to their respective Capital Accounts in
accordance with Treasury Regulations Section 1.704-1(b)(2)(iv), so as to ensure
to the maximum extent possible (i) that such allocations satisfy the economic
effect equivalence test of Treasury Regulations Section 1.704-1(b)(2)(ii)(i) (as
provided hereinafter) and (ii) that all allocations of items that cannot have
economic effect (including credits and nonrecourse deductions) are allocated to
the Members in proportion to their membership interests unless otherwise
required by Code Section 704(b) and the Treasury Regulations promulgated
thereunder. To the extent possible, items that can have economic effect shall be
allocated in such a manner that the balance of each Member's Capital Account at
the end of any fiscal year (increased by such Member's "share of partnership
minimum gain" as defined in Treasury Regulations Section 1.704-2) would be
positive to the extent of the amount of cash that such Member would receive (or
would be negative to the extent of the amount of cash that such Member should be
required to contribute to the Company) if the Company sold all of its property
for an amount of cash equal to the book value (as determined pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv)) of such property (reduced, but
not below zero, by the amount of nonrecourse debt to which such property is
subject) and all of the cash of the Company remaining after payment of all
liabilities (other than nonrecourse liabilities) of the Company were distributed
in liquidation immediately following the end of such fiscal year in accordance
with Section 5.3. Except to the extent otherwise required by the Code, the
"traditional method" provided for in Treasury Regulations Section 1.704-3(b)
shall apply to all tax allocations governed by Code Section 704(c) and all
"reverse Section 704(c) allocations."
(c) Other Allocations. The Members or the Majority Member, as
applicable, may adjust the Capital Accounts of the Members to reflect
reevaluations of the Company property whenever the adjustment would be permitted
under Treasury Regulations Section 1.704-1(b)(2)(iv)(f). In the event that the
Capital Accounts of the Members are so adjusted, (i) the Capital Accounts of the
Members shall be adjusted in accordance with Treasury Regulations Section
1.704l(b)(2)(iv)(g) for allocations of depreciation, depletion, amortization and
gain or loss, as computed for book purposes, with respect to such property and
(ii) the Members' distributive shares of depreciation, depletion, amortization
and gain or loss, as computed for tax purposes, with respect to such property
shall be determined so as to take account of the variation between the adjusted
tax basis and book value of such property in the same manner as under Section
704(c) of the Code. In the event that Code Section 704(c) applies to Company
property, the Capital Accounts of the Members shall be adjusted in accordance
with Treasury Regulations Section 1.704-1(b)(2)(iv)(g) for allocations of
depreciation, depletion, amortization and gain and loss, as computed for book
purposes, with respect to such property. In applying clause (ii) of the second
preceding sentence and all of the preceding sentence, the provisions of Code
Section 704(b) shall apply.
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5.3 Distributions. Subject to (i) the terms of the Act, (ii) any agreements
of the Company or any of its Affiliates with respect to indebtedness for money
borrowed to which the Company may from time to time be subject, and (iii) except
in the case of distributions pursuant to subsection (a) below, the prior written
consent of holders of a majority in interest of the Common Units, all funds of
the Company which are available for distribution (as determined by the Members
or the Majority Member, as applicable, in their discretion) shall be distributed
as follows:
(a) First, within one hundred and twenty (120) days after the end of
each taxable year during which ACME Televisions Holdings, LLC ("Holdings") shall
have any direct or indirect ownership interest in the Company, there shall be
distributed to each Member an amount equal to the product of (i) the Tax Rate
and (ii) the difference between (x) the amount of such Member's Taxable Income
with respect to such taxable year and (y) the cumulative amount of such Member's
Taxable Loss, if any, from all prior taxable years, but only to the extent such
Taxable Loss on a cumulative basis exceeds Taxable Income for all prior taxable
years on a cumulative basis (the "Tax Distributions"); provided however, that
such distribution shall in all events be sufficient to allow Holdings to make
the distributions required under Section 5.3(a) of the Limited Liability Company
Agreement of Holdings; and
(b) Second, pro rata to all Members in accordance with their
respective Distribution Percentages.
5.4 Distributions Upon Dissolution. Proceeds from a sale of all or
substantially all of the assets of the Company and amounts available upon
dissolution, after payment of, or adequate provision for, the debts and
obligations of the Company, including the expenses of its liquidation and
dissolution, shall be distributed and applied in the following priorities:
(a) First, to fund reserves as deemed reasonably necessary by the
Members, the Majority Member, as applicable, or the Liquidating Trustee for any
contingent, conditional or unmatured liabilities or other obligations of the
Company, which such reserves (i) may be paid to a bank (or other third party),
to be held in escrow for the purpose of paying any such contingent, conditional
or unmatured liabilities or other obligations, and (ii) shall at the expiration
of such period(s) as the Members, the Majority Member, as applicable, or
Liquidating Trustee may reasonably deem advisable, shall be distributed to the
Members in accordance with Section 5.3; and
(b) Second, in accordance with Section 5.3.
If any assets of the Company are to be distributed in kind in
connection with such liquidation, such assets shall be distributed on the basis
of their fair market value net
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of any liabilities encumbering such assets and, to the greatest extent possible,
shall be distributed pro-rata in accordance with the total amounts to be
distributed to each Member. Solely for purposes of Section 5.2 and immediately
prior to the effectiveness of any such distribution-in-kind, each item of gain
and loss that would have been recognized by the Company had the property being
distributed been sold at fair market value shall be determined and allocated to
those persons who were Members immediately prior to the effectiveness of such
distribution in accordance with Section 5.2.
5.5 Distribution Upon Withdrawal. No Member shall be entitled to any
distribution or payment with respect to its Membership Units upon the
resignation or withdrawal of such Member.
5.6 Tax Matters Partner. ACME Intermediate Holdings, LLC is hereby
designated as the initial "Tax Matters Partner" of the Company for purposes of
Section 6231(a)(7) of the Code, and such Tax Matters Partner shall have the
power to manage and control, on behalf of the Company, any administrative
proceeding at the Company level with the Internal Revenue Service relating to
the determination of any item of Company income, gain, loss, deduction or credit
for federal income tax purposes. The Members or the Majority Member, as
applicable, may at any time hereafter designate a new Tax Matters Partner;
provided, however, that only a Member may be designated as the Tax Matters
Partner of the Company.
(a) Partnership Status. The Company will elect to be treated as a
pass-through entity for purposes of federal and state income tax, and each
Member covenants that it will make no election, declaration or statement on or
in any tax return, tax filing, or any book or record maintained by it which is
inconsistent with or detrimental to the Company's ongoing maintenance of
partnership tax status (or as a single-member entity, if applicable).
(b) Income Tax Compliance. The Tax Matters Partner shall prepare or
cause to be prepared and filed on behalf of the Company, when and as required by
applicable law, all federal, state and local income tax information returns or
requests for extensions thereof. Not less than thirty (30) days prior to the due
date (including extensions) for any return (but not later than August 15 of each
year), the Tax Matters Partner shall submit to each Member a copy of the return
as proposed for review and a schedule showing the Member's allocable share of
the Company's tax attributes ("Tax Attributes") sufficient to allow such Member
to include such Tax Attributes in its federal income tax return. Each Member
shall provide to the Tax Matters Partner, when and as requested, all information
concerning the affairs of such Member as may be reasonably required to permit
the filing of such returns.
(c) Tax Elections. The Tax Matters Partner shall make the following
tax elections on behalf of the Company:
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(i) Unless required to adopt a different taxable year pursuant to
Section 706(b) of the Code, adopt the calendar year as the annual accounting
period;
(ii) Adopt the accrual method of accounting;
(iii) Deduct interest expense and taxes attributable to the
construction or installation of real and personal property improvements to the
fullest extent permitted by the Code;
(iv) Compute the allowance for depreciation under the most
accelerated tax depreciation method and using the shortest life and lowest
salvage value authorized by applicable law, consistent with the election
provided for in the following clause, with respect to all depreciable assets;
(v) If allowed by the Code, and to the maximum extent allowable,
elect to take available investment tax credit on the full basis of each asset;
and
(vi) Make such other elections as the Tax Matters Partner shall
have been directed in writing by the Members or the Majority Member, as
applicable, to make. The requirement to make any of the elections set forth
above is predicated upon the assumption that current federal income tax law will
continue in force. If any legislative change is made in the Code or any other
tax statutes or by the IRS in regulations and other pronouncements or by the
courts in case law affecting any of such elections so as to materially alter the
economic result of the required election, the Tax Matters Partner shall make
such election in respect of the item so affected as directed by the Members or
the Majority Member, as applicable.
(d) Code Section 754 Election. In connection with any transfer or
assignment of any Membership Units, or any distribution with respect to which a
Member recognizes gain under Code section 731(a), the Members or the Majority
Member, as applicable, shall, upon the written request of any Member, cause the
Company to file an election under Code section 754 and the Treasury Regulations
thereunder to adjust the basis of the Company assets under Code Section 734(b)
or 743(b) and a corresponding election under the applicable sections of state
and local law.
ARTICLE VI - TRANSFERS OF INTERESTS
6.1 Restrictions on Transfers. No Membership Units of the Company may be
Transferred, nor may any Member offer to Transfer, and no Transfer by a Member
shall be binding upon the Company or any Member unless such Transfer complies
with the provisions of this Article VI and the Company receives an executed copy
of the documents effecting such Transfer.
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No Transfer shall be permitted if such Transfer would (i) violate the
registration provisions of the Securities Act or the securities laws of any
applicable jurisdiction, (ii) cause the Company to become subject to regulation
as an "investment company" under the Investment Company Act, and the rules and
regulations promulgated thereunder, (iii) result in the termination of any
material contract to which the Company is a party and which is material, or (iv)
result in the treatment of the Company as an association taxable as a
corporation or as a "publicly traded partnership" for federal income tax
purposes. The Company may require reasonable evidence as to the foregoing,
including, without limitation, a favorable opinion of counsel.
Notwithstanding the foregoing, the pledge of the Membership Units to a
lender or lenders of the Company pursuant to a security and pledge agreement or
a substantially similar agreement and such lender(s)' exercise of its rights
thereunder shall be deemed to be a permitted transfer hereunder.
6.2 Substitute Members. If a Transferee of Membership Units does not become
(and until any such Transferee becomes) a substitute Member in accordance with
the provisions of Section 6.1 hereof, such Person shall not be entitled to
exercise or receive any of the rights, powers or benefits of a Member other than
the right to receive distributions which the assigning Member has Transferred to
such Person. The Company shall admit as a substitute Member any Person that
acquires Membership Units by Transfer from any Member pursuant to Section 6.1
hereof, but only upon the receipt of an executed instrument satisfactory to the
Company whereby such assignee becomes a party to this Agreement as a Member.
6.3 Allocation of Distributions Between Assignor and Assignee. Upon the
Transfer of Membership Units pursuant to this Article and unless the assignor
and assignee otherwise agree and so direct the Company in a written statement
signed by both the assignor and assignee (a) distributions pursuant to Article V
shall be made to the Person owning such Membership Units at the date of
distribution and (b) the assignee shall succeed to a pro-rata (based on the
percentage of such assignor's Membership Units Transferred) portion of the
assignor's Capital Account with respect to such Membership Units.
Any Membership Units Transferred shall remain subject to the provisions of
this Agreement and the transferee shall have entered into an enforceable written
agreement providing that all Membership Units so Transferred shall continue to
be subject to all provisions of this Agreement as if such Membership Units were
still held by the transferring Member, and provided further that such permitted
transferee shall not be permitted to make any further Transfer without complying
with the provisions of this Agreement. Anything to the contrary in this
Agreement notwithstanding, transferees permitted hereunder shall take any
Membership Units so Transferred subject to all obligations under
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this Agreement as if such Membership Units were still held by the transferring
Member whether or not they so expressly agree.
6.4 Permitted Transfers. Subject to the provisions of Sections 6.1(a) and
6.2, holders of Common Units may Transfer such Common Units to any other holder
of Common Units or to a partner or Affiliate of such Member or to any other
investment fund or other entity for which such Member and/or one or more
partners or Affiliates thereof, directly or indirectly through one or more
intermediaries, serve as general partner or manager or in a like capacity.
ARTICLE VII - INDEMNIFICATION
7.1 Right to Indemnification. Except as limited by law and subject to the
provisions of this Article, the Company shall indemnify each Indemnified Party
from and against any and all Losses in any way related to or arising out of this
Agreement, the business of the Company or the action or inaction of such Person
hereunder (including, without limitation, the actions or inactions of the
Members and the other Indemnified Parties pursuant to Article IX hereof upon
dissolution of the Company), which may be imposed on, incurred by or asserted at
any time against any such Indemnified Party, except that no indemnification
shall be provided for any Indemnified Party regarding any matter as to which it
shall be finally determined that such Indemnified Party did not act in good
faith and in the reasonable belief that its action was in the best interests of
the Company, or with respect to a criminal matter, that it had reasonable cause
to believe that its conduct was unlawful. Subject to the foregoing limitations,
such indemnification may be provided by the Company with respect to Losses in
connection with which it is claimed that such Indemnified Party received an
improper personal benefit by reason of its position, regardless of whether the
claim arises out of the Indemnified Party's service in such capacity, except for
matters as to which it is finally determined that an improper personal benefit
was received by such Indemnified Party. The indemnification contained in this
Article VII shall survive termination of this Agreement.
7.2 Award of Indemnification. The determination of whether the Company is
authorized to indemnify any Indemnified Party hereunder and any award of
indemnification shall be made in each instance by the Members; provided,
however, that as to any matter disposed of by a compromise payment, pursuant to
a consent decree or otherwise, no indemnification, either for said payment or
for any other Losses, shall be provided unless there has been obtained an
opinion in writing of legal counsel to the effect that the Person subject to
indemnification hereunder appears to have acted in good faith and that such
indemnification would not protect such Person against any liability to the
Company or the Members to which he, she or it would otherwise be subject by
reason of gross negligence, willful malfeasance or fraud in the conduct of his,
her or its office or actions not taken in good faith by such Person. The Company
shall be obliged to pay indemnification applied for by any Indemnified Party
unless there is an adverse
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determination (as provided above) within forty-five (45) days after the
application. If indemnification is denied, the applicant may seek an independent
determination of its right to indemnification by a court, and in such event, the
Company shall have the burden of proving that the applicant was ineligible for
indemnification under this Article. Notwithstanding the foregoing, in the case
of a proceeding by or in the right of the Company which an Indemnified Party is
adjudged liable to the Company, indemnification hereunder shall be provided only
upon a determination by a court having jurisdiction that in view of all the
circumstances of the case, the Indemnified Party is fairly and reasonably
entitled to indemnification for such Losses as the court shall deem proper.
7.3 Successful Defense. Notwithstanding any contrary provisions of this
Article, if any Indemnified Party has been wholly successful on the merits in
the defense of any action, suit or proceeding in which it was involved by reason
of its position with the Company or as a result of serving in such capacity
(including termination of investigative or other proceedings without a finding
of fault on the part of such Indemnified Party), such Indemnified Party shall be
indemnified by the Company against all Losses incurred by such Indemnified Party
in connection therewith.
7.4 Advance Payments. Except as limited by law, Losses incurred by an
Indemnified Party in defending any action, suit or proceeding, including a
proceeding by or in the right of the Company, shall be paid by the Company to
such Indemnified Party in advance of final disposition of the proceeding upon
receipt of its written undertaking to repay such amount if such Indemnified
Party is determined pursuant to this Article VII or adjudicated to be ineligible
for indemnification, which undertaking shall be an unlimited general obligation
but need not be secured and may be accepted without regard to the financial
ability of such Indemnified Party to make repayment; provided, however, that no
such advance payment of issues shall be made if it is determined pursuant to
Section 7.2 of this Article on the basis of the circumstances known at the time
(without further investigation) that such Indemnified Party is ineligible for
indemnification.
7.5 Insurance. The Company shall have power to purchase and maintain
insurance on behalf of any Indemnified Party against any liability or cost
incurred by such Person in any such capacity or arising out of its status as
such, whether or not the Company would have power to indemnify against such
liability or cost.
7.6 Heirs and Personal Representatives. The indemnification provided by
this Article shall inure to the benefit of the heirs and personal
representatives of the Indemnified Parties.
7.7 Non-Exclusivity. The provisions of this Article shall not be construed
to limit the power of the Company to indemnify the Members, Officers, employees
or agents to the fullest extent permitted by law or to enter into specific
agreements, commitments or arrangements for indemnification permitted by law.
The absence of any express provision
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for indemnification herein shall not limit any right of indemnification existing
independently of this Article.
7.8 Amendment. The provisions of this Article may be amended or repealed in
accordance with Section 10.5; provided, however, that no amendment or repeal of
such provisions that adversely affects the rights of the Members under this
Article with respect to acts or omissions occurring at any time prior to such
amendment or repeal, shall apply to any Member without such Member's consent.
ARTICLE VIII - CONFLICTS OF INTEREST
8.1 Transactions with Interested Persons; Conflicts.
(a) Unless entered into in bad faith, no contract or transaction
between the Company and one or more of its Members or any other Indemnified
Party, or between the Company and any other Person in which one or more of its
Members or any other Indemnified Party has a financial interest or is a
director, manager or officer, shall be voidable solely for this reason if such
contract or transaction is fair and reasonable to the Company; and no Member or
other Indemnified Party interested in such contract or transaction, because of
such interest, shall be liable to the Company or to any other Person or
organization for any loss or expense incurred by reason of such contract or
transaction or shall be accountable for any gain or profit realized from such
contract or transaction.
(b) Unless otherwise expressly provided herein, (i) whenever a
conflict of interest exists or arises between the Company, its Members and/or
the other Indemnified Parties or (ii) whenever this Agreement provides that any
such Person shall act in a manner that is, or provide terms that are, fair and
reasonable to the Company or any Member, such Person shall resolve such conflict
of interest, taking such action or providing such terms, considering in each
case the relative interest of each party (including its own interest) to such
conflict, agreement, transaction or situation and the benefits and burdens
relating to such interests, any customary or acceptable industry practices, and
any applicable generally acceptable accounting practices or principles. In the
absence of bad faith by the Member or other Indemnified Party, as the case may
be, the resolution, action or term so made, taken or provided by such Person
shall not constitute a breach of this Agreement or any other agreement
contemplated herein or of any duty or obligation of such Person at law or in
equity or otherwise.
8.2. Business Opportunities.
Members may engage in or possess an interest in other business
ventures of any nature, and neither the Company nor any other Member shall have
any rights by virtue of this Agreement in or to any such venture or the income
or profits derived therefrom, and
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the pursuit of any such venture, even if competitive with the activities of the
Company, shall not be deemed improper or wrongful. No Member shall be obligated
to present any particular investment or business opportunity to the Company even
if such opportunity is of a nature which could be taken by the Company.
ARTICLE IX - DISSOLUTION, LIQUIDATION, AND
TERMINATION
9.1 No Dissolution. The Company shall not be dissolved by the admission of
additional Members, the withdrawal of a Member or the written consent of all
Members, but shall continue to exist in perpetuity, except in accordance with
the terms of this Agreement. Upon the death, retirement, resignation, expulsion,
Bankruptcy or dissolution of any Member the Company shall not dissolve and its
affairs shall not be wound up except as set forth in Section 9.2 below.
9.2 Events Causing Dissolution. The Company shall be dissolved and its
affairs wound up upon the occurrence of any of the following events:
(a) if a Majority Member shall be acting as a Manager under Section
6.2 hereof, the Bankruptcy, dissolution, death, retirement, or resignation of
the Majority Member; unless the Company is continued upon the written consent of
a majority of the remaining Members, such consent to be given within ninety (90)
days following the occurrence of such event;
(b) if there shall be no Majority Member acting as a Manager under
Section 6.2 hereof, the Bankruptcy, dissolution, death, retirement, or
resignation of any Member; unless the Company is continued upon the written
consent of a majority of the remaining Members, such consent to be given within
ninety (90) days following the occurrence of such event;
(c) the entry of a decree of judicial dissolution under Section 18-802
of the Act.
9.3 Notice of Dissolution. Upon the dissolution of the Company, the Member
or the other Person or Persons (the "Liquidating Trustee") appointed by the
Members or the Majority Member, as applicable, to carry out the winding up of
the Company, shall promptly notify the Members of such dissolution.
9.4 Liquidation. Upon dissolution of the Company, the Liquidating Trustee
shall proceed diligently to liquidate the Company and wind up its affairs and to
make final distributions as provided in Section 5.4 hereof and in the Act. The
costs of dissolution and liquidation shall be borne as an expense of the
Company. Until final distribution, the
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Liquidating Trustee shall continue to operate the Company properties with all of
the power and authority of the Members or the Majority Member, as applicable. As
promptly as possible after dissolution and again after final liquidation, the
Liquidating Trustee shall cause an accounting to be made by a firm of
independent public accountants of the Company's assets, liabilities and
operations.
9.5 Certificate of Cancellation. On completion of the distribution of
Company assets as provided herein, the Company shall be terminated, and the
Members or the Majority Member, as applicable, (or such other Person or Persons
as the Act may require or permit) shall file a Certificate of Cancellation with
the Secretary of State of the State of Delaware under the Act, cancel any other
filings made pursuant to Sections 2.1, 2.2 and 2.4, and take such other actions
as may be necessary to terminate the existence of the Company.
ARTICLE X - GENERAL PROVISIONS
10.1 Offset. Whenever the Company is to pay any sum to any Member, any
amounts that Member owes the Company may be deducted from that sum before
payment. All amounts so deducted shall nevertheless be treated as distributions
for purposes of Sections 5.3, 5.4 and 5.5 hereof.
10.2 Notices. Except as expressly set forth to the contrary in this
Agreement, all notices, requests, or consents provided for or permitted to be
given under this Agreement must be in writing and shall be given either by
registered or certified mail, addressed to the recipient, with return receipt
requested, or by delivering the writing to the recipient in Person, by courier,
or by facsimile transmission; and a notice, request, or consent given under this
Agreement is effective upon receipt or three days after the date mailed,
whichever is sooner. All notices, requests, and consents to be given to a Member
must be sent to or delivered at the addresses given for that Member on Schedule
A, or such other address as that Member may specify by written notice to the
other Members and the Company. Any notice, request, or consent to be given to
the Company must be given to the Members or the Majority Member, as applicable,
at the address of the principal office of Company specified in Section 2.3.
Whenever any notice is required to be given by law, the Certificate or this
Agreement, a written waiver thereof, signed by the Person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
10.3 Entire Agreement. This Agreement, together with each Member's
Subscription Agreement, constitutes the entire agreement of the Members relating
to the Company and supersedes all prior contracts or agreements with respect to
the Company, whether oral or written.
22
<PAGE>
10.4 Amendment or Modification; Terms. This Agreement, including any
Schedule hereto, may be amended from time to time, in whole or in part, by an
instrument in writing signed in accordance with Section 3.4 hereof. Copies of
each such amendment shall be delivered to each Member at least thirty (30) days
prior to the effective date of such amendment; provided, however, in the case of
any amendment that the Members or the Majority Member, as applicable, determine
is necessary or appropriate to prevent the Company from being treated as a
publicly traded partnership taxed as a corporation under section 7704 of the
Code, the amendment shall be effective on the date provided in the instrument
containing the terms of such amendment. Nothing contained in this Agreement
shall permit the amendment of this Agreement to impair the exemption from
personal liability of the officers, employees and agents of the Company or
Members or to permit assessments upon the Members.
10.5 Binding Effect. Subject to the restrictions on Transfers set forth in
this Agreement, this Agreement is binding on and inures to the benefit of the
parties and their respective heirs, legal representatives, successors and
assigns.
10.6 Governing Law; Severability. This Agreement is governed by and shall
be construed in accordance with the law of the State of Delaware, exclusive of
its conflict-of-laws principles. In the event of a direct conflict between the
provisions of this Agreement and any provision of the Certificate, or any
mandatory provision of the Act, the applicable provision of the Certificate or
the Act shall control. If any provision of this Agreement or the application
thereof to any Person or circumstance is held invalid or unenforceable to any
extent, the remainder of this Agreement and the application of that provision
shall be enforced to the fullest extent permitted by law.
10.7 Further Assurances. In connection with this Agreement and the
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions, as requested by the Members or the Majority
Member, as applicable.
10.8 Waiver of Certain Rights. Each Member irrevocably waives any right it
may have to maintain any action for dissolution of the Company or for partition
of the property of the Company.
10.9 Third-Party Beneficiaries. Except with respect to the Lenders, who are
expressly intended to be third-party beneficiaries of this Agreement, there
shall be no third-party beneficiaries of this Agreement.
10.10 Failure to Pursue Remedies. The failure of any party to seek redress
for violation of, or to insist upon the strict performance of, any provision of
this Agreement
23
<PAGE>
shall not prevent a subsequent act, which would have originally constituted a
violation, from having the effect of any original violation.
10.11 Cumulative Remedies. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any party
shall not preclude or waive its right to use any or all other remedies. Said
rights and remedies are given in addition to any other right the parties may
have by law, statute, ordinance or otherwise.
10.12 Notice to Members of Provisions of this Agreement. By executing this
Agreement, each Member acknowledges that such Member has actual notice of (a)
all of the provisions of this Agreement, including, without limitation, the
restrictions on the Transfer of Membership Units set forth in Article VI and the
limitations on participation of Members in the management of the Company set
forth in Article III, and (b) all of the provisions of the Certificate. Each
Member hereby agrees that this Agreement constitutes adequate notice of all such
provisions, and each Member hereby waives any requirement that any further
notice thereunder be given.
10.13 Interpretation. For the purposes of this Agreement, terms not defined
in this Agreement shall be defined as provided in the Act; and all nouns,
pronouns and verbs used in this Agreement shall be construed as masculine,
feminine, neuter, singular, or plural, whichever shall be applicable. Titles or
captions of Articles and Sections contained in this Agreement are inserted as a
matter of convenience and for reference, and in no way define, limit, extend or
describe the scope of this Agreement or the intent of any provision hereof.
10.14 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all signing parties had signed the same
document, and all counterparts shall be construed together and shall constitute
the same instrument.
[END OF TEXT]
24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date set forth above.
ACME TELEVISION HOLDINGS OF UTAH, LLC
By /s/ Douglas E. Gealy
----------------------------------------
Name: Douglas E. Gealy
Title: President & COO
ACME TELEVISION, LLC
By /s/ Douglas E. Gealy
----------------------------------------
Name: Douglas E. Gealy
Title: President & COO
ACME SUBSIDIARY HOLDINGS II, LLC
By /s/ Douglas E. Gealy
----------------------------------------
Name: Douglas E. Gealy
Title: President & COO
25
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ACME TELEVISION HOLDINGS OF UTAH, LLC
Schedule A
Member No. of Units Capital Contribution
ACME Television, LLC 199 $995.00
ACME Subsidiary Holdings III, LLC 1 $ 5.00
CERTIFICATE OF FORMATION
OF
ACME TELEVISION HOLDINGS OF NEW MEXICO, L.L.C.
A LIMITED LIABILITY COMPANY
FIRST: The name of the limited liability company is:
ACME TELEVISION HOLDINGS OF NEW MEXICO, L.L.C.
SECOND: Its registered office in the State of Delaware is to be
located at 1013 Centre Road, in the City of Wilmington, County of
New Castle, 19805, and its registered agent at such address is
CORPORATION SERVICE COMPANY.
IN WITNESS WHEREOF, the undersigned, being the individual forming
the Company, has executed, signed and acknowledged this
Certificate of Formation this nineteenth day of September, A.D.
1997.
/s/ Jonathan P. Levi
--------------------------
Authorized Person
Jonathan P. Levi
________________________________________________________________________________
________________________________________________________________________________
ACME TELEVISION HOLDINGS OF NEW MEXICO, LLC
a Delaware limited liability company
LIMITED LIABILITY COMPANY AGREEMENT
Dated September 24, 1997
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PAGE
ARTICLE I - DEFINED TERMS 1
ARTICLE II - ORGANIZATION AND POWERS 5
2.1 Organization 5
2.2 Purposes and Powers 5
2.3 Principal Place of Business 6
2.4 Qualification in Other Jurisdictions 6
2.5 Fiscal Year 6
ARTICLE III - MEMBERS 6
3.1 Membership Units 6
3.2 Issuance of Membership Units; Admission of New Members 7
3.3 Voting Rights 8
3.4 Restrictions 8
3.5 Limitation on Liability of Members 9
3.6 Authority 9
3.7 Withdrawals; Termination 9
3.8 No Appraisal Rights 10
3.9 Compliance with Securities Laws and Other Laws and Obligations 10
ARTICLE IV - MANAGEMENT 10
4.1 Management 10
4.2 Reliance by Third Parties 11
4.3 Officers 11
ARTICLE V - CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS AND
ALLOCATIONS AND DISTRIBUTIONS 12
5.1 Capital Contributions 12
5.2 Capital Accounts and Allocations 12
5.3 Distributions 14
5.4 Distributions Upon Dissolution 14
5.5 Distribution Upon Withdrawal 15
5.6 Tax Matters Partner 15
ARTICLE VI - TRANSFERS OF INTERESTS 16
6.1 Restrictions on Transfers 16
6.2 Substitute Members 17
6.3 Allocation of Distributions Between Assignor and Assignee 17
6.4 Permitted Transfers 18
<PAGE>
ARTICLE VII - INDEMNIFICATION 18
7.1 Right to Indemnification 18
7.2 Award of Indemnification 18
7.3 Successful Defense 19
7.4 Advance Payments 19
7.5 Insurance 19
7.6 Heirs and Personal Representatives 19
7.7 Non-Exclusivity 19
7.8 Amendment 20
ARTICLE VIII - CONFLICTS OF INTEREST 20
8.1 Transactions with Interested Persons; Conflicts 20
8.2 Business Opportunities 20
ARTICLE IX - DISSOLUTION, LIQUIDATION, AND TERMINATION 21
9.1 No Dissolution 21
9.2 Events Causing Dissolution 21
9.3 Notice of Dissolution 21
9.4 Liquidation 21
9.5 Certificate of Cancellation 22
ARTICLE XI - GENERAL PROVISIONS 22
10.1 Offset 22
10.2 Notices 22
10.3 Entire Agreement 22
10.4 Amendment or Modification; Terms 23
10.5 Binding Effect 23
10.6 Governing Law; Severability 23
10.7 Further Assurances 23
10.8 Waiver of Certain Rights 23
10.9 Third-Party Beneficiaries 23
10.10 Failure to Pursue Remedies 23
10.11 Cumulative Remedies 24
10.12 Notice of Members of Provisions of this Agreement 24
10.13 Interpretation 24
10.14 Counterparts 24
Schedule A - Membership Units
</TABLE>
<PAGE>
ACME TELEVISION HOLDINGS OF NEW MEXICO, LLC
LIMITED LIABILITY COMPANY AGREEMENT
This Limited Liability Company Agreement is made as of September __,
1997 by and among ACME Television Holdings of New Mexico, LLC (the "Company")
and each of the Members listed on Schedule A hereto, and those Persons who
become Members of the Company in accordance with the provisions hereof and whose
names are set forth as such in the record books of the Company.
WHEREAS, the Company has been formed as a limited liability company
under the Delaware Limited Liability Company Act, Del. Code Ann. tit. 6, ss.
18.101 ET SEQ. (as am time to time, the "Act"), by filing a Certificate of
Formation of the Company with the office of the Secretary of State of the State
of Delaware on August , 1997; and
WHEREAS, the Members desire to set out fully their respective
rights, obligations and duties regarding the Company and its assets and
liabilities as set forth herein.
NOW, THEREFORE, in consideration of the agreements and obligations
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Members hereby
agree as follows:
ARTICLE I - DEFINED TERMS
Unless the context otherwise requires, the terms defined in this
Article I shall, for the purposes of this Agreement, have the meanings herein
specified (each such meaning to be equally applicable to both the singular and
plural forms of the respective terms so defined). Defined terms which are not
defined in this Article I or elsewhere in this Agreement shall have the meaning
ascribed to them in the Investment Agreement.
"Affiliate" shall mean, with respect to a specified Person, any
Person that directly or indirectly controls, is controlled by or is under common
control with, the specified Person. As used in this definition, the term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through ownership of voting securities, by contract or otherwise.
"Agreement" shall mean this Limited Liability Company Agreement, as
amended, modified, supplemented or restated from time to time.
"Bankruptcy" means, with respect to a Person, that either (i) an
involuntary petition under any bankruptcy or insolvency or other debtor relief
law or under the
<PAGE>
reorganization provisions of any such law has been filed with respect to such
Person or a receiver of or for the property of such Person has been appointed
without the acquiescence of such Person, which petition or appointment remains
undischarged or unstayed for an aggregate period of sixty (60) days (whether or
not consecutive) or (ii) a voluntary petition under any bankruptcy or insolvency
or other debtor relief law or under the reorganization provisions of any such
law has been filed by such Person, a voluntary assignment of such Person's
property for the benefit of creditors has been made, a written admission by such
Person of its inability to pay its debts as they mature has been made, a
receiver of or for the property of such Person has been appointed with the
acquiescence of such Person or such Person has done any similar act of like
import.
"Capital Contribution" shall mean with respect to any Initial Member
the amount set forth opposite its name on Schedule A and with respect to any New
Member the amount set forth opposite its name on Schedule A, as amended.
"Certificate" shall mean the Certificate of Formation and any and
all amendments thereto and restatements thereof filed on behalf of the Company
with the Secretary of State of the State of Delaware pursuant to the Act.
"Common Members" shall mean those persons listed on SCHEDULE A
hereto as Common Members.
"Common Units" shall mean those Membership Units designated as
Common Units, as described in Section 3.1 hereof.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, or any corresponding federal tax statute enacted after the date of this
Agreement. A reference to a specific section of the Code refers not only to such
specific section but also to any corresponding provision of any federal tax
statute enacted after the date of this Agreement, as such specific section or
corresponding provision is in effect on the date of application of the
provisions of this Agreement containing such reference.
"Distribution Percentage" shall mean a percentage determined for
each holder of Common Units by dividing the aggregate Common Units of such
holder by the aggregate Common Units of all holders of Common Units entitled to
distributions at the time of such determination.
"FCC" means the Federal Communications Commission.
"Indemnified Parties" shall mean the Members, any Affiliate of the
Members and each Person serving as an Officer, employee or other agent of the
Company (including Persons who serve at the Company's request as directors,
managers, officers, employees, agents or trustees of another organization in
which the Company has any interest as a shareholder, creditor or otherwise) and
their respective successors and assigns.
2
<PAGE>
"Initial Capital Contribution" shall mean with respect to any
Initial Member the amount set forth opposite its name on SCHEDULE A hereto.
"Initial Members" shall mean those Persons listed on SCHEDULE A
hereto as Initial Members as of the date hereof.
"Investment Company Act" means the Investment Company Act of 1940,
as amended from time to time, together with any successor statute, and the rules
and regulations promulgated thereunder.
"Losses" shall mean all liabilities, judgments, obligations, losses,
damages, taxes and interest and penalties thereon (other than (i) income taxes
due on income allocated to Membership Units; and (ii) taxes based on fees,
compensation or commissions received by an Indemnified Party in connection with
the administration of the Company or the Company's property), claims, actions,
suits or other proceedings (whether civil or criminal, pending or threatened,
before any-court or administrative or legislative body, and as the same are
accrued, in which an Indemnified Party may be or may have been involved as a
party or otherwise or with which he or she may be or may have been threatened,
while in office or thereafter), costs, expenses and disbursements (including,
without limitation, legal and accounting fees and expenses) of any kind and
nature whatsoever.
"Member" shall mean the Initial Members and any Person admitted as a
Member in accordance with the terms of this Agreement and named as a Member in
the record books of the Company, and includes any Person admitted pursuant to
the provisions of this Agreement when acting in his, her or its capacity as a
Member of the Company, and "Members" shall mean two (2) or more of such Persons
when acting in their capacities as Members of the Company.
"New Member" shall mean any Member who is not an Initial Member.
"Person" shall mean an individual, corporation, association,
partnership (general or limited), joint venture, trust, unincorporated
organization, limited liability company, any other entity or organization of any
kind or a government or any department, agency, authority, instrumentality or
political subdivision thereof.
"Securities Act" shall mean the Securities Act of 1933, as amended
from time to time, together with any successor statute, and the rules and
regulations promulgated thereunder.
"Subscription Agreement" shall mean a subscription agreement for the
purchase of a Membership Unit in the Company, in a form acceptable to the
Members or the Majority Member, as applicable.
3
<PAGE>
"Tax Rate" means, for any taxable year of a Member, the sum of the
Federal Rate and the State Rate, with (a) the "Federal Rate" defined to mean the
highest effective federal income tax rate applicable to any individual for such
year and (b) the "State Rate" defined as the product of (i) the highest
effective state income tax rate applicable to an individual Member for such year
multiplied by (ii) a percentage equal to the difference between one hundred
percent (100%) and the Federal Rate.
"Taxable Income" and "Taxable Loss" mean, for any taxable year, the
taxable income or loss attributable to such Member's distributive share of
taxable income or loss of the Company, as determined for federal income tax
purposes; provided that in making such determination all separately stated items
of income, gain, loss and deduction (other than tax-exempt income) shall be
included; and provided further, that in calculating Taxable Income and Taxable
Loss, items of income, gain, loss and deduction attributable to the sale or
exchange of all or substantially all of the assets of the Company shall be
excluded from such calculation.
"Transfer" shall mean any sale, assignment, transfer, exchange,
charge, pledge, gift, hypothecation, conveyance or encumbrance (such meaning to
be equally applicable to verb forms of such term).
"Treasury Regulations" means the income tax regulations, including
temporary regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
The following terms shall have the meanings set forth in the
indicated Sections hereof:
DEFINED TERM SECTION NUMBER
"Act" Preamble
"Capital Account" 5.02
"Company" Preamble
"Consolidated Group Securities" 3.04(a)
"Holdings" 5.03(a)
"Liquidating Trustee" 9.03
"Majority Member" 4.01(b)
"Membership Unit" 3.01
"Senior Executive Offices" 4.06
"Tax Distributions" 5.03
"Tax Matters Partner" 5.06
4
<PAGE>
ARTICLE II - ORGANIZATION AND POWERS
2.1 ORGANIZATION. The name of the Company is ACME Television
Holdings of New Mexico, LLC. The Company has been formed by the filing of its
Certificate with the Delaware Secretary of State pursuant to the Act. The
Certificate may be restated or amended by the Members or the Majority Member, as
applicable, from time to time in accordance with the Act and subject to the
terms of this Agreement. The Company shall deliver a copy of the Certificate and
any amendment thereto to any Member who so requests.
2.2 PURPOSES AND POWERS. The principal business activity and
purposes of thE Company shall initially be to acquire, develop, own and operate
television broadcast stations and to conduct any business related thereto or
useful in connection therewith. However, the business and purposes of the
Company shall not be limited to its initial principal business activity, and the
Company shall, subject to the terms of this Agreement, have authority to engage
in any other lawful business, purpose or activity permitted by the Act. Except
as otherwise provided in this Agreement, the Company, and the Members or the
Majority Member, as applicable, acting on behalf of the Company in accordance
with this Agreement, shall possess and may exercise all of the powers and
privileges granted by the Act or which may be exercised by any Person, together
with any powers incidental thereto, so far as such powers or privileges are
necessary, appropriate, proper, advisable, incidental or convenient to the
conduct, promotion or attainment of the business purposes or activities of the
Company, including without limitation the following powers:
(a) to conduct its business and operations in any state,
territory or possession of the United States or in any foreign country or
jurisdiction;
(b) to purchase, receive, take, lease or otherwise
acquire, own, hold, improve, maintain, use or otherwise deal in and with, sell,
convey, lease, exchange, transfer or otherwise dispose of, mortgage, pledge,
encumber or create a security interest in all or any of its real or personal
property, or any interest therein, wherever situated;
(c) to borrow or lend money or obtain or extend credit
and other financial accommodations, to invest and reinvest its funds in any type
of security or obligation of or interest in any public, private or governmental
entity, and to give and receive interests in real and personal property as
security for the payment of funds so borrowed, loaned or invested;
(d) to make and modify contracts, including contracts of
insurance, incur liabilities and give guaranties, whether or not such guaranties
are in furtherance of the business and purposes of the Company, including
without limitation, guaranties of
5
<PAGE>
obligations of other Persons who are interested in the Company or in whom the
Company has an interest;
(e) to employ and terminate Officers, employees, agents
and other Persons, to organize committees of the Company, to delegate to such
Persons and/or committees such power and authority, the performance of such
duties and the execution of such instruments in the name of the Company, to fix
the compensation and define the duties and obligations of such personnel, to
establish and carry out retirement, incentive and benefit plans for such
personnel, and to indemnify such personnel to the extent permitted by this
Agreement and the Act;
(f) to form and maintain subsidiaries and to merge with,
or consolidate into, another Delaware limited liability company or other
business entity (as defined in Section 18-209 of the Act); and
(g) to institute, prosecute, and defend any legal action
or arbitration proceeding involving the Company, and to pay, adjust, compromise,
settle, or refer to arbitration any claim by or against the Company or any of
its assets.
2.3 PRINCIPAL PLACE OF BUSINESS. The principal office and
place of business of the Company shall initially be Suite 850, 650 Town Center
Drive, Costa Mesa, California 92626. The Members or the Majority Member, as
applicable, may change the principal office or place of business of the Company
at any time and may cause the Company to establish other offices or places of
business in various jurisdictions and appoint agents for service of process in
such jurisdictions.
2.4 QUALIFICATION IN OTHER JURISDICTIONS. The Members or the
Majority MembeR, as applicable, shall cause the Company to be qualified or
registered under applicable laws of any jurisdiction in which the Company
transacts business and shall be authorized to execute, deliver and file any
certificates and documents necessary to effect such qualification or
registration.
2.5 FISCAL YEAR. The fiscal year of the Company shall end on
December 31 of each year.
ARTICLE III - MEMBERS
3.1 MEMBERSHIP UNITS. The Members shall have no rights or
powers in respect of the Company (including, without limitation, any rights in
respect of allocations of profit and loss or distributions) other than the
rights conferred by this Agreement represented by issued and outstanding units
of membership interest (the "Membership Units"), which shall be deemed to be
personal property giving only the rights provided in
6
<PAGE>
this Agreement and which shall consist of one class ("Common Units"), which
shall have rights and privileges, including voting rights as expressly set forth
in this Agreement. Every Member by virtue of having become a Member shall be
held to have expressly assented and agreed to the terms hereof and to have
become a party hereto. Ownership of a Membership Unit shall not entitle a Member
to any title in or to the whole or any part of the property of the Company or
right to call for a partition or division of the same or for an accounting. The
Initial Members of the Company, their addresses, and the respective classes and
denominations of Membership Units held by them shall be as set forth on SCHEDULE
A hereto, and said schedule shall be amended from time to time by the Members or
the Majority Member, as applicable, in accordance with the terms hereof to
reflect the withdrawal of Members or the admission of additional Members
pursuant to this Agreement.
The Company hereby authorizes for issuance 200 Common Units. As of
the date hereof, the Company shall have issued 200 Common Units to the Initial
Members, as set forth on SCHEDULE A hereto. Except for the Common Units issued
on the date hereof, none of the Common Units may be issued by the Company
without the prior written consent of a majority in interest of the Members.
3.2 ISSUANCE OF MEMBERSHIP UNITS: ADMISSION OF NEW MEMBERS.
(a) The Company is not authorized to offer and sell, or
cause to be offered and sold, additional Membership Units or to admit additional
Persons as Members except with the approval of the Members holding more than
fifty percent (50%) in interest of the Common Units.
(b) The Members or the Majority Member, as applicable,
may establish eligibility requirements for admission of a subscriber as a New
Member after the date hereof and may refuse to admit any subscriber that fails
to satisfy such eligibility requirements. The Members or the Majority Member, as
applicable, shall have the responsibility for determining whether a person or
entity is eligible for admission as a New Member. Each Person who first
subscribes for a Membership Unit in the Company after the date hereof shall be
admitted as a New Member of the Company at the time (i) such Person executes a
Subscription Agreement agreeing to be bound by the provisions hereof, (ii) the
Members or the Majority Member, as applicable, at their sole discretion, accepts
such Subscription Agreement on behalf of the Company and (iii) the subscriber
makes the Capital Contribution(s) required pursuant to the terms of this
Agreement and its Subscription Agreement. None of the existing Members shall
have any preemptive or similar right to subscribe to the issuance of new
Membership Units in the Company, and each of the Members acknowledges that its
membership interest is subject to adjustment (downward and upward) in the event
of the admission of New Members to the Company pursuant hereto or the withdrawal
of any Member from the Company.
7
<PAGE>
3.3 VOTING RIGHTS.
(a) Except as otherwise provided in this Agreement, no
Member or holder of a Membership Unit shall have the right to amend or terminate
this Agreement.
3.4 RESTRICTIONS. Notwithstanding anything in this Agreement
to the contrarY, the following matters shall require the prior written consent
of holders of more than fifty percent (50%) in interest of the Common Units:
(a) the redemption, purchase or other acquisition for
value (or payment into or set aside for a sinking fund for such purpose) of any
Membership Unit, or other type of equity interest of the Company or any of its
Subsidiaries, or security convertible into or exchangeable or exercisable for
such Membership Units or equity interests (which are hereinafter reflected to as
"Consolidated Group Securities");
(b) the authorization or issuance (or the incurrence of
any obligation to authorize or issue) of any additional Membership Units or
other Consolidated Group Securities;
(c) the increase or decrease of the total number of
authorized Membership Units or other Consolidated Group Securities;
(d) the payment or declaration of any dividend or
distribution (other than Tax Distributions pursuant to Section 5.3) with respect
to any Membership Units or other Consolidated Group Securities;
(e) the authorization of any merger or consolidation of
the Company or any of its Subsidiaries with or into any other entity (except for
mergers among wholly-owned Subsidiaries);
(f) the authorization of the reorganization or sale of
the Company or any of its Subsidiaries or the sale of any material assets of the
Company or any of its Subsidiaries;
(g) the authorization of any reclassification or
recapitalization of the outstanding Membership Units of the Company or any other
Consolidated Group Securities;
(h) engagement by the Company or any of its Subsidiaries
in any business other than the business now conducted or contemplated by the
Company or a business or businesses similar thereto or reasonably compatible
therewith;
8
<PAGE>
(i) the alteration, modification or amendment of this
Agreement; or
(j) the application by the Company for or consent by it
to the appointment of a receiver, trustee, custodian or liquidator of it or any
of its property, (ii) the admission in writing by the Company of its inability
to pay its debts as they mature, (iii) the making by the Company of a general
assignment for the benefit of creditors, or (iv) the filing by the Company of a
voluntary petition in bankruptcy, or a petition or an answer seeking
reorganization or an arrangement with creditors, or any other action by the
Company to take advantage of any bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation laws or statutes, or an answer
from the Company admitting the material allegations of a petition filed against
it in any proceeding under any such law.
3.5 LIMITATION ON LIABILITY OF MEMBERS. Except as otherwise
provided in the Act, no Member of the Company shall be obligated personally for
any debt, obligation or liability of the Company or of any other Member or
otherwise have any personal recourse hereunder, whether arising in contract,
tort or otherwise, solely by reason of being a Member. Except as expressly set
forth in this Agreement, no Member shall have any fiduciary or other duty to
another Member with respect to the business and affairs of the Company, and no
Member shall be liable to the Company or any other Member for acting in good
faith reliance upon the provisions of this Agreement. No Member shall have any
responsibility to restore any negative balance in its Capital Account or to
contribute to or in respect of the liabilities or obligations of the Company or
return distributions made by the Company except as required by this Agreement,
the Act or other applicable law; provided, however, that Members are responsible
for their failure to make required Capital Contributions in accordance with
Section 5.1.
3.6 AUTHORITY. Except as otherwise expressly provided herein,
in all matterS relating to or arising out of the conduct or the operation of the
Company, the decision of the Members (acting by vote of holders of more than
fifty percent (50%) in interest of the Common Units) or the Majority Member, as
applicable, shall be the decision of the Company. The Company may employ one or
more Persons from time to time, and such Persons, in their capacity as Officers
or employees of the Company, may take part in the control and management of the
business of the Company to the extent such authority and power to act for or on
behalf of the Company has been delegated to them by the Members or the Majority
Member, as applicable.
3.7 WITHDRAWALS; TERMINATION. No Member shall have any right
to resign or withdraw from the Company without the consent of the Members or the
Majority Member, as applicable, or to receive any distribution on its Membership
Units or the repayment of its Capital Contributions except as provided in
Article V hereof.
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3.8 NO APPRAISAL RIGHTS. No Member shall have any right to
have its interesT in the Company appraised and paid out under the circumstances
provided in Section 18-210 of the Act or any other circumstances.
3.9 COMPLIANCE WITH SECURITIES LAWS AND OTHER LAWS AND
OBLIGATIONS. Each Member hereby represents and warrants to the Company and
acknowledges that (a) it has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of an
investment in the Company and making an informed investment decision with
respect thereto, (b) it is able to bear the economic and financial risk of an
investment in the Company for an indefinite period of time and understands that
it has no right to withdraw and have its interest repurchased by the Company,
(c) it is acquiring an interest in the Company for investment only and not with
a view to, or for resale in connection with, any distribution to the public or
public offering thereof, and (d) it understands that the interests in the
Company have not been registered under the securities laws of any jurisdiction
and cannot be disposed of unless they are subsequently registered and/or
qualified under applicable securities laws or pursuant to valid exemptions from
such registration/qualification requirements and the provisions of this
Agreement have been complied with.
ARTICLE IV - MANAGEMENT
4.1 MANAGEMENT.
(a) Except as provided in Section 4.1(b) hereof, the
Company shall be managed by the Members. No action may be taken by any Member to
bind the Company without the prior consent of Members holding more than fifty
percent (50%) in interest of the Common Units.
(b) If any Member shall own more than fifty percent
(50%) in interest of the Common Units of the Company (the "Majority Member"),
management and control of the business of the Company shall be vested
exclusively in the Majority Member for so long as such Member holds more that
fifty percent (50%) in interest of the Common Units, and such Majority Member
shall have exclusive power and authority, in the name of and on behalf of the
Company, to perform all acts and do all things which, in its sole discretion, it
deems necessary or desirable to conduct the business of the Company.
The Majority Member shall, subject to all applicable provisions of
this Agreement, be authorized in the name and on behalf of the Company: (i) to
enter into, execute, amend, supplement, acknowledge and deliver any and all
contracts, agreements, leases or other instruments for the operation of the
Company's business; and (ii) in general to do all things and execute all
documents determined by it to be necessary or appropriate to conduct the
business of the Company as more fully set forth in Section 2.2 hereof or as
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provided by law, or to protect and preserve the Company's assets. The Majority
Member may delegate any or all of the foregoing powers. The Majority Member is
an agent of the Company for the purpose of the Company's business. Any action
taken by the Majority Member, and the signature of the Majority Member on any
agreement, contract, instrument or other document on behalf of the Company,
shall be sufficient to bind the Company and shall conclusively evidence the
authority of the Majority Member and the Company with respect thereto.
(c) The Members acting pursuant to Section 4.1(a) or the
Majority Member, as applicable, shall be the "manager" (within the meaning of
the Act) of the Company, and each shall have the benefits and protections
accorded "managers" under the Act. The Members acting pursuant to Section 4.1(a)
or the Majority Member, as applicable, shall devote such time to the business
and affairs of the Company as is reasonably necessary for the performance of
their duties, but shall not be required to devote full time to the performance
of such duties and may delegate their responsibilities as provided in this
Agreement. The Majority Member shall not be personally liable to the Company or
to its Members for breach of any duty that does not involve: (i) a breach of the
duty of loyalty to the Company or its Members; (ii) an act or omission not in
good faith or which involves intentional misconduct or a knowing violation of
law; or (iii) a transaction from which the Majority Member derived an improper
personal benefit.
4.2 RELIANCE BY THIRD PARTIES. Any person dealing with the
Company or any Member may rely upon a certificate signed by the Majority Member
or any Officer as to (i) the identity of any other Member; (ii) any factual
matters relevant to the affairs of the Company; (iii) the persons who are
authorized to execute and deliver any document on behalf of the Company; or (iv)
any action taken or omitted by the Company or any Member. The Majority Member
shall not be personally liable to the Company or to its Members for breach of
any duty that does not involve: (i) a breach of the duty of loyalty to the
Company or its other Members; (ii) an act or omission not in good faith or which
involves intentional misconduct or a knowing violation of law; or (iii) a
transaction from which the Majority Member derived an improper personal benefit.
4.3 OFFICERS. The Members or the Majority Member, as
applicable, may designate employees of the Company as officers of the Company
(the "Officers") as they deem necessary or desirable to carry on the business of
the Company and the Members or the Majority Member, as applicable, may delegate
to such Officers such power and authority as the Members or the Majority Member,
as applicable, deem advisable. Any Officer may hold two or more offices of the
Company. The initial Officers of the Company shall be Jamie Kellner (Chairman
and Chief Executive Officer), Douglas Gealy (President and Chief Operating
Officer) and Thomas Allen (Executive Vice President and Chief Financial
Officer). New offices may be created and filled by the Members or the Majority
Member, as applicable. Each Officer shall hold office until his or her successor
is designated by the Members or the Majority Member, as applicable, or until his
or her
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earlier death, resignation or removal. Any Officer may resign at any time upon
written notice to the Members or the Majority Member, as applicable. Any Officer
may be removed by the Members or the Majority Member, as applicable, with or
without cause at any time. A vacancy in any office occurring because of death,
resignation, removal or otherwise, may, but need not, be filled by the Members
or the Majority Member, as applicable. The Officers are not "managers" (within
the meaning of the Act) of the Company.
ARTICLE V - CAPITAL CONTRIBUTIONS; CAPITAL
ACCOUNTS AND ALLOCATIONS AND DISTRIBUTIONS
5.1 CAPITAL CONTRIBUTIONS. The Initial Member has made as of
the date hereoF the Capital Contribution to the Company specified on SCHEDULE A
attached hereto. Each New Member shall make the Capital Contribution to the
Company specified in such Member's Subscription Agreement as of the date of
admission of such New Member as a Member of the Company. Except as approved by
the Members or the Majority Member, as applicable, or as set forth on SCHEDULE A
or in a Member's Subscription Agreement, no Member shall be entitled or required
to make any Capital Contribution or loan or advance to the Company; PROVIDED,
HOWEVER, that the Company may, subject to the other terms of this Agreement,
borrow from its Members as well as from banks or other lending institutions to
finance its working capital or the acquisition of assets upon such terms and
conditions as shall be approved by the Members or the Majority Member, as
applicable, and any such loans by Members shall not be considered Capital
Contributions or reflected in their Capital Accounts. The agreed value of all
non-cash Capital Contributions made by Members shall be set forth on SCHEDULE A
or in such Member's Subscription Agreement. No Member shall be entitled to any
interest or compensation with respect to its Capital Contributions or any
services rendered on behalf of the Company except as specifically provided in
this Agreement. No Member shall have any liability for the repayment of the
Capital Contributions of any other Member and shall look only to the assets to
the Company for return of its Capital Contributions.
5.2 CAPITAL ACCOUNTS AND ALLOCATIONS.
(a) CAPITAL ACCOUNTS. A separate capital account (a
"Capital Account") shall be established and maintained for each Member, which
shall initially be equal to the Capital Contribution of such Member as set forth
on SCHEDULE A hereto. Such Capital Accounts shall be maintained in accordance
with Section 1.704-1(b)(2)(iv) of the Treasury Regulations, and this Section 5.2
shall be interpreted and applied in a manner consistent with said Section of the
Treasury Regulations. The Capital Accounts shall be maintained for the sole
purpose of allocating items of income, gain, loss and deduction among the
Members and shall have no effect on the amount of any distributions to any
Members in liquidation or otherwise. The amount of all distributions to Members
shall be determined pursuant to Sections 5.3, 5.4 and 5.5.
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(b) ALLOCATION OF PROFITS AND LOSSES. All items of
income, gain, loss and deduction as determined for book purposes shall be
allocated among the Members and credited or debited to their respective Capital
Accounts in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv), so
as to ensure to the maximum extent possible (i) that such allocations satisfy
the economic effect equivalence test of Treasury Regulations Section
1.704-1(b)(2)(ii)(i) (as provided hereinafter) and (ii) that all allocations of
items that cannot have economic effect (including credits and nonrecourse
deductions) are allocated to the Members in proportion to their membership
interests unless otherwise required by Code Section 704(b) and the Treasury
Regulations promulgated thereunder. To the extent possible, items that can have
economic effect shall be allocated in such a manner that the balance of each
Member's Capital Account at the end of any fiscal year (increased by such
Member's "share of partnership minimum gain" as defined in Treasury Regulations
Section 1.704-2) would be positive to the extent of the amount of cash that such
Member would receive (or would be negative to the extent of the amount of cash
that such Member should be required to contribute to the Company) if the Company
sold all of its property for an amount of cash equal to the book value (as
determined pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)) of such
property (reduced, but not below zero, by the amount of nonrecourse debt to
which such property is subject) and all of the cash of the Company remaining
after payment of all liabilities (other than nonrecourse liabilities) of the
Company were distributed in liquidation immediately following the end of such
fiscal year in accordance with Section 5.3. Except to the extent otherwise
required by the Code, the "traditional method" provided for in Treasury
Regulations Section 1.704-3(b) shall apply to all tax allocations governed by
Code Section 704(c) and all "reverse Section 704(c) allocations."
(c) OTHER ALLOCATIONS. The Members or the Majority
Member, as applicable, may adjust the Capital Accounts of the Members to reflect
reevaluations of the Company property whenever the adjustment would be permitted
under Treasury Regulations Section 1.704-1(b)(2)(iv)(f). In the event that the
Capital Accounts of the Members are so adjusted, (i) the Capital Accounts of the
Members shall be adjusted in accordance with Treasury Regulations Section
1.704l(b)(2)(iv)(g) for allocations of depreciation, depletion, amortization and
gain or loss, as computed for book purposes, with respect to such property and
(ii) the Members' distributive shares of depreciation, depletion, amortization
and gain or loss, as computed for tax purposes, with respect to such property
shall be determined so as to take account of the variation between the adjusted
tax basis and book value of such property in the same manner as under Section
704(c) of the Code. In the event that Code Section 704(c) applies to Company
property, the Capital Accounts of the Members shall be adjusted in accordance
with Treasury Regulations Section 1.704-1(b)(2)(iv)(g) for allocations of
depreciation, depletion, amortization and gain and loss, as computed for book
purposes, with respect to such property. In applying clause (ii) of the second
preceding sentence and all of the preceding sentence, the provisions of Code
Section 704(b) shall apply.
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5.3 DISTRIBUTIONS. Subject to (i) the terms of the Act, (ii)
any agreements of the Company or any of its Affiliates with respect to
indebtedness for money borrowed to which the Company may from time to time be
subject, and (iii) except in the case of distributions pursuant to subsection
(a) below, the prior written consent of holders of a majority in interest of the
Common Units, all funds of the Company which are available for distribution (as
determined by the Members or the Majority Member, as applicable, in their
discretion) shall be distributed as follows:
(a) FIRST, within one hundred and twenty (120) days
after the end of each taxable year during which ACME Televisions Holdings, LLC
("Holdings") shall have any direct or indirect ownership interest in the
Company, there shall be distributed to each Member an amount equal to the
product of (i) the Tax Rate and (ii) the difference between (x) the amount of
such Member's Taxable Income with respect to such taxable year and (y) the
cumulative amount of such Member's Taxable Loss, if any, from all prior taxable
years, but only to the extent such Taxable Loss on a cumulative basis exceeds
Taxable Income for all prior taxable years on a cumulative basis (the "Tax
Distributions"); PROVIDED HOWEVER, that such distribution shall in all events be
sufficient to allow Holdings to make the distributions required under Section
5.3(a) of the Limited Liability Company Agreement of Holdings; and
(b) SECOND, pro rata to all Members in accordance with
their respective Distribution Percentages.
5.4 DISTRIBUTIONS UPON DISSOLUTION. Proceeds from a sale of
all or substantially all of the assets of the Company and amounts available upon
dissolution, after payment of, or adequate provision for, the debts and
obligations of the Company, including the expenses of its liquidation and
dissolution, shall be distributed and applied in the following priorities:
(a) FIRST, to fund reserves as deemed reasonably
necessary by the Members, the Majority Member, as applicable, or the Liquidating
Trustee for any contingent, conditional or unmatured liabilities or other
obligations of the Company, which such reserves (i) may be paid to a bank (or
other third party), to be held in escrow for the purpose of paying any such
contingent, conditional or unmatured liabilities or other obligations, and (ii)
shall at the expiration of such period(s) as the Members, the Majority Member,
as applicable, or Liquidating Trustee may reasonably deem advisable, shall be
distributed to the Members in accordance with Section 5.3; and
(b) SECOND, in accordance with Section 5.3.
If any assets of the Company are to be distributed in kind in
connection with such liquidation, such assets shall be distributed on the basis
of their fair market value net
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of any liabilities encumbering such assets and, to the greatest extent possible,
shall be distributed pro-rata in accordance with the total amounts to be
distributed to each Member. Solely for purposes of Section 5.2 and immediately
prior to the effectiveness of any such distribution-in-kind, each item of gain
and loss that would have been recognized by the Company had the property being
distributed been sold at fair market value shall be determined and allocated to
those persons who were Members immediately prior to the effectiveness of such
distribution in accordance with Section 5.2.
5.5 DISTRIBUTION UPON WITHDRAWAL. No Member shall be
entitled to any distribution or payment with respect to its Membership Units
upon the resignation or withdrawal of such Member.
5.6 TAX MATTERS PARTNER. ACME Intermediate Holdings, LLC is
hereby designatED as the initial "Tax Matters Partner" of the Company for
purposes of Section 6231(a)(7) of the Code, and such Tax Matters Partner shall
have the power to manage and control, on behalf of the Company, any
administrative proceeding at the Company level with the Internal Revenue Service
relating to the determination of any item of Company income, gain, loss,
deduction or credit for federal income tax purposes. The Members or the Majority
Member, as applicable, may at any time hereafter designate a new Tax Matters
Partner; PROVIDED, however, that only a Member may be designated as the Tax
Matters Partner of the Company.
(a) PARTNERSHIP STATUS. The Company will elect to be
treated as a pass-through entity for purposes of federal and state income tax,
and each Member covenants that it will make no election, declaration or
statement on or in any tax return, tax filing, or any book or record maintained
by it which is inconsistent with or detrimental to the Company's ongoing
maintenance of partnership tax status (or as a single-member entity, if
applicable).
(b) INCOME TAX COMPLIANCE. The Tax Matters Partner shall
prepare or cause to be prepared and filed on behalf of the Company, when and as
required by applicable law, all federal, state and local income tax information
returns or requests for extensions thereof. Not less than thirty (30) days prior
to the due date (including extensions) for any return (but not later than August
15 of each year), the Tax Matters Partner shall submit to each Member a copy of
the return as proposed for review and a schedule showing the Member's allocable
share of the Company's tax attributes ("Tax Attributes") sufficient to allow
such Member to include such Tax Attributes in its federal income tax return.
Each Member shall provide to the Tax Matters Partner, when and as requested, all
information concerning the affairs of such Member as may be reasonably required
to permit the filing of such returns.
(c) TAX ELECTIONS. The Tax Matters Partner shall make
the following tax elections on behalf of the Company:
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(i) Unless required to adopt a different taxable
year pursuant to Section 706(b) of the Code, adopt the calendar year as the
annual accounting period;
(ii) Adopt the accrual method of accounting;
(iii) Deduct interest expense and taxes attributable
to the construction or installation of real and personal property improvements
to the fullest extent permitted by the Code;
(iv) Compute the allowance for depreciation under
the most accelerated tax depreciation method and using the shortest life and
lowest salvage value authorized by applicable law, consistent with the election
provided for in the following clause, with respect to all depreciable assets;
(v) If allowed by the Code, and to the maximum
extent allowable, elect to take available investment tax credit on the full
basis of each asset; and
(vi) Make such other elections as the Tax Matters
Partner shall have been directed in writing by the Members or the Majority
Member, as applicable, to make. The requirement to make any of the elections set
forth above is predicated upon the assumption that current federal income tax
law will continue in force. If any legislative change is made in the Code or any
other tax statutes or by the IRS in regulations and other pronouncements or by
the courts in case law affecting any of such elections so as to materially alter
the economic result of the required election, the Tax Matters Partner shall make
such election in respect of the item so affected as directed by the Members or
the Majority Member, as applicable.
(d) CODE SECTION 754 ELECTION. In connection with any
transfer or assignment of any Membership Units, or any distribution with respect
to which a Member recognizes gain under Code section 731(a), the Members or the
Majority Member, as applicable, shall, upon the written request of any Member,
cause the Company to file an election under Code section 754 and the Treasury
Regulations thereunder to adjust the basis of the Company assets under Code
Section 734(b) or 743(b) and a corresponding election under the applicable
sections of state and local law.
ARTICLE VI - TRANSFERS OF INTERESTS
6.1 RESTRICTIONS ON TRANSFERS. No Membership Units of the
Company may be Transferred, nor may any Member offer to Transfer, and no
Transfer by a Member shall be binding upon the Company or any Member unless such
Transfer complies with the provisions of this Article VI and the Company
receives an executed copy of the documents effecting such Transfer.
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No Transfer shall be permitted if such Transfer would (i) violate
the registration provisions of the Securities Act or the securities laws of any
applicable jurisdiction, (ii) cause the Company to become subject to regulation
as an "investment company" under the Investment Company Act, and the rules and
regulations promulgated thereunder, (iii) result in the termination of any
material contract to which the Company is a party and which is material, or (iv)
result in the treatment of the Company as an association taxable as a
corporation or as a "publicly traded partnership" for federal income tax
purposes. The Company may require reasonable evidence as to the foregoing,
including, without limitation, a favorable opinion of counsel.
Notwithstanding the foregoing, the pledge of the Membership Units to
a lender or lenders of the Company pursuant to a security and pledge agreement
or a substantially similar agreement and such lender(s)' exercise of its rights
thereunder shall be deemed to be a permitted transfer hereunder.
6.2 SUBSTITUTE MEMBERS. If a Transferee of Membership Units
does not become (and until any such Transferee becomes) a substitute Member in
accordance with the provisions of Section 6.1 hereof, such Person shall not be
entitled to exercise or receive any of the rights, powers or benefits of a
Member other than the right to receive distributions which the assigning Member
has Transferred to such Person. The Company shall admit as a substitute Member
any Person that acquires Membership Units by Transfer from any Member pursuant
to Section 6.1 hereof, but only upon the receipt of an executed instrument
satisfactory to the Company whereby such assignee becomes a party to this
Agreement as a Member.
6.3 ALLOCATION OF DISTRIBUTIONS BETWEEN ASSIGNOR AND
ASSIGNEE. Upon the Transfer of Membership Units pursuant to this Article and
unless the assignor and assignee otherwise agree and so direct the Company in a
written statement signed by both the assignor and assignee (a) distributions
pursuant to Article V shall be made to the Person owning such Membership Units
at the date of distribution and (b) the assignee shall succeed to a pro-rata
(based on the percentage of such assignor's Membership Units Transferred)
portion of the assignor's Capital Account with respect to such Membership Units.
Any Membership Units Transferred shall remain subject to the
provisions of this Agreement and the transferee shall have entered into an
enforceable written agreement providing that all Membership Units so Transferred
shall continue to be subject to all provisions of this Agreement as if such
Membership Units were still held by the transferring Member, and provided
further that such permitted transferee shall not be permitted to make any
further Transfer without complying with the provisions of this Agreement.
Anything to the contrary in this Agreement notwithstanding, transferees
permitted hereunder shall take any Membership Units so Transferred subject to
all obligations under
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this Agreement as if such Membership Units were still held by the transferring
Member whether or not they so expressly agree.
6.4 PERMITTED TRANSFERS. Subject to the provisions of
Sections 6.1(a) and 6.2, holders of Common Units may Transfer such Common Units
to any other holder of Common Units or to a partner or Affiliate of such Member
or to any other investment fund or other entity for which such Member and/or one
or more partners or Affiliates thereof, directly or indirectly through one or
more intermediaries, serve as general partner or manager or in a like capacity.
ARTICLE VII - INDEMNIFICATION
7.1 RIGHT TO INDEMNIFICATION. Except as limited by law and
subject to the provisions of this Article, the Company shall indemnify each
Indemnified Party from and against any and all Losses in any way related to or
arising out of this Agreement, the business of the Company or the action or
inaction of such Person hereunder (including, without limitation, the actions or
inactions of the Members and the other Indemnified Parties pursuant to Article
IX hereof upon dissolution of the Company), which may be imposed on, incurred by
or asserted at any time against any such Indemnified Party, except that no
indemnification shall be provided for any Indemnified Party regarding any matter
as to which it shall be finally determined that such Indemnified Party did not
act in good faith and in the reasonable belief that its action was in the best
interests of the Company, or with respect to a criminal matter, that it had
reasonable cause to believe that its conduct was unlawful. Subject to the
foregoing limitations, such indemnification may be provided by the Company with
respect to Losses in connection with which it is claimed that such Indemnified
Party received an improper personal benefit by reason of its position,
regardless of whether the claim arises out of the Indemnified Party's service in
such capacity, except for matters as to which it is finally determined that an
improper personal benefit was received by such Indemnified Party. The
indemnification contained in this Article VII shall survive termination of this
Agreement.
7.2 AWARD OF INDEMNIFICATION. The determination of whether
the Company is authorized to indemnify any Indemnified Party hereunder and any
award of indemnification shall be made in each instance by the Members;
provided, however, that as to any matter disposed of by a compromise payment,
pursuant to a consent decree or otherwise, no indemnification, either for said
payment or for any other Losses, shall be provided unless there has been
obtained an opinion in writing of legal counsel to the effect that the Person
subject to indemnification hereunder appears to have acted in good faith and
that such indemnification would not protect such Person against any liability to
the Company or the Members to which he, she or it would otherwise be subject by
reason of gross negligence, willful malfeasance or fraud in the conduct of his,
her or its office or actions not taken in good faith by such Person. The Company
shall be obliged to pay indemnification applied for by any Indemnified Party
unless there is an adverse
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determination (as provided above) within forty-five (45) days after the
application. If indemnification is denied, the applicant may seek an independent
determination of its right to indemnification by a court, and in such event, the
Company shall have the burden of proving that the applicant was ineligible for
indemnification under this Article. Notwithstanding the foregoing, in the case
of a proceeding by or in the right of the Company which an Indemnified Party is
adjudged liable to the Company, indemnification hereunder shall be provided only
upon a determination by a court having jurisdiction that in view of all the
circumstances of the case, the Indemnified Party is fairly and reasonably
entitled to indemnification for such Losses as the court shall deem proper.
7.3 SUCCESSFUL DEFENSE. Notwithstanding any contrary
provisions of this Article, if any Indemnified Party has been wholly successful
on the merits in the defense of any action, suit or proceeding in which it was
involved by reason of its position with the Company or as a result of serving in
such capacity (including termination of investigative or other proceedings
without a finding of fault on the part of such Indemnified Party), such
Indemnified Party shall be indemnified by the Company against all Losses
incurred by such Indemnified Party in connection therewith.
7.4 ADVANCE PAYMENTS. Except as limited by law, Losses
incurred by an Indemnified Party in defending any action, suit or proceeding,
including a proceeding by or in the right of the Company, shall be paid by the
Company to such Indemnified Party in advance of final disposition of the
proceeding upon receipt of its written undertaking to repay such amount if such
Indemnified Party is determined pursuant to this Article VII or adjudicated to
be ineligible for indemnification, which undertaking shall be an unlimited
general obligation but need not be secured and may be accepted without regard to
the financial ability of such Indemnified Party to make repayment; provided,
however, that no such advance payment of issues shall be made if it is
determined pursuant to Section 7.2 of this Article on the basis of the
circumstances known at the time (without further investigation) that such
Indemnified Party is ineligible for indemnification.
7.5 INSURANCE. The Company shall have power to purchase and
maintain insuranCE on behalf of any Indemnified Party against any liability or
cost incurred by such Person in any such capacity or arising out of its status
as such, whether or not the Company would have power to indemnify against such
liability or cost.
7.6 HEIRS AND PERSONAL REPRESENTATIVES. The indemnification
provided by thiS Article shall inure to the benefit of the heirs and personal
representatives of the Indemnified Parties.
7.7 NON-EXCLUSIVITY. The provisions of this Article shall not
be construed tO limit the power of the Company to indemnify the Members,
Officers, employees or agents to the fullest extent permitted by law or to enter
into specific agreements, commitments or arrangements for indemnification
permitted by law. The absence of any express provision
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for indemnification herein shall not limit any right of indemnification existing
independently of this Article.
7.8 AMENDMENT. The provisions of this Article may be amended
or repealed in accordance with Section 10.5; PROVIDED, HOWEVER, that no
amendment or repeal of such provisions that adversely affects the rights of the
Members under this Article with respect to acts or omissions occurring at any
time prior to such amendment or repeal, shall apply to any Member without such
Member's consent.
ARTICLE VIII - CONFLICTS OF INTEREST
8.1 TRANSACTIONS WITH INTERESTED PERSONS; CONFLICTS.
(a) Unless entered into in bad faith, no contract or
transaction between the Company and one or more of its Members or any other
Indemnified Party, or between the Company and any other Person in which one or
more of its Members or any other Indemnified Party has a financial interest or
is a director, manager or officer, shall be voidable solely for this reason if
such contract or transaction is fair and reasonable to the Company; and no
Member or other Indemnified Party interested in such contract or transaction,
because of such interest, shall be liable to the Company or to any other Person
or organization for any loss or expense incurred by reason of such contract or
transaction or shall be accountable for any gain or profit realized from such
contract or transaction.
(b) Unless otherwise expressly provided herein,
(i) whenever a conflict of interest exists or arises between the Company, its
Members and/or the other Indemnified Parties or (ii) whenever this Agreement
provides that any such Person shall act in a manner that is, or provide terms
that are, fair and reasonable to the Company or any Member, such Person shall
resolve such conflict of interest, taking such action or providing such terms,
considering in each case the relative interest of each party (including its own
interest) to such conflict, agreement, transaction or situation and the benefits
and burdens relating to such interests, any customary or acceptable industry
practices, and any applicable generally acceptable accounting practices or
principles. In the absence of bad faith by the Member or other Indemnified
Party, as the case may be, the resolution, action or term so made, taken or
provided by such Person shall not constitute a breach of this Agreement or any
other agreement contemplated herein or of any duty or obligation of such Person
at law or in equity or otherwise.
8.2 BUSINESS OPPORTUNITIES.
Members may engage in or possess an interest in other business
ventures of any nature, and neither the Company nor any other Member shall have
any rights by virtue of this Agreement in or to any such venture or the income
or profits derived therefrom, and
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the pursuit of any such venture, even if competitive with the activities of the
Company, shall not be deemed improper or wrongful. No Member shall be obligated
to present any particular investment or business opportunity to the Company even
if such opportunity is of a nature which could be taken by the Company.
ARTICLE IX - DISSOLUTION, LIQUIDATION, AND
TERMINATION
9.1 NO DISSOLUTION. The Company shall not be dissolved by the
admission of additional Members, the withdrawal of a Member or the written
consent of all Members, but shall continue to exist in perpetuity, except in
accordance with the terms of this Agreement. Upon the death, retirement,
resignation, expulsion, Bankruptcy or dissolution of any Member the Company
shall not dissolve and its affairs shall not be wound up except as set forth in
Section 9.2 below.
9.2 EVENTS CAUSING DISSOLUTION. The Company shall be
dissolved and its affairs wound up upon the occurrence of any of the following
events:
(a) if a Majority Member shall be acting as a Manager
under Section 6.2 hereof, the Bankruptcy, dissolution, death, retirement, or
resignation of the Majority Member; unless the Company is continued upon the
written consent of a majority of the remaining Members, such consent to be given
within ninety (90) days following the occurrence of such event;
(b) if there shall be no Majority Member acting as a
Manager under Section 6.2 hereof, the Bankruptcy, dissolution, death,
retirement, or resignation of any Member; unless the Company is continued upon
the written consent of a majority of the remaining Members, such consent to be
given within ninety (90) days following the occurrence of such event;
(c) the entry of a decree of judicial dissolution under
Section 18-802 of the Act.
9.3 NOTICE OF DISSOLUTION. Upon the dissolution of the
Company, the Member OR the other Person or Persons (the "Liquidating Trustee")
appointed by the Members or the Majority Member, as applicable, to carry out the
winding up of the Company, shall promptly notify the Members of such
dissolution.
9.4 LIQUIDATION. Upon dissolution of the Company, the
Liquidating Trustee shall proceed diligently to liquidate the Company and wind
up its affairs and to make final distributions as provided in Section 5.4 hereof
and in the Act. The costs of dissolution and liquidation shall be borne as an
expense of the Company. Until final distribution, the
21
<PAGE>
Liquidating Trustee shall continue to operate the Company properties with all of
the power and authority of the Members or the Majority Member, as applicable. As
promptly as possible after dissolution and again after final liquidation, the
Liquidating Trustee shall cause an accounting to be made by a firm of
independent public accountants of the Company's assets, liabilities and
operations.
9.5 CERTIFICATE OF CANCELLATION. On completion of the
distribution of Company assets as provided herein, the Company shall be
terminated, and the Members or the Majority Member, as applicable, (or such
other Person or Persons as the Act may require or permit) shall file a
Certificate of Cancellation with the Secretary of State of the State of Delaware
under the Act, cancel any other filings made pursuant to Sections 2.1, 2.2 and
2.4, and take such other actions as may be necessary to terminate the existence
of the Company.
ARTICLE X - GENERAL PROVISIONS
10.1 OFFSET. Whenever the Company is to pay any sum to any
Member, any amounTS that Member owes the Company may be deducted from that sum
before payment. All amounts so deducted shall nevertheless be treated as
distributions for purposes of Sections 5.3, 5.4 and 5.5 hereof.
10.2 NOTICES. Except as expressly set forth to the contrary in
this AgreemenT, all notices, requests, or consents provided for or permitted to
be given under this Agreement must be in writing and shall be given either by
registered or certified mail, addressed to the recipient, with return receipt
requested, or by delivering the writing to the recipient in Person, by courier,
or by facsimile transmission; and a notice, request, or consent given under this
Agreement is effective upon receipt or three days after the date mailed,
whichever is sooner. All notices, requests, and consents to be given to a Member
must be sent to or delivered at the addresses given for that Member on SCHEDULE
A, or such other address as that Member may specify by written notice to the
other Members and the Company. Any notice, request, or consent to be given to
the Company must be given to the Members or the Majority Member, as applicable,
at the address of the principal office of Company specified in Section 2.3.
Whenever any notice is required to be given by law, the Certificate or this
Agreement, a written waiver thereof, signed by the Person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
10.3 ENTIRE AGREEMENT. This Agreement, together with each
Member's Subscription Agreement, constitutes the entire agreement of the Members
relating to the Company and supersedes all prior contracts or agreements with
respect to the Company, whether oral or written.
22
<PAGE>
10.4 AMENDMENT OR MODIFICATION; TERMS. This Agreement,
including any SchedulE hereto, may be amended from time to time, in whole or in
part, by an instrument in writing signed in accordance with Section 3.4 hereof.
Copies of each such amendment shall be delivered to each Member at least thirty
(30) days prior to the effective date of such amendment; PROVIDED, HOWEVER, in
the case of any amendment that the Members or the Majority Member, as
applicable, determine is necessary or appropriate to prevent the Company from
being treated as a publicly traded partnership taxed as a corporation under
section 7704 of the Code, the amendment shall be effective on the date provided
in the instrument containing the terms of such amendment. Nothing contained in
this Agreement shall permit the amendment of this Agreement to impair the
exemption from personal liability of the officers, employees and agents of the
Company or Members or to permit assessments upon the Members.
10.5 BINDING EFFECT. Subject to the restrictions on Transfers
set forth in this Agreement, this Agreement is binding on and inures to the
benefit of the parties and their respective heirs, legal representatives,
successors and assigns.
10.6 GOVERNING LAW; SEVERABILITY. This Agreement is governed
by and shall be construed in accordance with the law of the State of Delaware,
exclusive of its conflict-of-laws principles. In the event of a direct conflict
between the provisions of this Agreement and any provision of the Certificate,
or any mandatory provision of the Act, the applicable provision of the
Certificate or the Act shall control. If any provision of this Agreement or the
application thereof to any Person or circumstance is held invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of that provision shall be enforced to the fullest extent permitted by law.
10.7 FURTHER ASSURANCES. In connection with this Agreement and
the transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions, as requested by the Members or the Majority
Member, as applicable.
10.8 WAIVER OF CERTAIN RIGHTS. Each Member irrevocably waives
any right it mAY have to maintain any action for dissolution of the Company or
for partition of the property of the Company.
10.9 THIRD-PARTY BENEFICIARIES. Except with respect to the
Lenders, who are expressly intended to be third-party beneficiaries of this
Agreement, there shall be no third-party beneficiaries of this Agreement.
10.10 FAILURE TO PURSUE REMEDIES. The failure of any party to
seek redress for violation of, or to insist upon the strict performance of, any
provision of this Agreement
23
<PAGE>
shall not prevent a subsequent act, which would have originally constituted a
violation, from having the effect of any original violation.
10.11 CUMULATIVE REMEDIES. The rights and remedies provided by
this Agreement are cumulative and the use of any one right or remedy by any
party shall not preclude or waive its right to use any or all other remedies.
Said rights and remedies are given in addition to any other right the parties
may have by law, statute, ordinance or otherwise.
10.12 NOTICE TO MEMBERS OF PROVISIONS OF THIS AGREEMENT. By
executing this Agreement, each Member acknowledges that such Member has actual
notice of (a) all of the provisions of this Agreement, including, without
limitation, the restrictions on the Transfer of Membership Units set forth in
Article VI and the limitations on participation of Members in the management of
the Company set forth in Article III, and (b) all of the provisions of the
Certificate. Each Member hereby agrees that this Agreement constitutes adequate
notice of all such provisions, and each Member hereby waives any requirement
that any further notice thereunder be given.
10.13 INTERPRETATION. For the purposes of this Agreement, terms
not defined iN this Agreement shall be defined as provided in the Act; and all
nouns, pronouns and verbs used in this Agreement shall be construed as
masculine, feminine, neuter, singular, or plural, whichever shall be applicable.
Titles or captions of Articles and Sections contained in this Agreement are
inserted as a matter of convenience and for reference, and in no way define,
limit, extend or describe the scope of this Agreement or the intent of any
provision hereof.
10.14 COUNTERPARTS. This Agreement may be executed in any
number of counterparts with the same effect as if all signing parties had signed
the same document, and all counterparts shall be construed together and shall
constitute the same instrument.
[END OF TEXT]
24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date set forth above.
ACME TELEVISION HOLDINGS OF NEW
MEXICO, LLC
By /s/ Douglas E. Gealy
----------------------------------------
Name: Douglas E. Gealy
Title: President & COO
ACME TELEVISION, LLC
By /s/ Douglas E. Gealy
----------------------------------------
Name: Douglas E. Gealy
Title: President & COO
ACME SUBSIDIARY HOLDINGS III, LLC
By /s/ Douglas E. Gealy
----------------------------------------
Name: Douglas E. Gealy
Title: President & COO
25
<PAGE>
ACME TELEVISION HOLDINGS OF NEW MEXICO, LLC
Schedule A
Member NO. OF UNITS CAPITAL CONTRIBUTION
ACME Television, LLC 199 $995.00
ACME Subsidiary Holdings III, LLC 1 $ 5.00
26
CERTIFICATE OF FORMATION
OF
ACME TELEVISION LICENSES OF OREGON, LLC
A LIMITED LIABILITY COMPANY
FIRST: The name of the limited liability company is:
ACME TELEVISION LICENSES OF OREGON, LLC
SECOND: Its registered office in the State of Delaware is to be located at 1013
Centre Road, in the City of Wilmington, County of New Castle, 19805, and its
registered agent at such address is CORPORATION SERVICE COMPANY.
IN WITNESS WHEREOF, the undersigned, being the individual forming the Company,
has executed, signed and acknowledged this Certificate of Formation this
twenty-second day of September, A.D. 1997.
/s/ Jonathan P. Levi
- -----------------------------
Authorized Person
Jonathan P. Levi
CERTIFICATE OF FORMATION
OF
ACME TELEVISION LICENSES OF TENNESSEE, LLC
A LIMITED LIABILITY COMPANY
FIRST: The name of the limited liability company is:
ACME TELEVISION LICENSES OF TENNESSEE, LLC
SECOND: Its registered office in the State of Delaware is to be located at 1013
Centre Road, in the City of Wilmington, County of New Castle, 19805, and its
registered agent at such address is CORPORATION SERVICE COMPANY.
IN WITNESS WHEREOF, the undersigned, being the individual forming the Company,
has executed, signed and acknowledged this Certificate of Formation this
twenty-second day of September, A.D. 1997.
/s/ Jonathan P. Levi
- -------------------------
Authorized Person
Jonathan P. Levi
CERTIFICATE OF FORMATION
OF
ACME TELEVISION LICENSES OF NEW MEXICO, L.L.C.
A LIMITED LIABILITY COMPANY
FIRST: The name of the limited liability company is:
ACME TELEVISION LICENSES OF NEW MEXICO, L.L.C.
SECOND: Its registered office in the State of Delaware is to be
located at 1013 Centre Road, in the City of Wilmington, County of
New Castle, 19805, and its registered agent at such address is
CORPORATION SERVICE COMPANY.
IN WITNESS WHEREOF, the undersigned, being the individual forming
the Company, has executed, signed and acknowledged this
Certificate of Formation this twenty-first day of August, A.D.
1997.
/s/ Jonathan P. Levi
--------------------------
Authorized Person
Jonathan P. Levi
________________________________________________________________________________
________________________________________________________________________________
ACME TELEVISION LICENSES OF NEW MEXICO, LLC
a Delaware limited liability company
LIMITED LIABILITY COMPANY AGREEMENT
Dated September 24, 1997
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I - DEFINED TERMS 1
ARTICLE II - ORGANIZATION AND POWERS 5
2.1 Organization 5
2.2 Purposes and Powers 5
2.3 Principal Place of Business 6
2.4 Qualification in Other Jurisdictions 6
2.5 Fiscal Year 6
ARTICLE III - MEMBERS 6
3.1 Membership Units 6
3.2 Issuance of Membership Units; Admission of New Members 7
3.3 Voting Rights 8
3.4 Restrictions 8
3.5 Limitation on Liability of Members 9
3.6 Authority 9
3.7 Withdrawals; Termination 9
3.8 No Appraisal Rights 10
3.9 Compliance with Securities Laws and Other Laws and
Obligations 10
ARTICLE IV - MANAGEMENT 10
4.1 Management 10
4.2 Reliance by Third Parties 11
4.3 Officers 11
ARTICLE V - CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS AND
ALLOCATIONS AND DISTRIBUTIONS 12
5.1 Capital Contributions 12
5.2 Capital Accounts and Allocations 12
5.3 Distributions 14
5.4 Distributions Upon Dissolution 14
5.5 Distribution Upon Withdrawal 15
5.6 Tax Matters Partner 15
ARTICLE VI - TRANSFERS OF INTERESTS 16
6.1 Restrictions on Transfers 16
6.2 Substitute Members 17
6.3 Allocation of Distributions Between Assignor and
Assignee 17
6.4 Permitted Transfers 18
<PAGE>
ARTICLE VII - INDEMNIFICATION 18
7.1 Right to Indemnification 18
7.2 Award of Indemnification 18
7.3 Successful Defense 19
7.4 Advance Payments 19
7.5 Insurance 19
7.6 Heirs and Personal Representatives 19
7.7 Non-Exclusivity 19
7.8 Amendment 20
ARTICLE VIII - CONFLICTS OF INTEREST 20
8.1 Transactions with Interested Persons; Conflicts 20
8.2 Business Opportunities 20
ARTICLE IX - DISSOLUTION, LIQUIDATION, AND TERMINATION 21
9.1 No Dissolution 21
9.2 Events Causing Dissolution 21
9.3 Notice of Dissolution 21
9.4 Liquidation 21
9.5 Certificate of Cancellation 22
ARTICLE XI - GENERAL PROVISIONS 22
10.1 Offset 22
10.2 Notices 22
10.3 Entire Agreement 22
10.4 Amendment or Modification; Terms 23
10.5 Binding Effect 23
10.6 Governing Law; Severability 23
10.7 Further Assurances 23
10.8 Waiver of Certain Rights 23
10.9 Third-Party Beneficiaries 23
10.10 Failure to Pursue Remedies 23
10.11 Cumulative Remedies 24
10.12 Notice of Members of Provisions of this Agreement 24
10.13 Interpretation 24
10.14 Counterparts 24
Schedule A - Membership Units
<PAGE>
ACME TELEVISION LICENSES OF NEW MEXICO, LLC
LIMITED LIABILITY COMPANY AGREEMENT
This Limited Liability Company Agreement is made as of September 24,
1997 by and among ACME Television Licenses of New Mexico, LLC (the "Company")
and each of the Members listed on Schedule A hereto, and those Persons who
become Members of the Company in accordance with the provisions hereof and whose
names are set forth as such in the record books of the Company.
WHEREAS, the Company has been formed as a limited liability company
under the Delaware Limited Liability Company Act, Del. Code Ann. tit. 6, ss.
18.101 ET SEQ. (as am time to time, the "Act"), by filing a Certificate of
Formation of the Company with the office of the Secretary of State of the State
of Delaware on August 21, 1997; and
WHEREAS, the Members desire to set out fully their respective
rights, obligations and duties regarding the Company and its assets and
liabilities as set forth herein.
NOW, THEREFORE, in consideration of the agreements and obligations
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Members hereby
agree as follows:
ARTICLE I - DEFINED TERMS
Unless the context otherwise requires, the terms defined in this
Article I shall, for the purposes of this Agreement, have the meanings herein
specified (each such meaning to be equally applicable to both the singular and
plural forms of the respective terms so defined). Defined terms which are not
defined in this Article I or elsewhere in this Agreement shall have the meaning
ascribed to them in the Investment Agreement.
"Affiliate" shall mean, with respect to a specified Person, any
Person that directly or indirectly controls, is controlled by or is under common
control with, the specified Person. As used in this definition, the term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through ownership of voting securities, by contract or otherwise.
"Agreement" shall mean this Limited Liability Company Agreement, as
amended, modified, supplemented or restated from time to time.
"Bankruptcy" means, with respect to a Person, that either (i) an
involuntary petition under any bankruptcy or insolvency or other debtor relief
law or under the
<PAGE>
reorganization provisions of any such law has been filed with respect to such
Person or a receiver of or for the property of such Person has been appointed
without the acquiescence of such Person, which petition or appointment remains
undischarged or unstayed for an aggregate period of sixty (60) days (whether or
not consecutive) or (ii) a voluntary petition under any bankruptcy or insolvency
or other debtor relief law or under the reorganization provisions of any such
law has been filed by such Person, a voluntary assignment of such Person's
property for the benefit of creditors has been made, a written admission by such
Person of its inability to pay its debts as they mature has been made, a
receiver of or for the property of such Person has been appointed with the
acquiescence of such Person or such Person has done any similar act of like
import.
"Capital Contribution" shall mean with respect to any Initial Member
the amount set forth opposite its name on Schedule A and with respect to any New
Member the amount set forth opposite its name on Schedule A, as amended.
"Certificate" shall mean the Certificate of Formation and any and
all amendments thereto and restatements thereof filed on behalf of the Company
with the Secretary of State of the State of Delaware pursuant to the Act.
"Common Members" shall mean those persons listed on SCHEDULE A
hereto as Common Members.
"Common Units" shall mean those Membership Units designated as
Common Units, as described in Section 3.1 hereof.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, or any corresponding federal tax statute enacted after the date of this
Agreement. A reference to a specific section of the Code refers not only to such
specific section but also to any corresponding provision of any federal tax
statute enacted after the date of this Agreement, as such specific section or
corresponding provision is in effect on the date of application of the
provisions of this Agreement containing such reference.
"Distribution Percentage" shall mean a percentage determined for
each holder of Common Units by dividing the aggregate Common Units of such
holder by the aggregate Common Units of all holders of Common Units entitled to
distributions at the time of such determination.
"FCC" means the Federal Communications Commission.
"Indemnified Parties" shall mean the Members, any Affiliate of the
Members and each Person serving as an Officer, employee or other agent of the
Company (including Persons who serve at the Company's request as directors,
managers, officers, employees, agents or trustees of another organization in
which the Company has any interest as a shareholder, creditor or otherwise) and
their respective successors and assigns.
2
<PAGE>
"Initial Capital Contribution" shall mean with respect to any
Initial Member the amount set forth opposite its name on SCHEDULE A hereto.
"Initial Members" shall mean those Persons listed on SCHEDULE A
hereto as Initial Members as of the date hereof.
"Investment Company Act" means the Investment Company Act of 1940,
as amended from time to time, together with any successor statute, and the rules
and regulations promulgated thereunder.
"Losses" shall mean all liabilities, judgments, obligations, losses,
damages, taxes and interest and penalties thereon (other than (i) income taxes
due on income allocated to Membership Units; and (ii) taxes based on fees,
compensation or commissions received by an Indemnified Party in connection with
the administration of the Company or the Company's property), claims, actions,
suits or other proceedings (whether civil or criminal, pending or threatened,
before any-court or administrative or legislative body, and as the same are
accrued, in which an Indemnified Party may be or may have been involved as a
party or otherwise or with which he or she may be or may have been threatened,
while in office or thereafter), costs, expenses and disbursements (including,
without limitation, legal and accounting fees and expenses) of any kind and
nature whatsoever.
"Member" shall mean the Initial Members and any Person admitted as a
Member in accordance with the terms of this Agreement and named as a Member in
the record books of the Company, and includes any Person admitted pursuant to
the provisions of this Agreement when acting in his, her or its capacity as a
Member of the Company, and "Members" shall mean two (2) or more of such Persons
when acting in their capacities as Members of the Company.
"New Member" shall mean any Member who is not an Initial Member.
"Person" shall mean an individual, corporation, association,
partnership (general or limited), joint venture, trust, unincorporated
organization, limited liability company, any other entity or organization of any
kind or a government or any department, agency, authority, instrumentality or
political subdivision thereof.
"Securities Act" shall mean the Securities Act of 1933, as amended
from time to time, together with any successor statute, and the rules and
regulations promulgated thereunder.
"Subscription Agreement" shall mean a subscription agreement for the
purchase of a Membership Unit in the Company, in a form acceptable to the
Members or the Majority Member, as applicable.
3
<PAGE>
"Tax Rate" means, for any taxable year of a Member, the sum of the
Federal Rate and the State Rate, with (a) the "Federal Rate" defined to mean the
highest effective federal income tax rate applicable to any individual for such
year and (b) the "State Rate" defined as the product of (i) the highest
effective state income tax rate applicable to an individual Member for such year
multiplied by (ii) a percentage equal to the difference between one hundred
percent (100%) and the Federal Rate.
"Taxable Income" and "Taxable Loss" mean, for any taxable year, the
taxable income or loss attributable to such Member's distributive share of
taxable income or loss of the Company, as determined for federal income tax
purposes; provided that in making such determination all separately stated items
of income, gain, loss and deduction (other than tax-exempt income) shall be
included; and provided further, that in calculating Taxable Income and Taxable
Loss, items of income, gain, loss and deduction attributable to the sale or
exchange of all or substantially all of the assets of the Company shall be
excluded from such calculation.
"Transfer" shall mean any sale, assignment, transfer, exchange,
charge, pledge, gift, hypothecation, conveyance or encumbrance (such meaning to
be equally applicable to verb forms of such term).
"Treasury Regulations" means the income tax regulations, including
temporary regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
The following terms shall have the meanings set forth in the
indicated Sections hereof:
DEFINED TERM SECTION NUMBER
"Act" Preamble
"Capital Account" 5.02
"Company" Preamble
"Consolidated Group Securities" 3.04(a)
"Holdings" 5.03(a)
"Liquidating Trustee" 9.03
"Majority Member" 4.01(b)
"Membership Unit" 3.01
"Senior Executive Offices" 4.06
"Tax Distributions" 5.03
"Tax Matters Partner" 5.06
4
<PAGE>
ARTICLE II - ORGANIZATION AND POWERS
2.1 ORGANIZATION. The name of the Company is ACME Television
Licenses of New Mexico, LLC. The Company has been formed by the filing of its
Certificate with the Delaware Secretary of State pursuant to the Act. The
Certificate may be restated or amended by the Members or the Majority Member, as
applicable, from time to time in accordance with the Act and subject to the
terms of this Agreement. The Company shall deliver a copy of the Certificate and
any amendment thereto to any Member who so requests.
2.2 PURPOSES AND POWERS. The principal business activity and
purposes of thE Company shall initially be to acquire, develop, own and operate
television broadcast stations and to conduct any business related thereto or
useful in connection therewith. However, the business and purposes of the
Company shall not be limited to its initial principal business activity, and the
Company shall, subject to the terms of this Agreement, have authority to engage
in any other lawful business, purpose or activity permitted by the Act. Except
as otherwise provided in this Agreement, the Company, and the Members or the
Majority Member, as applicable, acting on behalf of the Company in accordance
with this Agreement, shall possess and may exercise all of the powers and
privileges granted by the Act or which may be exercised by any Person, together
with any powers incidental thereto, so far as such powers or privileges are
necessary, appropriate, proper, advisable, incidental or convenient to the
conduct, promotion or attainment of the business purposes or activities of the
Company, including without limitation the following powers:
(a) to conduct its business and operations in any state,
territory or possession of the United States or in any foreign country or
jurisdiction;
(b) to purchase, receive, take, lease or otherwise
acquire, own, hold, improve, maintain, use or otherwise deal in and with, sell,
convey, lease, exchange, transfer or otherwise dispose of, mortgage, pledge,
encumber or create a security interest in all or any of its real or personal
property, or any interest therein, wherever situated;
(c) to borrow or lend money or obtain or extend credit
and other financial accommodations, to invest and reinvest its funds in any type
of security or obligation of or interest in any public, private or governmental
entity, and to give and receive interests in real and personal property as
security for the payment of funds so borrowed, loaned or invested;
(d) to make and modify contracts, including contracts of
insurance, incur liabilities and give guaranties, whether or not such guaranties
are in furtherance of the business and purposes of the Company, including
without limitation, guaranties of
5
<PAGE>
obligations of other Persons who are interested in the Company or in whom the
Company has an interest;
(e) to employ and terminate Officers, employees, agents
and other Persons, to organize committees of the Company, to delegate to such
Persons and/or committees such power and authority, the performance of such
duties and the execution of such instruments in the name of the Company, to fix
the compensation and define the duties and obligations of such personnel, to
establish and carry out retirement, incentive and benefit plans for such
personnel, and to indemnify such personnel to the extent permitted by this
Agreement and the Act;
(f) to form and maintain subsidiaries and to merge with,
or consolidate into, another Delaware limited liability company or other
business entity (as defined in Section 18-209 of the Act); and
(g) to institute, prosecute, and defend any legal action
or arbitration proceeding involving the Company, and to pay, adjust, compromise,
settle, or refer to arbitration any claim by or against the Company or any of
its assets.
2.3 PRINCIPAL PLACE OF BUSINESS. The principal office and
place of business of the Company shall initially be Suite 850, 650 Town Center
Drive, Costa Mesa, California 92626. The Members or the Majority Member, as
applicable, may change the principal office or place of business of the Company
at any time and may cause the Company to establish other offices or places of
business in various jurisdictions and appoint agents for service of process in
such jurisdictions.
2.4 QUALIFICATION IN OTHER JURISDICTIONS. The Members or the
Majority Member, as applicable, shall cause the Company to be qualified or
registered under applicable laws of any jurisdiction in which the Company
transacts business and shall be authorized to execute, deliver and file any
certificates and documents necessary to effect such qualification or
registration.
2.5 FISCAL YEAR. The fiscal year of the Company shall end on
December 31 of each year.
ARTICLE III - MEMBERS
3.1 MEMBERSHIP UNITS. The Members shall have no rights or
powers in respect of the Company (including, without limitation, any rights in
respect of allocations of profit and loss or distributions) other than the
rights conferred by this Agreement represented by issued and outstanding units
of membership interest (the "Membership Units"), which shall be deemed to be
personal property giving only the rights provided in
6
<PAGE>
this Agreement and which shall consist of one class ("Common Units"), which
shall have rights and privileges, including voting rights as expressly set forth
in this Agreement. Every Member by virtue of having become a Member shall be
held to have expressly assented and agreed to the terms hereof and to have
become a party hereto. Ownership of a Membership Unit shall not entitle a Member
to any title in or to the whole or any part of the property of the Company or
right to call for a partition or division of the same or for an accounting. The
Initial Members of the Company, their addresses, and the respective classes and
denominations of Membership Units held by them shall be as set forth on SCHEDULE
A hereto, and said schedule shall be amended from time to time by the Members or
the Majority Member, as applicable, in accordance with the terms hereof to
reflect the withdrawal of Members or the admission of additional Members
pursuant to this Agreement.
The Company hereby authorizes for issuance 200 Common Units. As of
the date hereof, the Company shall have issued 200 Common Units to the Initial
Members, as set forth on SCHEDULE A hereto. Except for the Common Units issued
on the date hereof, none of the Common Units may be issued by the Company
without the prior written consent of a majority in interest of the Members.
3.2 ISSUANCE OF MEMBERSHIP UNITS: ADMISSION OF NEW MEMBERS.
(a) The Company is not authorized to offer and sell, or
cause to be offered and sold, additional Membership Units or to admit additional
Persons as Members except with the approval of the Members holding more than
fifty percent (50%) in interest of the Common Units.
(b) The Members or the Majority Member, as applicable,
may establish eligibility requirements for admission of a subscriber as a New
Member after the date hereof and may refuse to admit any subscriber that fails
to satisfy such eligibility requirements. The Members or the Majority Member, as
applicable, shall have the responsibility for determining whether a person or
entity is eligible for admission as a New Member. Each Person who first
subscribes for a Membership Unit in the Company after the date hereof shall be
admitted as a New Member of the Company at the time (i) such Person executes a
Subscription Agreement agreeing to be bound by the provisions hereof, (ii) the
Members or the Majority Member, as applicable, at their sole discretion, accepts
such Subscription Agreement on behalf of the Company and (iii) the subscriber
makes the Capital Contribution(s) required pursuant to the terms of this
Agreement and its Subscription Agreement. None of the existing Members shall
have any preemptive or similar right to subscribe to the issuance of new
Membership Units in the Company, and each of the Members acknowledges that its
membership interest is subject to adjustment (downward and upward) in the event
of the admission of New Members to the Company pursuant hereto or the withdrawal
of any Member from the Company.
7
<PAGE>
3.3 VOTING RIGHTS.
(a) Except as otherwise provided in this Agreement, no
Member or holder of a Membership Unit shall have the right to amend or terminate
this Agreement.
3.4 RESTRICTIONS. Notwithstanding anything in this Agreement
to the contrarY, the following matters shall require the prior written consent
of holders of more than fifty percent (50%) in interest of the Common Units:
(a) the redemption, purchase or other acquisition for
value (or payment into or set aside for a sinking fund for such purpose) of any
Membership Unit, or other type of equity interest of the Company or any of its
Subsidiaries, or security convertible into or exchangeable or exercisable for
such Membership Units or equity interests (which are hereinafter reflected to as
"Consolidated Group Securities");
(b) the authorization or issuance (or the incurrence of
any obligation to authorize or issue) of any additional Membership Units or
other Consolidated Group Securities;
(c) the increase or decrease of the total number of
authorized Membership Units or other Consolidated Group Securities;
(d) the payment or declaration of any dividend or
distribution (other than Tax Distributions pursuant to Section 5.3) with respect
to any Membership Units or other Consolidated Group Securities;
(e) the authorization of any merger or consolidation of
the Company or any of its Subsidiaries with or into any other entity (except for
mergers among wholly-owned Subsidiaries);
(f) the authorization of the reorganization or sale of
the Company or any of its Subsidiaries or the sale of any material assets of the
Company or any of its Subsidiaries;
(g) the authorization of any reclassification or
recapitalization of the outstanding Membership Units of the Company or any other
Consolidated Group Securities;
(h) engagement by the Company or any of its Subsidiaries
in any business other than the business now conducted or contemplated by the
Company or a business or businesses similar thereto or reasonably compatible
therewith;
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(i) the alteration, modification or amendment of this
Agreement; or the application by the Company for or consent by it to the
appointment of a receiver, trustee, custodian or liquidator of it or any of its
property, (ii) the admission in writing by the Company of its inability to pay
its debts as they mature, (iii) the making by the Company of a general
assignment for the benefit of creditors, or (iv) the filing by the Company of a
voluntary petition in bankruptcy, or a petition or an answer seeking
reorganization or an arrangement with creditors, or any other action by the
Company to take advantage of any bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation laws or statutes, or an answer
from the Company admitting the material allegations of a petition filed against
it in any proceeding under any such law.
3.5 LIMITATION ON LIABILITY OF MEMBERS. Except as otherwise
provided in the Act, no Member of the Company shall be obligated personally for
any debt, obligation or liability of the Company or of any other Member or
otherwise have any personal recourse hereunder, whether arising in contract,
tort or otherwise, solely by reason of being a Member. Except as expressly set
forth in this Agreement, no Member shall have any fiduciary or other duty to
another Member with respect to the business and affairs of the Company, and no
Member shall be liable to the Company or any other Member for acting in good
faith reliance upon the provisions of this Agreement. No Member shall have any
responsibility to restore any negative balance in its Capital Account or to
contribute to or in respect of the liabilities or obligations of the Company or
return distributions made by the Company except as required by this Agreement,
the Act or other applicable law; provided, however, that Members are responsible
for their failure to make required Capital Contributions in accordance with
Section 5.1.
3.6 AUTHORITY. Except as otherwise expressly provided herein, in
all matterS relating to or arising out of the conduct or the operation of the
Company, the decision of the Members (acting by vote of holders of more than
fifty percent (50%) in interest of the Common Units) or the Majority Member, as
applicable, shall be the decision of the Company. The Company may employ one or
more Persons from time to time, and such Persons, in their capacity as Officers
or employees of the Company, may take part in the control and management of the
business of the Company to the extent such authority and power to act for or on
behalf of the Company has been delegated to them by the Members or the Majority
Member, as applicable.
3.7 WITHDRAWALS; TERMINATION. No Member shall have any right to
resign or withdraw from the Company without the consent of the Members or the
Majority Member, as applicable, or to receive any distribution on its Membership
Units or the repayment of its Capital Contributions except as provided in
Article V hereof.
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3.8 NO APPRAISAL RIGHTS. No Member shall have any right to have
its interesT in the Company appraised and paid out under the circumstances
provided in Section 18-210 of the Act or any other circumstances.
3.9 COMPLIANCE WITH SECURITIES LAWS AND OTHER LAWS AND
OBLIGATIONS. Each Member hereby represents and warrants to the Company and
acknowledges that (a) it has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of an
investment in the Company and making an informed investment decision with
respect thereto, (b) it is able to bear the economic and financial risk of an
investment in the Company for an indefinite period of time and understands that
it has no right to withdraw and have its interest repurchased by the Company,
(c) it is acquiring an interest in the Company for investment only and not with
a view to, or for resale in connection with, any distribution to the public or
public offering thereof, and (d) it understands that the interests in the
Company have not been registered under the securities laws of any jurisdiction
and cannot be disposed of unless they are subsequently registered and/or
qualified under applicable securities laws or pursuant to valid exemptions from
such registration/qualification requirements and the provisions of this
Agreement have been complied with.
ARTICLE IV - MANAGEMENT
4.1 MANAGEMENT.
(a) Except as provided in Section 4.1(b) hereof, the Company
shall be managed by the Members. No action may be taken by any Member to bind
the Company without the prior consent of Members holding more than fifty percent
(50%) in interest of the Common Units.
(b) If any Member shall own more than fifty percent (50%) in
interest oF the Common Units of the Company (the "Majority Member"), management
and control of the business of the Company shall be vested exclusively in the
Majority Member for so long as such Member holds more that fifty percent (50%)
in interest of the Common Units, and such Majority Member shall have exclusive
power and authority, in the name of and on behalf of the Company, to perform all
acts and do all things which, in its sole discretion, it deems necessary or
desirable to conduct the business of the Company.
The Majority Member shall, subject to all applicable provisions of
this Agreement, be authorized in the name and on behalf of the Company: (i) to
enter into, execute, amend, supplement, acknowledge and deliver any and all
contracts, agreements, leases or other instruments for the operation of the
Company's business; and (ii) in general to do all things and execute all
documents determined by it to be necessary or appropriate to conduct the
business of the Company as more fully set forth in Section 2.2 hereof or as
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provided by law, or to protect and preserve the Company's assets. The Majority
Member may delegate any or all of the foregoing powers. The Majority Member is
an agent of the Company for the purpose of the Company's business. Any action
taken by the Majority Member, and the signature of the Majority Member on any
agreement, contract, instrument or other document on behalf of the Company,
shall be sufficient to bind the Company and shall conclusively evidence the
authority of the Majority Member and the Company with respect thereto.
(c) The Members acting pursuant to Section 4.1(a) or the
Majority Member, as applicable, shall be the "manager" (within the meaning of
the Act) of the Company, and each shall have the benefits and protections
accorded "managers" under the Act. The Members acting pursuant to Section 4.1(a)
or the Majority Member, as applicable, shall devote such time to the business
and affairs of the Company as is reasonably necessary for the performance of
their duties, but shall not be required to devote full time to the performance
of such duties and may delegate their responsibilities as provided in this
Agreement. The Majority Member shall not be personally liable to the Company or
to its Members for breach of any duty that does not involve: (i) a breach of the
duty of loyalty to the Company or its Members; (ii) an act or omission not in
good faith or which involves intentional misconduct or a knowing violation of
law; or (iii) a transaction from which the Majority Member derived an improper
personal benefit.
4.2 RELIANCE BY THIRD PARTIES. Any person dealing with the
Company or any Member may rely upon a certificate signed by the Majority Member
or any Officer as to (i) the identity of any other Member; (ii) any factual
matters relevant to the affairs of the Company; (iii) the persons who are
authorized to execute and deliver any document on behalf of the Company; or (iv)
any action taken or omitted by the Company or any Member. The Majority Member
shall not be personally liable to the Company or to its Members for breach of
any duty that does not involve: (i) a breach of the duty of loyalty to the
Company or its other Members; (ii) an act or omission not in good faith or which
involves intentional misconduct or a knowing violation of law; or (iii) a
transaction from which the Majority Member derived an improper personal benefit.
4.3 OFFICERS. The Members or the Majority Member, as applicable,
may designate employees of the Company as officers of the Company (the
"Officers") as they deem necessary or desirable to carry on the business of the
Company and the Members or the Majority Member, as applicable, may delegate to
such Officers such power and authority as the Members or the Majority Member, as
applicable, deem advisable. Any Officer may hold two or more offices of the
Company. The initial Officers of the Company shall be Jamie Kellner (Chairman
and Chief Executive Officer), Douglas Gealy (President and Chief Operating
Officer) and Thomas Allen (Executive Vice President and Chief Financial
Officer). New offices may be created and filled by the Members or the Majority
Member, as applicable. Each Officer shall hold office until his or her successor
is designated by the Members or the Majority Member, as applicable, or until his
or her
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earlier death, resignation or removal. Any Officer may resign at any time upon
written notice to the Members or the Majority Member, as applicable. Any Officer
may be removed by the Members or the Majority Member, as applicable, with or
without cause at any time. A vacancy in any office occurring because of death,
resignation, removal or otherwise, may, but need not, be filled by the Members
or the Majority Member, as applicable. The Officers are not "managers" (within
the meaning of the Act) of the Company.
ARTICLE V - CAPITAL CONTRIBUTIONS; CAPITAL
ACCOUNTS AND ALLOCATIONS AND DISTRIBUTIONS
5.1 CAPITAL CONTRIBUTIONS. The Initial Member has made as of the
date hereoF the Capital Contribution to the Company specified on SCHEDULE A
attached hereto. Each New Member shall make the Capital Contribution to the
Company specified in such Member's Subscription Agreement as of the date of
admission of such New Member as a Member of the Company. Except as approved by
the Members or the Majority Member, as applicable, or as set forth on SCHEDULE A
or in a Member's Subscription Agreement, no Member shall be entitled or required
to make any Capital Contribution or loan or advance to the Company; PROVIDED,
HOWEVER, that the Company may, subject to the other terms of this Agreement,
borrow from its Members as well as from banks or other lending institutions to
finance its working capital or the acquisition of assets upon such terms and
conditions as shall be approved by the Members or the Majority Member, as
applicable, and any such loans by Members shall not be considered Capital
Contributions or reflected in their Capital Accounts. The agreed value of all
non-cash Capital Contributions made by Members shall be set forth on SCHEDULE A
or in such Member's Subscription Agreement. No Member shall be entitled to any
interest or compensation with respect to its Capital Contributions or any
services rendered on behalf of the Company except as specifically provided in
this Agreement. No Member shall have any liability for the repayment of the
Capital Contributions of any other Member and shall look only to the assets to
the Company for return of its Capital Contributions.
5.2 CAPITAL ACCOUNTS AND ALLOCATIONS.
(a) CAPITAL ACCOUNTS. A separate capital account (a "Capital
Account") shall be established and maintained for each Member, which shall
initially be equal to the Capital Contribution of such Member as set forth on
SCHEDULE A hereto. Such Capital Accounts shall be maintained in accordance with
Section 1.704-1(b)(2)(iv) of the Treasury Regulations, and this Section 5.2
shall be interpreted and applied in a manner consistent with said Section of the
Treasury Regulations. The Capital Accounts shall be maintained for the sole
purpose of allocating items of income, gain, loss and deduction among the
Members and shall have no effect on the amount of any distributions to any
Members in liquidation or otherwise. The amount of all distributions to Members
shall be determined pursuant to Sections 5.3, 5.4 and 5.5.
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(b) ALLOCATION OF PROFITS AND LOSSES. All items of income,
gain, loss and deduction as determined for book purposes shall be allocated
among the Members and credited or debited to their respective Capital Accounts
in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv), so as to
ensure to the maximum extent possible (i) that such allocations satisfy the
economic effect equivalence test of Treasury Regulations Section
1.704-1(b)(2)(ii)(i) (as provided hereinafter) and (ii) that all allocations of
items that cannot have economic effect (including credits and nonrecourse
deductions) are allocated to the Members in proportion to their membership
interests unless otherwise required by Code Section 704(b) and the Treasury
Regulations promulgated thereunder. To the extent possible, items that can have
economic effect shall be allocated in such a manner that the balance of each
Member's Capital Account at the end of any fiscal year (increased by such
Member's "share of partnership minimum gain" as defined in Treasury Regulations
Section 1.704-2) would be positive to the extent of the amount of cash that such
Member would receive (or would be negative to the extent of the amount of cash
that such Member should be required to contribute to the Company) if the Company
sold all of its property for an amount of cash equal to the book value (as
determined pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)) of such
property (reduced, but not below zero, by the amount of nonrecourse debt to
which such property is subject) and all of the cash of the Company remaining
after payment of all liabilities (other than nonrecourse liabilities) of the
Company were distributed in liquidation immediately following the end of such
fiscal year in accordance with Section 5.3. Except to the extent otherwise
required by the Code, the "traditional method" provided for in Treasury
Regulations Section 1.704-3(b) shall apply to all tax allocations governed by
Code Section 704(c) and all "reverse Section 704(c) allocations."
(c) OTHER ALLOCATIONS. The Members or the Majority Member, as
applicable, may adjust the Capital Accounts of the Members to reflect
reevaluations of the Company property whenever the adjustment would be permitted
under Treasury Regulations Section 1.704-1(b)(2)(iv)(f). In the event that the
Capital Accounts of the Members are so adjusted, (i) the Capital Accounts of the
Members shall be adjusted in accordance with Treasury Regulations Section
1.704l(b)(2)(iv)(g) for allocations of depreciation, depletion, amortization and
gain or loss, as computed for book purposes, with respect to such property and
(ii) the Members' distributive shares of depreciation, depletion, amortization
and gain or loss, as computed for tax purposes, with respect to such property
shall be determined so as to take account of the variation between the adjusted
tax basis and book value of such property in the same manner as under Section
704(c) of the Code. In the event that Code Section 704(c) applies to Company
property, the Capital Accounts of the Members shall be adjusted in accordance
with Treasury Regulations Section 1.704-1(b)(2)(iv)(g) for allocations of
depreciation, depletion, amortization and gain and loss, as computed for book
purposes, with respect to such property. In applying clause (ii) of the second
preceding sentence and all of the preceding sentence, the provisions of Code
Section 704(b) shall apply.
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5.3 DISTRIBUTIONS. Subject to (i) the terms of the Act, (ii) any
agreements of the Company or any of its Affiliates with respect to indebtedness
for money borrowed to which the Company may from time to time be subject, and
(iii) except in the case of distributions pursuant to subsection (a) below, the
prior written consent of holders of a majority in interest of the Common Units,
all funds of the Company which are available for distribution (as determined by
the Members or the Majority Member, as applicable, in their discretion) shall be
distributed as follows:
(a) FIRST, within one hundred and twenty (120) days after the
end of eaCH taxable year during which ACME Televisions Holdings, LLC
("Holdings") shall have any direct or indirect ownership interest in the
Company, there shall be distributed to each Member an amount equal to the
product of (i) the Tax Rate and (ii) the difference between (x) the amount of
such Member's Taxable Income with respect to such taxable year and (y) the
cumulative amount of such Member's Taxable Loss, if any, from all prior taxable
years, but only to the extent such Taxable Loss on a cumulative basis exceeds
Taxable Income for all prior taxable years on a cumulative basis (the "Tax
Distributions"); PROVIDED HOWEVER, that such distribution shall in all events be
sufficient to allow Holdings to make the distributions required under Section
5.3(a) of the Limited Liability Company Agreement of Holdings; and
(b) SECOND, pro rata to all Members in accordance with their
respective Distribution Percentages.
5.4 DISTRIBUTIONS UPON DISSOLUTION. Proceeds from a sale of all
or substantially all of the assets of the Company and amounts available upon
dissolution, after payment of, or adequate provision for, the debts and
obligations of the Company, including the expenses of its liquidation and
dissolution, shall be distributed and applied in the following priorities:
(a) FIRST, to fund reserves as deemed reasonably necessary by
the Members, the Majority Member, as applicable, or the Liquidating Trustee for
any contingent, conditional or unmatured liabilities or other obligations of the
Company, which such reserves (i) may be paid to a bank (or other third party),
to be held in escrow for the purpose of paying any such contingent, conditional
or unmatured liabilities or other obligations, and (ii) shall at the expiration
of such period(s) as the Members, the Majority Member, as applicable, or
Liquidating Trustee may reasonably deem advisable, shall be distributed to the
Members in accordance with Section 5.3; and
(b) SECOND, in accordance with Section 5.3.
If any assets of the Company are to be distributed in kind in
connection with such liquidation, such assets shall be distributed on the basis
of their fair market value net
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of any liabilities encumbering such assets and, to the greatest extent possible,
shall be distributed pro-rata in accordance with the total amounts to be
distributed to each Member. Solely for purposes of Section 5.2 and immediately
prior to the effectiveness of any such distribution-in-kind, each item of gain
and loss that would have been recognized by the Company had the property being
distributed been sold at fair market value shall be determined and allocated to
those persons who were Members immediately prior to the effectiveness of such
distribution in accordance with Section 5.2.
5.5 DISTRIBUTION UPON WITHDRAWAL. No Member shall be entitled to
any distribution or payment with respect to its Membership Units upon the
resignation or withdrawal of such Member.
5.6 TAX MATTERS PARTNER. ACME Intermediate Holdings, LLC is
hereby designatED as the initial "Tax Matters Partner" of the Company for
purposes of Section 6231(a)(7) of the Code, and such Tax Matters Partner shall
have the power to manage and control, on behalf of the Company, any
administrative proceeding at the Company level with the Internal Revenue Service
relating to the determination of any item of Company income, gain, loss,
deduction or credit for federal income tax purposes. The Members or the Majority
Member, as applicable, may at any time hereafter designate a new Tax Matters
Partner; PROVIDED, however, that only a Member may be designated as the Tax
Matters Partner of the Company.
(a) PARTNERSHIP STATUS. The Company will elect to be treated
as a pass-through entity for purposes of federal and state income tax, and each
Member covenants that it will make no election, declaration or statement on or
in any tax return, tax filing, or any book or record maintained by it which is
inconsistent with or detrimental to the Company's ongoing maintenance of
partnership tax status (or as a single-member entity, if applicable).
(b) INCOME TAX COMPLIANCE. The Tax Matters Partner shall
prepare or cause to be prepared and filed on behalf of the Company, when and as
required by applicable law, all federal, state and local income tax information
returns or requests for extensions thereof. Not less than thirty (30) days prior
to the due date (including extensions) for any return (but not later than August
15 of each year), the Tax Matters Partner shall submit to each Member a copy of
the return as proposed for review and a schedule showing the Member's allocable
share of the Company's tax attributes ("Tax Attributes") sufficient to allow
such Member to include such Tax Attributes in its federal income tax return.
Each Member shall provide to the Tax Matters Partner, when and as requested, all
information concerning the affairs of such Member as may be reasonably required
to permit the filing of such returns.
(c) TAX ELECTIONS. The Tax Matters Partner shall make the
following taX elections on behalf of the Company:
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(i) Unless required to adopt a different taxable year pursuant
to Section 706(b) of the Code, adopt the calendar year as the annual accounting
period;
(ii) Adopt the accrual method of accounting;
(iii) Deduct interest expense and taxes attributable to the
construction or installation of real and personal property improvements to the
fullest extent permitted by the Code;
(iv) Compute the allowance for depreciation under the most
accelerated tax depreciation method and using the shortest life and lowest
salvage value authorized by applicable law, consistent with the election
provided for in the following clause, with respect to all depreciable assets;
(v) If allowed by the Code, and to the maximum extent
allowable, elect to take available investment tax credit on the full basis of
each asset; and
(vi) Make such other elections as the Tax Matters Partner
shall havE been directed in writing by the Members or the Majority Member, as
applicable, to make. The requirement to make any of the elections set forth
above is predicated upon the assumption that current federal income tax law will
continue in force. If any legislative change is made in the Code or any other
tax statutes or by the IRS in regulations and other pronouncements or by the
courts in case law affecting any of such elections so as to materially alter the
economic result of the required election, the Tax Matters Partner shall make
such election in respect of the item so affected as directed by the Members or
the Majority Member, as applicable.
(d) CODE SECTION 754 ELECTION. In connection with any transfer or
assignment of any Membership Units, or any distribution with respect to which a
Member recognizes gain under Code section 731(a), the Members or the Majority
Member, as applicable, shall, upon the written request of any Member, cause the
Company to file an election under Code section 754 and the Treasury Regulations
thereunder to adjust the basis of the Company assets under Code Section 734(b)
or 743(b) and a corresponding election under the applicable sections of state
and local law.
ARTICLE VI - TRANSFERS OF INTERESTS
6.1 RESTRICTIONS ON TRANSFERS. No Membership Units of the Company may
be Transferred, nor may any Member offer to Transfer, and no Transfer by a
Member shall be binding upon the Company or any Member unless such Transfer
complies with the provisions of this Article VI and the Company receives an
executed copy of the documents effecting such Transfer.
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No Transfer shall be permitted if such Transfer would (i) violate the
registration provisions of the Securities Act or the securities laws of any
applicable jurisdiction, (ii) cause the Company to become subject to regulation
as an "investment company" under the Investment Company Act, and the rules and
regulations promulgated thereunder, (iii) result in the termination of any
material contract to which the Company is a party and which is material, or (iv)
result in the treatment of the Company as an association taxable as a
corporation or as a "publicly traded partnership" for federal income tax
purposes. The Company may require reasonable evidence as to the foregoing,
including, without limitation, a favorable opinion of counsel.
Notwithstanding the foregoing, the pledge of the Membership Units to a
lender or lenders of the Company pursuant to a security and pledge agreement or
a substantially similar agreement and such lender(s)' exercise of its rights
thereunder shall be deemed to be a permitted transfer hereunder.
6.2 SUBSTITUTE MEMBERS. If a Transferee of Membership Units does not
become (and until any such Transferee becomes) a substitute Member in accordance
with the provisions of Section 6.1 hereof, such Person shall not be entitled to
exercise or receive any of the rights, powers or benefits of a Member other than
the right to receive distributions which the assigning Member has Transferred to
such Person. The Company shall admit as a substitute Member any Person that
acquires Membership Units by Transfer from any Member pursuant to Section 6.1
hereof, but only upon the receipt of an executed instrument satisfactory to the
Company whereby such assignee becomes a party to this Agreement as a Member.
6.3 ALLOCATION OF DISTRIBUTIONS BETWEEN ASSIGNOR AND ASSIGNEE. Upon
the Transfer of Membership Units pursuant to this Article and unless the
assignor and assignee otherwise agree and so direct the Company in a written
statement signed by both the assignor and assignee (a) distributions pursuant to
Article V shall be made to the Person owning such Membership Units at the date
of distribution and (b) the assignee shall succeed to a pro-rata (based on the
percentage of such assignor's Membership Units Transferred) portion of the
assignor's Capital Account with respect to such Membership Units.
Any Membership Units Transferred shall remain subject to the
provisions of this Agreement and the transferee shall have entered into an
enforceable written agreement providing that all Membership Units so Transferred
shall continue to be subject to all provisions of this Agreement as if such
Membership Units were still held by the transferring Member, and provided
further that such permitted transferee shall not be permitted to make any
further Transfer without complying with the provisions of this Agreement.
Anything to the contrary in this Agreement notwithstanding, transferees
permitted hereunder shall take any Membership Units so Transferred subject to
all obligations under
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this Agreement as if such Membership Units were still held by the transferring
Member whether or not they so expressly agree.
6.4 PERMITTED TRANSFERS. Subject to the provisions of Sections 6.1(a)
and 6.2, holders of Common Units may Transfer such Common Units to any other
holder of Common Units or to a partner or Affiliate of such Member or to any
other investment fund or other entity for which such Member and/or one or more
partners or Affiliates thereof, directly or indirectly through one or more
intermediaries, serve as general partner or manager or in a like capacity.
ARTICLE VII - INDEMNIFICATION
7.1 RIGHT TO INDEMNIFICATION. Except as limited by law and subject to
the provisions of this Article, the Company shall indemnify each Indemnified
Party from and against any and all Losses in any way related to or arising out
of this Agreement, the business of the Company or the action or inaction of such
Person hereunder (including, without limitation, the actions or inactions of the
Members and the other Indemnified Parties pursuant to Article IX hereof upon
dissolution of the Company), which may be imposed on, incurred by or asserted at
any time against any such Indemnified Party, except that no indemnification
shall be provided for any Indemnified Party regarding any matter as to which it
shall be finally determined that such Indemnified Party did not act in good
faith and in the reasonable belief that its action was in the best interests of
the Company, or with respect to a criminal matter, that it had reasonable cause
to believe that its conduct was unlawful. Subject to the foregoing limitations,
such indemnification may be provided by the Company with respect to Losses in
connection with which it is claimed that such Indemnified Party received an
improper personal benefit by reason of its position, regardless of whether the
claim arises out of the Indemnified Party's service in such capacity, except for
matters as to which it is finally determined that an improper personal benefit
was received by such Indemnified Party. The indemnification contained in this
Article VII shall survive termination of this Agreement.
7.2 AWARD OF INDEMNIFICATION. The determination of whether the Company
is authorized to indemnify any Indemnified Party hereunder and any award of
indemnification shall be made in each instance by the Members; provided,
however, that as to any matter disposed of by a compromise payment, pursuant to
a consent decree or otherwise, no indemnification, either for said payment or
for any other Losses, shall be provided unless there has been obtained an
opinion in writing of legal counsel to the effect that the Person subject to
indemnification hereunder appears to have acted in good faith and that such
indemnification would not protect such Person against any liability to the
Company or the Members to which he, she or it would otherwise be subject by
reason of gross negligence, willful malfeasance or fraud in the conduct of his,
her or its office or actions not taken in good faith by such Person. The Company
shall be obliged to pay indemnification applied for by any Indemnified Party
unless there is an adverse
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determination (as provided above) within forty-five (45) days after the
application. If indemnification is denied, the applicant may seek an independent
determination of its right to indemnification by a court, and in such event, the
Company shall have the burden of proving that the applicant was ineligible for
indemnification under this Article. Notwithstanding the foregoing, in the case
of a proceeding by or in the right of the Company which an Indemnified Party is
adjudged liable to the Company, indemnification hereunder shall be provided only
upon a determination by a court having jurisdiction that in view of all the
circumstances of the case, the Indemnified Party is fairly and reasonably
entitled to indemnification for such Losses as the court shall deem proper.
7.3 SUCCESSFUL DEFENSE. Notwithstanding any contrary provisions of
this Article, if any Indemnified Party has been wholly successful on the merits
in the defense of any action, suit or proceeding in which it was involved by
reason of its position with the Company or as a result of serving in such
capacity (including termination of investigative or other proceedings without a
finding of fault on the part of such Indemnified Party), such Indemnified Party
shall be indemnified by the Company against all Losses incurred by such
Indemnified Party in connection therewith.
7.4 ADVANCE PAYMENTS. Except as limited by law, Losses incurred by an
Indemnified Party in defending any action, suit or proceeding, including a
proceeding by or in the right of the Company, shall be paid by the Company to
such Indemnified Party in advance of final disposition of the proceeding upon
receipt of its written undertaking to repay such amount if such Indemnified
Party is determined pursuant to this Article VII or adjudicated to be ineligible
for indemnification, which undertaking shall be an unlimited general obligation
but need not be secured and may be accepted without regard to the financial
ability of such Indemnified Party to make repayment; provided, however, that no
such advance payment of issues shall be made if it is determined pursuant to
Section 7.2 of this Article on the basis of the circumstances known at the time
(without further investigation) that such Indemnified Party is ineligible for
indemnification.
7.5 INSURANCE. The Company shall have power to purchase and maintain
insuranCE on behalf of any Indemnified Party against any liability or cost
incurred by such Person in any such capacity or arising out of its status as
such, whether or not the Company would have power to indemnify against such
liability or cost.
7.6 HEIRS AND PERSONAL REPRESENTATIVES. The indemnification provided
by thiS Article shall inure to the benefit of the heirs and personal
representatives of the Indemnified Parties.
7.7 NON-EXCLUSIVITY. The provisions of this Article shall not be
construed tO limit the power of the Company to indemnify the Members, Officers,
employees or agents to the fullest extent permitted by law or to enter into
specific agreements, commitments or arrangements for indemnification permitted
by law. The absence of any express provision
19
<PAGE>
for indemnification herein shall not limit any right of indemnification existing
independently of this Article.
7.8 AMENDMENT. The provisions of this Article may be amended or
repealed in accordance with Section 10.5; PROVIDED, HOWEVER, that no amendment
or repeal of such provisions that adversely affects the rights of the Members
under this Article with respect to acts or omissions occurring at any time prior
to such amendment or repeal, shall apply to any Member without such Member's
consent.
ARTICLE VIII - CONFLICTS OF INTEREST
8.1 TRANSACTIONS WITH INTERESTED PERSONS; CONFLICTS.
(a) Unless entered into in bad faith, no contract or transaction
betweeN the Company and one or more of its Members or any other Indemnified
Party, or between the Company and any other Person in which one or more of its
Members or any other Indemnified Party has a financial interest or is a
director, manager or officer, shall be voidable solely for this reason if such
contract or transaction is fair and reasonable to the Company; and no Member or
other Indemnified Party interested in such contract or transaction, because of
such interest, shall be liable to the Company or to any other Person or
organization for any loss or expense incurred by reason of such contract or
transaction or shall be accountable for any gain or profit realized from such
contract or transaction.
(b) Unless otherwise expressly provided herein, (i) whenever a
conflict of interest exists or arises between the Company, its Members and/or
the other Indemnified Parties or (ii) whenever this Agreement provides that any
such Person shall act in a manner that is, or provide terms that are, fair and
reasonable to the Company or any Member, such Person shall resolve such conflict
of interest, taking such action or providing such terms, considering in each
case the relative interest of each party (including its own interest) to such
conflict, agreement, transaction or situation and the benefits and burdens
relating to such interests, any customary or acceptable industry practices, and
any applicable generally acceptable accounting practices or principles. In the
absence of bad faith by the Member or other Indemnified Party, as the case may
be, the resolution, action or term so made, taken or provided by such Person
shall not constitute a breach of this Agreement or any other agreement
contemplated herein or of any duty or obligation of such Person at law or in
equity or otherwise.
8.2 BUSINESS OPPORTUNITIES.
Members may engage in or possess an interest in other business
ventures of any nature, and neither the Company nor any other Member shall have
any rights by virtue of this Agreement in or to any such venture or the income
or profits derived therefrom, and
20
<PAGE>
the pursuit of any such venture, even if competitive with the activities of the
Company, shall not be deemed improper or wrongful. No Member shall be obligated
to present any particular investment or business opportunity to the Company even
if such opportunity is of a nature which could be taken by the Company.
ARTICLE IX - DISSOLUTION, LIQUIDATION, AND
TERMINATION
9.1 NO DISSOLUTION. The Company shall not be dissolved by the
admission of additional Members, the withdrawal of a Member or the written
consent of all Members, but shall continue to exist in perpetuity, except in
accordance with the terms of this Agreement. Upon the death, retirement,
resignation, expulsion, Bankruptcy or dissolution of any Member the Company
shall not dissolve and its affairs shall not be wound up except as set forth in
Section 9.2 below.
9.2 EVENTS CAUSING DISSOLUTION. The Company shall be dissolved
and its affairs wound up upon the occurrence of any of the following events:
(a) if a Majority Member shall be acting as a Manager under
Section 6.2 hereof, the Bankruptcy, dissolution, death, retirement, or
resignation of the Majority Member; unless the Company is continued upon the
written consent of a majority of the remaining Members, such consent to be given
within ninety (90) days following the occurrence of such event;
(b) if there shall be no Majority Member acting as a Manager
under Section 6.2 hereof, the Bankruptcy, dissolution, death, retirement, or
resignation of any Member; unless the Company is continued upon the written
consent of a majority of the remaining Members, such consent to be given within
ninety (90) days following the occurrence of such event;
(c) the entry of a decree of judicial dissolution under
Section 18-802 OF the Act.
9.3 NOTICE OF DISSOLUTION. Upon the dissolution of the Company,
the Member OR the other Person or Persons (the "Liquidating Trustee") appointed
by the Members or the Majority Member, as applicable, to carry out the winding
up of the Company, shall promptly notify the Members of such dissolution.
9.4 LIQUIDATION. Upon dissolution of the Company, the Liquidating
Trustee shall proceed diligently to liquidate the Company and wind up its
affairs and to make final distributions as provided in Section 5.4 hereof and in
the Act. The costs of dissolution and liquidation shall be borne as an expense
of the Company. Until final distribution, the
21
<PAGE>
Liquidating Trustee shall continue to operate the Company properties with all of
the power and authority of the Members or the Majority Member, as applicable. As
promptly as possible after dissolution and again after final liquidation, the
Liquidating Trustee shall cause an accounting to be made by a firm of
independent public accountants of the Company's assets, liabilities and
operations.
9.5 CERTIFICATE OF CANCELLATION. On completion of the
distribution of CompaNY assets as provided herein, the Company shall be
terminated, and the Members or the Majority Member, as applicable, (or such
other Person or Persons as the Act may require or permit) shall file a
Certificate of Cancellation with the Secretary of State of the State of Delaware
under the Act, cancel any other filings made pursuant to Sections 2.1, 2.2 and
2.4, and take such other actions as may be necessary to terminate the existence
of the Company.
ARTICLE X - GENERAL PROVISIONS
10.1 OFFSET. Whenever the Company is to pay any sum to any Member, any
amounTS that Member owes the Company may be deducted from that sum before
payment. All amounts so deducted shall nevertheless be treated as distributions
for purposes of Sections 5.3, 5.4 and 5.5 hereof.
10.2 NOTICES. Except as expressly set forth to the contrary in this
AgreemenT, all notices, requests, or consents provided for or permitted to be
given under this Agreement must be in writing and shall be given either by
registered or certified mail, addressed to the recipient, with return receipt
requested, or by delivering the writing to the recipient in Person, by courier,
or by facsimile transmission; and a notice, request, or consent given under this
Agreement is effective upon receipt or three days after the date mailed,
whichever is sooner. All notices, requests, and consents to be given to a Member
must be sent to or delivered at the addresses given for that Member on SCHEDULE
A, or such other address as that Member may specify by written notice to the
other Members and the Company. Any notice, request, or consent to be given to
the Company must be given to the Members or the Majority Member, as applicable,
at the address of the principal office of Company specified in Section 2.3.
Whenever any notice is required to be given by law, the Certificate or this
Agreement, a written waiver thereof, signed by the Person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
10.3 ENTIRE AGREEMENT. This Agreement, together with each Member's
Subscription Agreement, constitutes the entire agreement of the Members relating
to the Company and supersedes all prior contracts or agreements with respect to
the Company, whether oral or written.
22
<PAGE>
10.4 AMENDMENT OR MODIFICATION; TERMS. This Agreement, including any
SchedulE hereto, may be amended from time to time, in whole or in part, by an
instrument in writing signed in accordance with Section 3.4 hereof. Copies of
each such amendment shall be delivered to each Member at least thirty (30) days
prior to the effective date of such amendment; PROVIDED, HOWEVER, in the case of
any amendment that the Members or the Majority Member, as applicable, determine
is necessary or appropriate to prevent the Company from being treated as a
publicly traded partnership taxed as a corporation under section 7704 of the
Code, the amendment shall be effective on the date provided in the instrument
containing the terms of such amendment. Nothing contained in this Agreement
shall permit the amendment of this Agreement to impair the exemption from
personal liability of the officers, employees and agents of the Company or
Members or to permit assessments upon the Members.
10.5 BINDING EFFECT. Subject to the restrictions on Transfers set
forth in this Agreement, this Agreement is binding on and inures to the benefit
of the parties and their respective heirs, legal representatives, successors and
assigns.
10.6 GOVERNING LAW; SEVERABILITY. This Agreement is governed by and
shall be construed in accordance with the law of the State of Delaware,
exclusive of its conflict-of-laws principles. In the event of a direct conflict
between the provisions of this Agreement and any provision of the Certificate,
or any mandatory provision of the Act, the applicable provision of the
Certificate or the Act shall control. If any provision of this Agreement or the
application thereof to any Person or circumstance is held invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of that provision shall be enforced to the fullest extent permitted by law.
10.7 FURTHER ASSURANCES. In connection with this Agreement and the
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions, as requested by the Members or the Majority
Member, as applicable.
10.8 WAIVER OF CERTAIN RIGHTS. Each Member irrevocably waives any
right it mAY have to maintain any action for dissolution of the Company or for
partition of the property of the Company.
10.9 THIRD-PARTY BENEFICIARIES. Except with respect to the Lenders,
who are expressly intended to be third-party beneficiaries of this Agreement,
there shall be no third-party beneficiaries of this Agreement.
10.10 FAILURE TO PURSUE REMEDIES. The failure of any party to seek
redress foR violation of, or to insist upon the strict performance of, any
provision of this Agreement
23
<PAGE>
shall not prevent a subsequent act, which would have originally constituted a
violation, from having the effect of any original violation.
10.11 CUMULATIVE REMEDIES. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any party
shall not preclude or waive its right to use any or all other remedies. Said
rights and remedies are given in addition to any other right the parties may
have by law, statute, ordinance or otherwise.
10.12 NOTICE TO MEMBERS OF PROVISIONS OF THIS AGREEMENT. By executing
this Agreement, each Member acknowledges that such Member has actual notice of
(a) all of the provisions of this Agreement, including, without limitation, the
restrictions on the Transfer of Membership Units set forth in Article VI and the
limitations on participation of Members in the management of the Company set
forth in Article III, and (b) all of the provisions of the Certificate. Each
Member hereby agrees that this Agreement constitutes adequate notice of all such
provisions, and each Member hereby waives any requirement that any further
notice thereunder be given.
10.13 INTERPRETATION. For the purposes of this Agreement, terms not
defined iN this Agreement shall be defined as provided in the Act; and all
nouns, pronouns and verbs used in this Agreement shall be construed as
masculine, feminine, neuter, singular, or plural, whichever shall be applicable.
Titles or captions of Articles and Sections contained in this Agreement are
inserted as a matter of convenience and for reference, and in no way define,
limit, extend or describe the scope of this Agreement or the intent of any
provision hereof.
10.14 COUNTERPARTS. This Agreement may be executed in any number of
counterparts with the same effect as if all signing parties had signed the same
document, and all counterparts shall be construed together and shall constitute
the same instrument.
[END OF TEXT]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date set forth above.
ACME TELEVISION LICENSES OF NEW MEXICO, LLC
By /s/Douglas E. Gealy
--------------------------------
Name: Douglas E. Gealy
Title: President & COO
ACME TELEVISION HOLDINGS OF NEW MEXICO, LLC
By /s/Douglas E. Gealy
--------------------------------
Name: Douglas E. Gealy
Title: President & COO
ACME SUBSIDIARY HOLDINGS III, LLC
By /s/Douglas E. Gealy
--------------------------------
Name: Douglas E. Gealy
Title: President & COO
<PAGE>
ACME TELEVISION LICENSES OF NEW MEXICO, LLC
Schedule A
<TABLE>
<CAPTION>
<S> <C> <C>
Member NO. OF UNITS CAPITAL CONTRIBUTION
ACME Television Holdings of New Mexico, LLC 199 $995.00
ACME Subsidiary Holdings III, LLC 1 $ 5.00
</TABLE>
CERTIFICATE OF FORMATION
OF
ACME TELEVISION OF OREGON, LLC
A LIMITED LIABILITY COMPANY
FIRST: The name of the limited liability company is:
ACME TELEVISION OF OREGON, LLC
SECOND: Its registered office in the State of Delaware is to be located at 1013
Centre Road, in the City of Wilmington, County of New Castle, 19805, and its
registered agent at such address is CORPORATION SERVICE COMPANY.
IN WITNESS WHEREOF, the undersigned, being the individual forming the Company,
has executed, signed and acknowledged this Certificate of Formation this
twenty-second day of September, A.D. 1997.
/s/ Jonathan P. Levi
- -------------------------------
Authorized Person
Jonathan P. Levi
CERTIFICATE OF FORMATION
OF
ACME TELEVISION OF TENNESSEE, LLC
A LIMITED LIABILITY COMPANY
FIRST: The name of the limited liability company is:
ACME TELEVISION OF TENNESSEE, LLC
SECOND: Its registered office in the State of Delaware is to be located at 1013
Centre Road, in the City of Wilmington, County of New Castle, 19805, and its
registered agent at such address is CORPORATION SERVICE COMPANY.
IN WITNESS WHEREOF, the undersigned, being the individual forming the Company,
has executed, signed and acknowledged this Certificate of Formation this
twenty-second day of September, A.D. 1997.
/s/ Jonathan P. Levi
- ------------------------
Authorized Person
Jonathan P. Levi
CERTIFICATE OF FORMATION
OF
ACME SUBSIDIARY HOLDINGS III, LLC
A LIMITED LIABILITY COMPANY
FIRST: The name of the limited liability company is:
ACME SUBSIDIARY HOLDINGS III, LLC
SECOND: Its registered office in the State of Delaware is to be located at 1013
Centre Road, in the City of Wilmington, County of New Castle, 19805, and its
registered agent at such address is CORPORATION SERVICE COMPANY.
IN WITNESS WHEREOF, the undersigned, being the individual forming the Company,
has executed, signed and acknowledged this Certificate of Formation this
twenty-second day of September, A.D. 1997.
/s/Jonathan P. Levi
- -------------------------
Authorized Person
Jonathan P. Levi
_______________________________________________________________________________
_______________________________________________________________________________
ACME SUBSIDIARY HOLDINGS III, LLC
a Delaware limited liability company
LIMITED LIABILITY COMPANY AGREEMENT
Dated September 24, 1997
_______________________________________________________________________________
_______________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINED TERMS 1
ATICLE II ORGANIZATION AND POWERS 5
2.01 Organization 5
2.02 Purposes and Powers 5
2.03 Principal Place of Business 6
2.04 Qualification in Other Jurisdictions 6
2.05 Fiscal Year 6
ARTICLE III MEMBERS 6
3.01 Membership Units 6
3.02 Issuance of Membership Units; Admission of
New Members 7
3.03 Voting Rights 7
3.04 Restrictions 7
3.05 Limitation on Liability of Members 9
3.06 Authority 9
3.07 Withdrawals; Termination 9
3.08 No Appraisal Rights 9
3.09 Compliance with Securities Laws and Other Laws
and Obligations 9
ARTICLE IV MANAGEMENT 10
4.01 Management 10
4.02 Reliance by Third Parties 11
4.03 Officers 11
ARTICLE V CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS AND
ALLOCATIONS AND DISTRIBUTIONS 11
5.01 Capital Contributions 11
5.02 Capital Accounts and Allocations 12
5.03 Distributions 12
5.04 Distributions Upon Dissolution 13
5.05 Distribution Upon Withdrawal 13
5.06 Tax Status 13
ARTICLE VI TRANSFERS OF INTERESTS 13
6.01 Restrictions on Transfers 13
6.02 Substitute Members 14
6.03 Allocation of Distributions Between Assignor
and Assignee 14
i
<PAGE>
ARTICLE VII INDEMNIFICATION 14
7.01 Right to Indemnification 14
7.02 Award of Indemnification 15
7.03 Successful Defense 15
7.04 Advance Payments 16
7.05 Insurance 16
7.06 Heirs and Personal Representatives 16
7.07 Non-Exclusivity 16
7.08 Amendment 16
ARTICLE VIII CONFLICTS OF INTEREST 16
8.01 Transactions with Interested Persons; Conflicts 16
8.02 Business Opportunities 17
ARTICLE IX DISSOLUTION, LIQUIDATION, AND TERMINATION 17
9.01 No Dissolution 17
9.02 Events Causing Dissolution 17
9.03 Notice of Dissolution 18
9.04 Liquidation 18
9.05 Certificate of Cancellation 18
ARTICLE XI GENERAL PROVISIONS 18
10.01 Offset 18
10.02 Notices 18
10.03 Entire Agreement 19
10.04 Amendment or Modification; Terms 19
10.05 Binding Effect 19
10.06 Governing Law; Severability 19
10.07 Further Assurances 20
10.08 Waiver of Certain Rights 20
10.09 Third-Party Beneficiaries 20
10.1 Failure to Pursue Remedies 20
10.11 Cumulative Remedies 20
10.12 Notice of Members of Provisions of this Agreement 20
10.13 Interpretation 20
10.14 Counterparts 21
Schedule A - Membership Units 23
ii
<PAGE>
ACME Subsidiary Holdings III, LLC
Limited Liability Company Agreement
This Limited Liability Company Agreement is made as of September 24, 1997
by and among ACME Subsidiary Holdings III, LLC (the "Company") and each of the
Members listed on Schedule A hereto, and those Persons who become Members of the
Company in accordance with the provisions hereof and whose names are set forth
as such in the record books of the Company.
WHEREAS, the Company has been formed as a limited liability company under
the Delaware Limited Liability Company Act, Del. Code Ann. tit. 6, Section
18.101 et seq. (as am time to time, the "Act"), by filing a Certificate of
Formation of the Company with the office of the Secretary of State of the State
of Delaware on September 24, 1997; and
WHEREAS, the Members desire to set out fully their respective rights,
obligations and duties regarding the Company and its assets and liabilities.
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Members hereby
agree as follows:
ARTICLE I - DEFINED TERMS
Unless the context otherwise requires, the terms defined in this Article I
shall, for the purposes of this Agreement, have the meanings herein specified
(each such meaning to be equally applicable to both the singular and plural
forms of the respective terms so defined). Defined terms which are not defined
in this Article I or elsewhere in this Agreement shall have the meaning ascribed
to them in the Investment Agreement.
"Affiliate" shall mean, with respect to a specified Person, any Person that
directly or indirectly controls, is controlled by or is under common control
with, the specified Person. As used in this definition, the term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise.
"Agreement" shall mean this Limited Liability Company Agreement, as
amended, modified, supplemented or restated from time to time.
"Bankruptcy" means, with respect to a Person, that either (i) an
involuntary petition under any bankruptcy or insolvency or other debtor relief
law or under the reorganization provisions of any such law has been filed with
respect to such Person or a
<PAGE>
receiver of or for the property of such Person has been appointed without the
acquiescence of such Person, which petition or appointment remains undischarged
or unstayed for an aggregate period of sixty (60) days (whether or not
consecutive) or (ii) a voluntary petition under any bankruptcy or insolvency or
other debtor relief law or under the reorganization provisions of any such law
has been filed by such Person, a voluntary assignment of such Person's property
for the benefit of creditors has been made, a written admission by such Person
of its inability to pay its debts as they mature has been made, a receiver of or
for the property of such Person has been appointed with the acquiescence of such
Person or such Person has done any similar act of like import.
"Capital Contribution" shall mean with respect to any Initial Member the
amount set forth opposite its name on Schedule A and with respect to any New
Member the amount set forth opposite its name on Schedule A, as amended.
"Certificate" shall mean the Certificate of Formation and any and all
amendments thereto and restatements thereof filed on behalf of the Company with
the Secretary of State of the State of Delaware pursuant to the Act.
"Common Members" shall mean those persons listed on Schedule A hereto as
Common Members.
"Common Units" shall mean those Membership Units designated as Common
Units, as described in Section 3.01 hereof.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any corresponding federal tax statute enacted after the date of this
Agreement. A reference to a specific section of the Code refers not only to such
specific section but also to any corresponding provision of any federal tax
statute enacted after the date of this Agreement, as such specific section or
corresponding provision is in effect on the date of application of the
provisions of this Agreement containing such reference.
"Distribution Percentage" shall mean a percentage determined for each
holder of Common Units by dividing the aggregate Common Units of such holder by
the aggregate Common Units of all holders of Common Units entitled to
distributions at the time of such determination.
"FCC" means the Federal Communications Commission.
"Indemnified Parties" shall mean the Members, any Affiliate of the Members
and each Person serving as an Officer, employee or other agent of the Company
(including Persons who serve at the Company's request as directors, managers,
officers, employees, agents or trustees of another organization in which the
Company has any interest as a shareholder, creditor or otherwise) and their
respective successors and assigns.
2
<PAGE>
"Initial Capital Contribution" shall mean with respect to any Initial
Member the amount set forth opposite its name on Schedule A.
"Initial Members" shall mean those Persons listed on Schedule A hereto as
Initial Members as of the date hereof.
"Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time, together with any successor statute, and the rules
and regulations promulgated thereunder.
"Losses" shall mean all liabilities, judgments, obligations, losses,
damages, taxes and interest and penalties thereon (other than (i) income taxes
due on income allocated to Membership Units; and (ii) taxes based on fees,
compensation or commissions received by an Indemnified Party in connection with
the administration of the Company or the Company's property), claims, actions,
suits or other proceedings (whether civil or criminal, pending or threatened,
before any-court or administrative or legislative body, and as the same are
accrued, in which an Indemnified Party may be or may have been involved as a
party or otherwise or with which he or she may be or may have been threatened,
while in office or thereafter), costs, expenses and disbursements (including,
without limitation, legal and accounting fees and expenses) of any kind and
nature whatsoever.
"Member" shall mean the Initial Members and any Person admitted as a Member
in accordance with the terms of this Agreement and named as a Member in the
record books of the Company, and includes any Person admitted pursuant to the
provisions of this Agreement when acting in his, her or its capacity as a Member
of the Company, and "Members" shall mean two (2) or more of such Persons when
acting in their capacities as Members of the Company.
"New Member" shall mean any Member who is not an Initial Member.
"Person" shall mean an individual, corporation, association, partnership
(general or limited), joint venture, trust, unincorporated organization, limited
liability company, any other entity or organization of any kind or a government
or any department, agency, authority, instrumentality or political subdivision
thereof.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time, together with any successor statute, and the rules and regulations
promulgated thereunder.
"Subscription Agreement" shall mean a subscription agreement for the
purchase of a Membership Unit in the Company, in a form acceptable to the
Members or the Majority Member, as applicable.
3
<PAGE>
"Tax Rate" means, for any taxable year of a Member, the sum of the Federal
Rate and the State Rate, with (a) the "Federal Rate" defined to mean the highest
effective federal income tax rate applicable to any individual for such year and
(b) the "State Rate" defined as the product of (i) the highest effective state
income tax rate applicable to an individual Member for such year multiplied by
(ii) a percentage equal to the difference between one hundred percent (100%) and
the Federal Rate.
"Taxable Income" and "Taxable Loss" mean, for any taxable year, the taxable
income or loss attributable to such Member's distributive share of taxable
income or loss of the Company, as determined for federal income tax purposes;
provided that in making such determination all separately stated items of
income, gain, loss and deduction (other than tax-exempt income) shall be
included; and provided further, that in calculating Taxable Income and Taxable
Loss, items of income, gain, loss and deduction attributable to the sale or
exchange of all or substantially all of the assets of the Company shall be
excluded from such calculation.
"Transfer" shall mean any sale, assignment, transfer, exchange, charge,
pledge, gift, hypothecation, conveyance or encumbrance (such meaning to be
equally applicable to verb forms of such term).
"Treasury Regulations" means the income tax regulations, including
temporary regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
The following terms shall have the meanings set forth in the indicated
Sections hereof:
Defined Term Section Number
"Act" Preamble
"Capital Account" 5.02
"Company" Preamble
"Consolidated Group Securities" 3.04(a)
"Holdings" 5.03(a)
"Liquidating Trustee" 9.03
"Majority Member" 4.01(b)
"Membership Unit" 3.01
"Tax Distributions" 5.03
"Tax Matters Partner" 5.06
4
<PAGE>
ARTICLE II - ORGANIZATION AND POWERS
2.01 Organization. The name of the Company is ACME Subsidiary Holdings,
LLC. The Company has been formed by the filing of its Certificate with the
Delaware Secretary of State pursuant to the Act. The Certificate may be restated
or amended by the Members or the Majority Member, as applicable, from time to
time in accordance with the Act and subject to the terms of this Agreement. The
Company shall deliver a copy of the Certificate and any amendment thereto to any
Member who so requests.
2.02 Purposes and Powers. The principal business activity and purposes of
the Company shall initially be to acquire, develop, own and operate television
broadcast stations and to conduct any business related thereto or useful in
connection therewith. However, the business and purposes of the Company shall
not be limited to its initial principal business activity, and the Company
shall, subject to the terms of this Agreement, have authority to engage in any
other lawful business, purpose or activity permitted by the Act. Except as
otherwise provided in this Agreement, the Company and the Members or the
Majority Member acting on behalf of the Company in accordance with this
Agreement shall possess and may exercise all of the powers and privileges
granted by the Act or which may be exercised by any Person, together with any
powers incidental thereto, so far as such powers or privileges are necessary,
appropriate, proper, advisable, incidental or convenient to the conduct,
promotion or attainment of the business purposes or activities of the Company,
including without limitation the following powers:
(a) to conduct its business and operations in any state, territory or
possession of the United States or in any foreign country or jurisdiction;
(b) to purchase, receive, take, lease or otherwise acquire, own, hold,
improve, maintain, use or otherwise deal in and with, sell, convey, lease,
exchange, transfer or otherwise dispose of, mortgage, pledge, encumber or create
a security interest in all or any of its real or personal property, or any
interest therein, wherever situated;
(c) to borrow or lend money or obtain or extend credit and other financial
accommodations, to invest and reinvest its funds in any type of security or
obligation of or interest in any public, private or governmental entity, and to
give and receive interests in real and personal property as security for the
payment of funds so borrowed, loaned or invested;
(d) to make and modify contracts, including contracts of insurance, incur
liabilities and give guaranties, whether or not such guaranties are in
furtherance of the business and purposes of the Company, including without
limitation, guaranties of obligations of other Persons who are interested in the
Company or in whom the Company has an interest;
5
<PAGE>
(e) to employ and terminate Officers, employees, agents and other Persons,
to organize committees of the Company, to delegate to such Persons and/or
committees such power and authority, the performance of such duties and the
execution of such instruments in the name of the Company, to fix the
compensation and define the duties and obligations of such personnel, to
establish and carry out retirement, incentive and benefit plans for such
personnel, and to indemnify such personnel to the extent permitted by this
Agreement and the Act;
(f) to form and maintain subsidiaries and to merge with, or consolidate
into, another Delaware limited liability company or other business entity (as
defined in Section 18-209 of the Act); and
(g) to institute, prosecute, and defend any legal action or arbitration
proceeding involving the Company, and to pay, adjust, compromise, settle, or
refer to arbitration any claim by or against the Company or any of its assets.
2.03 Principal Place of Business. The principal office and place of
business of the Company shall initially be Suite 850, 650 Town Center Drive,
Costa Mesa, California 92626. The Members or the Majority Member, as applicable,
may change the principal office or place of business of the Company at any time
and may cause the Company to establish other offices or places of business in
various jurisdictions and appoint agents for service of process in such
jurisdictions.
2.04 Qualification in Other Jurisdictions. The Members or the Majority
Member, as applicable, shall cause the Company to be qualified or registered
under applicable laws of any jurisdiction in which the Company transacts
business and shall be authorized to execute, deliver and file any certificates
and documents necessary to effect such qualification or registration.
2.05 Fiscal Year. The fiscal year of the Company shall end on December 31
of each year.
ARTICLE III - MEMBERS
3.01 Membership Units. The Members shall have no rights or powers in
respect of the Company (including, without limitation, any rights in respect of
allocations of profit and loss or distributions) other than the rights conferred
by this Agreement represented by issued and outstanding units of membership
interest (the "Membership Units"), which shall be deemed to be personal property
giving only the rights provided in this Agreement and which shall consist of one
class ("Common Units"), which shall have rights and privileges, including voting
rights as expressly set forth in this Agreement. Every Member by virtue of
having become a Member shall be held to have expressly assented and agreed to
the terms hereof and to have become a party hereto. Ownership of a
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Membership Unit shall not entitle a Member to any title in or to the whole or
any part of the property of the Company or right to call for a partition or
division of the same or for an accounting. The Initial Members of the Company,
their addresses, and the respective classes and denominations of Membership
Units held by them shall be as set forth on Schedule A hereto, and said schedule
shall be amended from time to time by the Members or the Majority Member, as
applicable, in accordance with the terms hereof to reflect the withdrawal of
Members or the admission of additional Members pursuant to this Agreement.
The Company hereby authorizes for issuance 10 Common Units, all of which
shall have been issued to the Initial Member.
3.02 Issuance of Membership Units: Admission of New Members.
(a) The Company is not authorized to offer and sell, or cause to be offered
and sold, additional Membership Units or to admit additional Persons as Members
except with the approval of the Members holding more than fifty percent (50%) in
interest of the Common Units.
(b) The Members or the Majority Member, as applicable, may establish
eligibility requirements for admission of a subscriber as a New Member after the
date hereof and may refuse to admit any subscriber that fails to satisfy such
eligibility requirements. The Members or the Majority Member, as applicable,
shall have the responsibility for determining whether a person or entity is
eligible for admission as a New Member. Each Person who first subscribes for a
Membership Unit in the Company after the date hereof shall be admitted as a New
Member of the Company at the time (i) such Person executes a Subscription
Agreement agreeing to be bound by the provisions hereof, (ii) the Members or the
Majority Member, as applicable, at their sole discretion, accepts such
Subscription Agreement on behalf of the Company and (iii) the subscriber makes
the Capital Contribution(s) required pursuant to the terms of this Agreement and
its Subscription Agreement. None of the existing Members shall have any
preemptive or similar right to subscribe to the issuance of new Membership Units
in the Company, and each of the Members acknowledges that its membership
interest is subject to adjustment (downward and upward) in the event of the
admission of New Members to the Company pursuant hereto or the withdrawal of any
Member from the Company.
3.03 Voting Rights. Except as otherwise provided in this Agreement, no
Member or holder of a Membership Unit shall have the right to amend or terminate
this Agreement.
3.04 Restrictions. Notwithstanding anything in this Agreement to the
contrary, the following matters shall require the prior written consent of
holders of more than fifty percent (50%) in interest of the Common Units:
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(a) the redemption, purchase or other acquisition for value (or payment
into or set aside for a sinking fund for such purpose) of any Membership Unit,
or other type of equity interest of the Company or any of its Subsidiaries, or
security convertible into or exchangeable or exercisable for such Membership
Units or equity interests (which are hereinafter reflected to as "Consolidated
Group Securities");
(b) the authorization or issuance (or the incurrence of any obligation to
authorize or issue) of any additional Membership Units or other Consolidated
Group Securities;
(c) the increase or decrease of the total number of authorized Membership
Units or other Consolidated Group Securities;
(d) the payment or declaration of any dividend or distribution (other than
Tax Distributions pursuant to Section 5.03) with respect to any Membership Units
or other Consolidated Group Securities;
(e) the authorization of any merger or consolidation of the Company or any
of its Subsidiaries with or into any other entity (except for mergers among
wholly-owned Subsidiaries);
(f) the authorization of the reorganization or sale of the Company or any
of its Subsidiaries or the sale of any material assets of the Company or any of
its Subsidiaries;
(g) the authorization of any reclassification or recapitalization of the
outstanding Membership Units of the Company or any other Consolidated Group
Securities;
(h) engagement by the Company or any of its Subsidiaries in any business
other than the business now conducted or contemplated by the Company or a
business or businesses similar thereto or reasonably compatible therewith;
(i) the alteration, modification or amendment of this Agreement; or
(j) the application by the Company for or consent by it to the appointment
of a receiver, trustee, custodian or liquidator of it or any of its property,
(ii) the admission in writing by the Company of its inability to pay its debts
as they mature, (iii) the making by the Company of a general assignment for the
benefit of creditors, or (iv) the filing by the Company of a voluntary petition
in bankruptcy, or a petition or an answer seeking reorganization or an
arrangement with creditors, or any other action by the Company to take advantage
of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution
or liquidation laws or statutes, or an answer from the Company admitting the
material allegations of a petition filed against it in any proceeding under any
such law.
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3.05 Limitation on Liability of Members. Except as otherwise provided in
the Act, no Member of the Company shall be obligated personally for any debt,
obligation or liability of the Company or of any other Member or otherwise have
any personal recourse hereunder, whether arising in contract, tort or otherwise,
solely by reason of being a Member. Except as expressly set forth in this
Agreement, no Member shall have any fiduciary or other duty to another Member
with respect to the business and affairs of the Company, and no Member shall be
liable to the Company or any other Member for acting in good faith reliance upon
the provisions of this Agreement. No Member shall have any responsibility to
restore any negative balance in its Capital Account or to contribute to or in
respect of the liabilities or obligations of the Company or return distributions
made by the Company except as required by this Agreement, the Act or other
applicable law; provided, however, that Members are responsible for their
failure to make required Capital Contributions in accordance with Section 5.01.
3.06 Authority. Except as otherwise expressly provided herein, in all
matters relating to or arising out of the conduct or the operation of the
Company, the decision of the Members (acting by vote of holders of more than
fifty percent (50%) in interest of the Common Units) or the Majority Member, as
applicable, shall be the decision of the Company. The Company may employ one or
more Members from time to time, and such Members, in their capacity as Officers
or employees of the Company, may take part in the control and management of the
business of the Company to the extent such authority and power to act for or on
behalf of the Company has been delegated to them by the Members or the Majority
Member, as applicable.
3.07 Withdrawals; Termination. No Member shall have any right to resign or
withdraw from the Company without the consent of the Members or the Majority
Member, as applicable, or to receive any distribution on its Membership Units or
the repayment of its Capital Contributions except as provided in Article V
hereof.
3.08 No Appraisal Rights. No Member shall have any right to have its
interest in the Company appraised and paid out under the circumstances provided
in Section 18-210 of the Act or any other circumstances.
3.09 Compliance with Securities Laws and Other Laws and Obligations. Each
Member hereby represents and warrants to the Company and acknowledges that (a)
it has such knowledge and experience in financial and business matters that it
is capable of evaluating the merits and risks of an investment in the Company
and making an informed investment decision with respect thereto, (b) it is able
to bear the economic and financial risk of an investment in the Company for an
indefinite period of time and understands that it has no right to withdraw and
have its interest repurchased by the Company, (c) it is acquiring an interest in
the Company for investment only and not with a view to, or for resale in
connection with, any distribution to the public or public offering thereof, and
(d) it understands that the interests in the Company have not been registered
under the securities laws of any jurisdiction and cannot be disposed of unless
they are subsequently
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registered and/or qualified under applicable securities laws or pursuant to
valid exemptions from such registration/qualification requirements and the
provisions of this Agreement have been complied with.
ARTICLE IV - MANAGEMENT
4.01 Management.
(a) Except as provided in Section 4.01(b) hereof, the Company shall be
managed by the Members. No action may be taken by any Member to bind the Company
without the prior consent of Members holding more than fifty percent (50%) in
interest of the Common Units.
(b) If any Member shall own more than fifty percent (50%) in interest of
the Common Units of the Company (the "Majority Member"), management and control
of the business of the Company shall be vested exclusively in the Majority
Member for so long as such Member holds more than fifty percent (50%) in
interest of the Common Units, and such Majority Member shall have exclusive
power and authority, in the name of and on behalf of the Company, to perform all
acts and do all things which, in its sole discretion, it deems necessary or
desirable to conduct the business of the Company.
The Majority Member shall, subject to all applicable provisions of this
Agreement, be authorized in the name and on behalf of the Company: (i) to enter
into, execute, amend, supplement, acknowledge and deliver any and all contracts,
agreements, leases or other instruments for the operation of the Company's
business; and (ii) in general to do all things and execute all documents
determined by it to be necessary or appropriate to conduct the business of the
Company as more fully set forth in Section 2.02 hereof or as provided by law, or
to protect and preserve the Company's assets. The Majority Member may delegate
any or all of the foregoing powers. The Majority Member is an agent of the
Company for the purpose of the Company's business. Any action taken by the
Majority Member, and the signature of the Majority Member on any agreement,
contract, instrument or other document on behalf of the Company, shall be
sufficient to bind the Company and shall conclusively evidence the authority of
the Majority Member and the Company with respect thereto.
(c) The Members acting pursuant to Section 4.01(a) or the Majority Member
(as applicable) shall be the "manager" (within the meaning of the Act) of the
Company, and each shall have the benefits and protections accorded "managers"
under the Act. The Members acting pursuant to Section 4.01(a) or the Majority
Member shall devote such time to the business and affairs of the Company as is
reasonably necessary for the performance of their duties, but shall not be
required to devote full time to the performance of such duties and may delegate
their responsibilities as provided in this Agreement.
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4.02 Reliance by Third Parties. Any person dealing with the Company or any
Member may rely upon a certificate signed by the Majority Member or any Officer
as to (i) the identity of any other Member; (ii) any factual matters relevant to
the affairs of the Company; (iii) the persons who are authorized to execute and
deliver any document on behalf of the Company; or (iv) any action taken or
omitted by the Company or any Member. The Majority Member shall not be
personally liable to the Company or to its Members for breach of any duty that
does not involve: (i) a breach of the duty of loyalty to the Company or its
other Members; (ii) an act or omission not in good faith or which involves
intentional misconduct or a knowing violation of law; or (iii) a transaction
from which the Majority Member derived an improper personal benefit.
4.03 Officers. The Members or the Majority Member, as applicable, may
designate employees of the Company as officers of the Company (the "Officers")
as they deem necessary or desirable to carry on the business of the Company and
the Members or the Majority Member, as applicable, may delegate to such Officers
such power and authority as the Members or the Majority Member, as applicable,
deem advisable. Any Officer may hold two or more offices of the Company. The
initial Officers of the Company shall be Jamie Kellner (Chairman and Chief
Executive Officer), Douglas Gealy (President and Chief Operating Officer) and
Thomas Allen (Executive Vice President and Chief Financial Officer). New offices
may be created and filled by the Members or the Majority Member, as applicable.
Each Officer shall hold office until his or her successor is designated by the
Members or the Majority Member, as applicable, or until his or her earlier
death, resignation or removal. Any Officer may resign at any time upon written
notice to the Members or the Majority Member, as applicable. Any Officer may be
removed by the Members or the Majority Member, as applicable, with or without
cause at any time. A vacancy in any office occurring because of death,
resignation, removal or otherwise, may, but need not, be filled by the Members
or the Majority Member, as applicable. The Officers are not "managers" (within
the meaning of the Act) of the Company.
ARTICLE V - CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS AND
ALLOCATIONS AND DISTRIBUTIONS
5.01 Capital Contributions. The Initial Member has made as of the date
hereof the Capital Contribution to the Company specified on Schedule A attached
hereto. Each New Member shall make the Capital Contribution to the Company
specified in such Member's Subscription Agreement as of the date of admission of
such New Member as a Member of the Company. Except as approved by the Members or
the Majority Member, as applicable, or as set forth on Schedule A or in a
Member's Subscription Agreement, no Member shall be entitled or required to make
any Capital Contribution or loan or advance to the Company; provided, however,
that the Company may, subject to the other terms of this Agreement, borrow from
its Members as well as from banks or other lending institutions to finance its
working capital or the acquisition of assets upon such terms and
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conditions as shall be approved by the Members or the Majority Member, as
applicable, and any such loans by Members shall not be considered Capital
Contributions or reflected in their Capital Accounts. The agreed value of all
non-cash Capital Contributions made by Members shall be set forth on Schedule A
or in such Member's Subscription Agreement. No Member shall be entitled to any
interest or compensation with respect to its Capital Contributions or any
services rendered on behalf of the Company except as specifically provided in
this Agreement. No Member shall have any liability for the repayment of the
Capital Contributions of any other Member and shall look only to the assets to
the Company for return of its Capital Contributions.
5.02 Capital Accounts and Allocations.
(a) Capital Accounts. A separate capital account (a "Capital Account")
shall be established and maintained for each Member, which shall initially be
equal to the Capital Contribution of such Member as set forth on Schedule A
hereto. The Capital Accounts shall have no effect on the amount of any
distributions to any Members in liquidation or otherwise. The amount of all
distributions to Members shall be determined pursuant to Sections 5.03, 5.04 and
5.05.
(b) Allocation of Profits and Losses. All items of income, gain, loss and
deduction as determined for book purposes shall be allocated among the Members
and credited or debited to their respective Capital Accounts in accordance with
their respective Distribution Percentages.
5.03 Distributions. Subject to (i) the terms of the Act, (ii) any
agreements of the Company or any of its Affiliates with respect to indebtedness
for money borrowed to which the Company may from time to time be subject , and
(iii) except in the case of distributions pursuant to subsection (a) below, the
prior written consent of holders of a majority in interest of the Common Units,
all funds of the Company which are available for distribution (as determined by
the Members or the Majority Member, as applicable, in their discretion) shall be
distributed as follows:
(a) First, within one hundred and twenty (120) days after the end of each
taxable year during which ACME Televisions Holdings, LLC ("Holdings") shall have
any direct or indirect ownership interest in the Company, there shall be
distributed to each Member an amount sufficient to allow Holdings to make the
distributions required under Section 5.03(a) of the Limited Liability Company
Agreement of Holdings (the "Tax Distributions"); and
(b) Second, pro rata to all Members in accordance with their respective
Distribution Percentages.
5.04 Distributions Upon Dissolution. Proceeds from a sale of all or
substantially all of the assets of the Company and amounts available upon
dissolution, after
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payment of, or adequate provision for, the debts and obligations of the Company,
including the expenses of its liquidation and dissolution, shall be distributed
and applied in the following priorities:
(a) First, to fund reserves as deemed reasonably necessary by the Members
or the Majority Member, as applicable, or the Liquidating Trustee for any
contingent, conditional or unmatured liabilities or other obligations of the
Company, which such reserves (i) may be paid to a bank (or other third party),
to be held in escrow for the purpose of paying any such contingent, conditional
or unmatured liabilities or other obligations, and (ii) shall at the expiration
of such period(s) as the Members or the Majority Member, as applicable, or
Liquidating Trustee may reasonably deem advisable, shall be distributed to the
Members in accordance with Section 5.03; and
(b) Second, in accordance with Section 5.03.
If any assets of the Company are to be distributed in kind in connection
with such liquidation, such assets shall be distributed on the basis of their
fair market value net of any liabilities encumbering such assets and, to the
greatest extent possible, shall be distributed pro-rata in accordance with the
total amounts to be distributed to each Member.
5.05 Distribution Upon Withdrawal. No Member shall be entitled to any
distribution or payment with respect to its Membership Units upon the
resignation or withdrawal of such Member.
5.06 Tax Status. For as long as all of the interests in the Company are
held by ACME Television, LLC, the Company will elect to be disregarded as an
entity separate from its owner for tax purposes and will be treated for tax
purposes as a branch or division of Holdings.
ARTICLE VI - TRANSFERS OF INTERESTS
6.01 Restrictions on Transfers. No Membership Units of the Company may be
Transferred, nor may any Member offer to Transfer, and no Transfer by a Member
shall be binding upon the Company or any Member unless such Transfer complies
with the provisions of this Article VI and the Company receives an executed copy
of the documents effecting such Transfer.
No Transfer shall be permitted if such Transfer would (i) violate the
registration provisions of the Securities Act or the securities laws of any
applicable jurisdiction, (ii) cause the Company to become subject to regulation
as an "investment company" under the Investment Company Act, and the rules and
regulations promulgated thereunder, (iii) result in the termination of any
material contract to which the Company is a party and
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which is material, or (iv) result in the treatment of the Company as an
association taxable as a corporation or as a "publicly traded partnership" for
federal income tax purposes. The Company may require reasonable evidence as to
the foregoing, including, without limitation, a favorable opinion of counsel.
6.02 Substitute Members. If a Transferee of Membership Units does not
become (and until any such Transferee becomes) a substitute Member in accordance
with the provisions of Section 6.01 hereof, such Person shall not be entitled to
exercise or receive any of the rights, powers or benefits of a Member other than
the right to receive distributions which the assigning Member has Transferred to
such Person. The Company shall admit as a substitute Member any Person that
acquires Membership Units by Transfer from any Member pursuant to Section 6.01
hereof, but only upon the receipt of an executed instrument satisfactory to the
Company whereby such assignee becomes a party to this Agreement as a Member.
6.03 Allocation of Distributions Between Assignor and Assignee. Upon the
Transfer of Membership Units pursuant to this Article and unless the assignor
and assignee otherwise agree and so direct the Company in a written statement
signed by both the assignor and assignee (a) distributions pursuant to Article V
shall be made to the Person owning such Membership Units at the date of
distribution and (b) the assignee shall succeed to a pro-rata (based on the
percentage of such assignor's Membership Units Transferred) portion of the
assignor's Capital Account with respect to such Membership Units.
Any Membership Units Transferred shall remain subject to the provisions of
this Agreement and the transferee shall have entered into an enforceable written
agreement providing that all Membership Units so Transferred shall continue to
be subject to all provisions of this Agreement as if such Membership Units were
still held by the transferring Member, and provided further that such permitted
transferee shall not be permitted to make any further Transfer without complying
with the provisions of this Agreement. Anything to the contrary in this
Agreement notwithstanding, transferees permitted hereunder shall take any
Membership Units so Transferred subject to all obligations under this Agreement
as if such Membership Units were still held by the transferring Member whether
or not they so expressly agree.
ARTICLE VII - INDEMNIFICATION
7.01 Right to Indemnification. Except as limited by law and subject to the
provisions of this Article, the Company shall indemnify each Indemnified Party
from and against any and all Losses in any way related to or arising out of this
Agreement, the business of the Company or the action or inaction of such Person
hereunder (including, without limitation, the actions or inactions of the
Members and the other Indemnified Parties pursuant to Article IX hereof upon
dissolution of the Company), which may be
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imposed on, incurred by or asserted at any time against any such Indemnified
Party, except that no indemnification shall be provided for any Indemnified
Party regarding any matter as to which it shall be finally determined that such
Indemnified Party did not act in good faith and in the reasonable belief that
its action was in the best interests of the Company, or with respect to a
criminal matter, that it had reasonable cause to believe that its conduct was
unlawful. Subject to the foregoing limitations, such indemnification may be
provided by the Company with respect to Losses in connection with which it is
claimed that such Indemnified Party received an improper personal benefit by
reason of its position, regardless of whether the claim arises out of the
Indemnified Party's service in such capacity, except for matters as to which it
is finally determined that an improper personal benefit was received by such
Indemnified Party. The indemnification contained in this Article VII shall
survive termination of this Agreement.
7.02 Award of Indemnification. The determination of whether the Company is
authorized to indemnify any Indemnified Party hereunder and any award of
indemnification shall be made in each instance by the Members provided, however,
that as to any matter disposed of by a compromise payment, pursuant to a consent
decree or otherwise, no indemnification, either for said payment or for any
other Losses, shall be provided unless there has been obtained an opinion in
writing of legal counsel to the effect that the Person subject to
indemnification hereunder appears to have acted in good faith and that such
indemnification would not protect such Person against any liability to the
Company or the Members to which he, she or it would otherwise be subject by
reason of gross negligence, willful malfeasance or fraud in the conduct of his,
her or its office or actions not taken in good faith by such Person. The Company
shall be obliged to pay indemnification applied for by any Indemnified Party
unless there is an adverse determination (as provided above) within forty-five
(45) days after the application. If indemnification is denied, the applicant may
seek an independent determination of its right to indemnification by a court,
and in such event, the Company shall have the burden of proving that the
applicant was ineligible for indemnification under this Article. Notwithstanding
the foregoing, in the case of a proceeding by or in the right of the Company
which an Indemnified Party is adjudged liable to the Company, indemnification
hereunder shall be provided only upon a determination by a court having
jurisdiction that in view of all the circumstances of the case, the Indemnified
Party is fairly and reasonably entitled to indemnification for such Losses as
the court shall deem proper.
7.03 Successful Defense. Notwithstanding any contrary provisions of this
Article, if any Indemnified Party has been wholly successful on the merits in
the defense of any action, suit or proceeding in which it was involved by reason
of its position with the Company or as a result of serving in such capacity
(including termination of investigative or other proceedings without a finding
of fault on the part of such Indemnified Party), such Indemnified Party shall be
indemnified by the Company against all Losses incurred by such Indemnified Party
in connection therewith.
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7.04 Advance Payments. Except as limited by law, Losses incurred by an
Indemnified Party in defending any action, suit or proceeding, including a
proceeding by or in the right of the Company, shall be paid by the Company to
such Indemnified Party in advance of final disposition of the proceeding upon
receipt of its written undertaking to repay such amount if such Indemnified
Party is determined pursuant to this Article VII or adjudicated to be ineligible
for indemnification, which undertaking shall be an unlimited general obligation
but need not be secured and may be accepted without regard to the financial
ability of such Indemnified Party to make repayment; provided, however, that no
such advance payment of issues shall be made if it is determined pursuant to
Section 7.02 of this Article on the basis of the circumstances known at the time
(without further investigation) that such Indemnified Party is ineligible for
indemnification.
7.05 Insurance. The Company shall have power to purchase and maintain
insurance on behalf of any Indemnified Party against any liability or cost
incurred by such Person in any such capacity or arising out of its status as
such, whether or not the Company would have power to indemnify against such
liability or cost.
7.06 Heirs and Personal Representatives. The indemnification provided by
this Article shall inure to the benefit of the heirs and personal
representatives of the Indemnified Parties.
7.07 Non-Exclusivity. The provisions of this Article shall not be construed
to limit the power of the Company to indemnify the Members, Officers, employees
or agents to the fullest extent permitted by law or to enter into specific
agreements, commitments or arrangements for indemnification permitted by law.
The absence of any express provision for indemnification herein shall not limit
any right of indemnification existing independently of this Article.
7.08 Amendment. The provisions of this Article may be amended or repealed
in accordance with Section 10.05; provided, however, that no amendment or repeal
of such provisions that adversely affects the rights of the Members under this
Article with respect to acts or omissions occurring at any time prior to such
amendment or repeal, shall apply to any Member without such Member's consent.
ARTICLE VIII - CONFLICTS OF INTEREST
8.01 Transactions with Interested Persons; Conflicts.
(a) Unless entered into in bad faith, no contract or transaction between
the Company and one or more of its Members or any other Indemnified Party, or
between the Company and any other Person in which one or more of its Members or
any other Indemnified Party has a financial interest or is a director, manager
or officer, shall be voidable solely for this reason if such contract or
transaction is fair and reasonable to the
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Company; and no Member or other Indemnified Party interested in such contract or
transaction, because of such interest, shall be liable to the Company or to any
other Person or organization for any loss or expense incurred by reason of such
contract or transaction or shall be accountable for any gain or profit realized
from such contract or transaction.
(b) Unless otherwise expressly provided herein, (i) whenever a conflict of
interest exists or arises between the Company, its Members and/or the other
Indemnified Parties or (ii) whenever this Agreement provides that any such
Person shall act in a manner that is, or provide terms that are, fair and
reasonable to the Company or any Member, such Person shall resolve such conflict
of interest, taking such action or providing such terms, considering in each
case the relative interest of each party (including its own interest) to such
conflict, agreement, transaction or situation and the benefits and burdens
relating to such interests, any customary or acceptable industry practices, and
any applicable generally acceptable accounting practices or principles. In the
absence of bad faith by the Member or other Indemnified Party, as the case may
be, the resolution, action or term so made, taken or provided by such Person
shall not constitute a breach of this Agreement or any other agreement
contemplated herein or of any duty or obligation of such Person at law or in
equity or otherwise.
8.02 Business Opportunities.
Members may engage in or possess an interest in other business ventures of
any nature, and neither the Company nor any other Member shall have any rights
by virtue of this Agreement in or to any such venture or the income or profits
derived therefrom, and the pursuit of any such venture, even if competitive with
the activities of the Company, shall not be deemed improper or wrongful. No
Member shall be obligated to present any particular investment or business
opportunity to the Company even if such opportunity is of a nature which could
be taken by the Company.
ARTICLE IX - DISSOLUTION, LIQUIDATION, AND TERMINATION
9.01 No Dissolution. The Company shall not be dissolved by the admission of
additional Members, the withdrawal of a Member or the written consent of all
Members, but shall continue to exist in perpetuity, except in accordance with
the terms of this Agreement. Upon the death, retirement, resignation, expulsion,
Bankruptcy or dissolution of any Member the Company shall not dissolve and its
affairs shall not be wound up except as set forth in Section 9.02 below.
9.02 Events Causing Dissolution. The Company shall be dissolved and its
affairs wound up upon the occurrence of any of the following events:
(a) if a Majority Member shall be acting as a Manager under Section 6.02
hereof, the Bankruptcy, dissolution, death, retirement, or resignation of the
Majority
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Member; unless the Company is continued upon the written consent of a majority
of the remaining Members, such consent to be given within ninety (90) days
following the occurrence of such event;
(b) if there shall be no Majority Member acting as a Manager under Section
6.02 hereof, the Bankruptcy, dissolution, death, retirement, or resignation of
any Member; unless the Company is continued upon the written consent of a
majority of the remaining Members, such consent to be given within ninety (90)
days following the occurrence of such event; or
(c) the entry of a decree of judicial dissolution under Section 18-802 of
the Act.
9.03 Notice of Dissolution. Upon the dissolution of the Company, the Member
or the other Person or Persons (the "Liquidating Trustee") appointed by the
Members or the Majority Member, as applicable, to carry out the winding up of
the Company, shall promptly notify the Members of such dissolution.
9.04 Liquidation. Upon dissolution of the Company, the Liquidating Trustee
shall proceed diligently to liquidate the Company and wind up its affairs and to
make final distributions as provided in Section 5.04 hereof and in the Act. The
costs of dissolution and liquidation shall be borne as an expense of the
Company. Until final distribution, the Liquidating Trustee shall continue to
operate the Company properties with all of the power and authority of the
Members or the Majority Member, as applicable . As promptly as possible after
dissolution and again after final liquidation, the Liquidating Trustee shall
cause an accounting to be made by a firm of independent public accountants of
the Company's assets, liabilities and operations.
9.05 Certificate of Cancellation. On completion of the distribution of
Company assets as provided herein, the Company shall be terminated, and the
Members or the Majority Member, as applicable, (or such other Person or Persons
as the Act may require or permit) shall file a Certificate of Cancellation with
the Secretary of State of the State of Delaware under the Act, cancel any other
filings made pursuant to Sections 2.01, 2.02 and 2.04, and take such other
actions as may be necessary to terminate the existence of the Company.
ARTICLE X - GENERAL PROVISIONS
10.01 Offset. Whenever the Company is to pay any sum to any Member, any
amounts that Member owes the Company may be deducted from that sum before
payment. All amounts so deducted shall nevertheless be treated as distributions
for purposes of Sections 5.03, 5.04 and 5.05 hereof.
18
<PAGE>
10.02 Notices. Except as expressly set forth to the contrary in this
Agreement, all notices, requests, or consents provided for or permitted to be
given under this Agreement must be in writing and shall be given either by
registered or certified mail, addressed to the recipient, with return receipt
requested, or by delivering the writing to the recipient in Person, by courier,
or by facsimile transmission; and a notice, request, or consent given under this
Agreement is effective upon receipt or three days after the date mailed,
whichever is sooner. All notices, requests, and consents to be given to a Member
must be sent to or delivered at the addresses given for that Member on Schedule
A, or such other address as that Member may specify by written notice to the
other Members and the Company. Any notice, request, or consent to be given to
the Company must be given to the Members or the Majority Member, as applicable,
at the address of the principal office of Company specified in Section 2.03.
Whenever any notice is required to be given by law, the Certificate or this
Agreement, a written waiver thereof, signed by the Person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
10.03 Entire Agreement. This Agreement, together with each Member's
Subscription Agreement, constitutes the entire agreement of the Members relating
to the Company and supersedes all prior contracts or agreements with respect to
the Company, whether oral or written.
10.04 Amendment or Modification; Terms. This Agreement, including any
Schedule hereto, may be amended from time to time, in whole or in part, by an
instrument in writing signed in accordance with Section 3.04 hereof. Copies of
each such amendment shall be delivered to each Member at least thirty (30) days
prior to the effective date of such amendment; provided, however, in the case of
any amendment that the Members or the Majority Member, as applicable, determines
is necessary or appropriate to prevent the Company from being treated as a
publicly traded partnership taxed as a corporation under section 7704 of the
Code, the amendment shall be effective on the date provided in the instrument
containing the terms of such amendment. Nothing contained in this Agreement
shall permit the amendment of this Agreement to impair the exemption from
personal liability of the Members , officers, employees and agents of the
Company or Members or to permit assessments upon the Members.
10.05 Binding Effect. Subject to the restrictions on Transfers set forth in
this Agreement, this Agreement is binding on and inures to the benefit of the
parties and their respective heirs, legal representatives, successors and
assigns.
10.06 Governing Law; Severability. This Agreement is governed by and shall
be construed in accordance with the law of the State of Delaware, exclusive of
its conflict-of-laws principles. In the event of a direct conflict between the
provisions of this Agreement and any provision of the Certificate, or any
mandatory provision of the Act, the applicable provision of the Certificate or
the Act shall control. If any provision of this Agreement or the application
thereof to any Person or circumstance is held invalid or
19
<PAGE>
unenforceable to any extent, the remainder of this Agreement and the application
of that provision shall be enforced to the fullest extent permitted by law.
10.07 Further Assurances. In connection with this Agreement and the
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions, as requested by the Members or the Majority
Member, as applicable.
10.08 Waiver of Certain Rights. Each Member irrevocably waives any right it
may have to maintain any action for dissolution of the Company or for partition
of the property of the Company.
10.09 Third-Party Beneficiaries. Except with respect to the Lenders, who
are expressly intended to be third-party beneficiaries of this Agreement, there
shall be no third-party beneficiaries of this Agreement.
10.10 Failure to Pursue Remedies. The failure of any party to seek redress
for violation of, or to insist upon the strict performance of, any provision of
this Agreement shall not prevent a subsequent act, which would have originally
constituted a violation, from having the effect of any original violation.
10.11 Cumulative Remedies. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any party
shall not preclude or waive its right to use any or all other remedies. Said
rights and remedies are given in addition to any other right the parties may
have by law, statute, ordinance or otherwise.
10.12 Notice to Members of Provisions of this Agreement. By executing this
Agreement, each Member acknowledges that such Member has actual notice of (a)
all of the provisions of this Agreement, including, without limitation, the
restrictions on the Transfer of Membership Units set forth in Article VI and the
limitations on participation of Members in the management of the Company set
forth in Article III, and (b) all of the provisions of the Certificate. Each
Member hereby agrees that this Agreement constitutes adequate notice of all such
provisions, and each Member hereby waives any requirement that any further
notice thereunder be given.
10.13 Interpretation. For the purposes of this Agreement, terms not defined
in this Agreement shall be defined as provided in the Act; and all nouns,
pronouns and verbs used in this Agreement shall be construed as masculine,
feminine, neuter, singular, or plural, whichever shall be applicable. Titles or
captions of Articles and Sections contained in this Agreement are inserted as a
matter of convenience and for reference, and in no way define, limit, extend or
describe the scope of this Agreement or the intent of any provision hereof.
20
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10.14 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all signing parties had signed the same
document, and all counterparts shall be construed together and shall constitute
the same instrument.
[END OF TEXT]
21
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date set forth above.
ACME SUBSIDIARY HOLDINGS III, LLC
By/s/Douglas E. Gealy
-----------------------------
Name: Douglas E. Gealy
Title: President & COO
ACME TELEVISION, LLC
By/s/Douglas E. Gealy
-----------------------------
Name: Douglas E. Gealy
Title: President & COO
<PAGE>
ACME SUBSIDIARY HOLDINGS III, LLC
Schedule A
Member No. of Units
Acme Television, LLC 200
CERTIFICATE OF FORMATION
OF
ACME TELEVISION OF UTAH, L.L.C.
A LIMITED LIABILITY COMPANY
FIRST: The name of the limited liability company is:
ACME TELEVISION OF UTAH, L.L.C.
SECOND: Its registered office in the State of Delaware is to be
located at 1013 Centre Road, in the City of Wilmington, County of
New Castle, 19805, and its registered agent at such address is
CORPORATION SERVICE COMPANY.
IN WITNESS WHEREOF, the undersigned, being the individual forming
the Company, has executed, signed and acknowledged this
Certificate of Formation this twenty-first day of August, A.D.
1997.
/s/ Jonathan P. Levi
----------------------------
Authorized Person
Jonathan P. Levi
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ACME TELEVISION OF UTAH, LLC
a Delaware limited liability company
LIMITED LIABILITY COMPANY AGREEMENT
Dated October 31, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I - DEFINED TERMS 1
ARTICLE II - ORGANIZATION AND POWERS 5
2.1 Organization 5
2.2 Purposes and Powers 5
2.3 Principal Place of Business 6
2.4 Qualification in Other Jurisdictions 6
2.5 Fiscal Year 6
ARTICLE III - MEMBERS 6
3.1 Membership Units 6
3.2 Issuance of Membership Units; Admission of New Members 7
3.3 Voting Rights 8
3.4 Restrictions 8
3.5 Limitation on Liability of Members 9
3.6 Authority 9
3.7 Withdrawals; Termination 9
3.8 No Appraisal Rights 10
3.9 Compliance with Securities Laws and Other Laws and
Obligations 10
ARTICLE IV - MANAGEMENT 10
4.1 Management 10
4.2 Reliance by Third Parties 11
4.3 Officers 11
ARTICLE V - CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS AND
ALLOCATIONS AND DISTRIBUTIONS 12
5.1 Capital Contributions 12
5.2 Capital Accounts and Allocations 12
5.3 Distributions 14
5.4 Distributions Upon Dissolution 14
5.5 Distribution Upon Withdrawal 15
5.6 Tax Matters Partner 15
ARTICLE VI - TRANSFERS OF INTERESTS 16
6.1 Restrictions on Transfers 16
6.2 Substitute Members 17
6.3 Allocation of Distributions Between Assignor and
Assignee 17
6.4 Permitted Transfers 17
6.5 Permitted Transfers to Lenders 18
<PAGE>
ARTICLE VII - INDEMNIFICATION 19
7.1 Right to Indemnification 19
7.2 Award of Indemnification 20
7.3 Successful Defense 20
7.4 Advance Payments 21
7.5 Insurance 21
7.6 Heirs and Personal Representatives 21
7.7 Non-Exclusivity 21
7.8 Amendment 21
ARTICLE VIII - CONFLICTS OF INTEREST 22
8.1 Transactions with Interested Persons; Conflicts 22
8.2 Business Opportunities 22
ARTICLE IX - DISSOLUTION, LIQUIDATION, AND TERMINATION 23
9.1 No Dissolution 23
9.2 Events Causing Dissolution 22
9.3 Notice of Dissolution 23
9.4 Liquidation 23
9.5 Certificate of Cancellation 24
ARTICLE XI - GENERAL PROVISIONS 24
10.1 Offset 24
10.2 Notices 24
10.3 Entire Agreement 24
10.4 Amendment or Modification; Terms 24
10.5 Binding Effect 25
10.6 Governing Law; Severability 25
10.7 Further Assurances 25
10.8 Waiver of Certain Rights 25
10.9 Third-Party Beneficiaries 25
10.10 Failure to Pursue Remedies 25
10.11 Cumulative Remedies 25
10.12 Notice of Members of Provisions of this Agreement 26
10.13 Interpretation 26
10.14 Counterparts 26
Schedule A - Membership Units
<PAGE>
ACME Television of Utah, LLC
Limited Liability Company Agreement
This Limited Liability Company Agreement is made as of October 31, 1997 by
and among ACME Television of Utah, LLC (the "Company") and each of the Members
listed on Schedule A hereto, and those Persons who become Members of the Company
in accordance with the provisions hereof and whose names are set forth as such
in the record books of the Company.
WHEREAS, the Company has been formed as a limited liability company under
the Delaware Limited Liability Company Act, Del. Code Ann. tit. 6, ss. 18.101 et
seq. (as amended from time to time, the "Act"), by filing a Certificate of
Formation of the Company with the office of the Secretary of State of the State
of Delaware on August 21, 1997; and
WHEREAS, the Members desire to set out fully their respective rights,
obligations and duties regarding the Company and its assets and liabilities as
set forth herein.
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Members hereby
agree as follows:
ARTICLE I - DEFINED TERMS
Unless the context otherwise requires, the terms defined in this Article I
shall, for the purposes of this Agreement, have the meanings herein specified
(each such meaning to be equally applicable to both the singular and plural
forms of the respective terms so defined).
"Affiliate" shall mean, with respect to a specified Person, any Person that
directly or indirectly controls, is controlled by or is under common control
with, the specified Person. As used in this definition, the term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise.
"Agreement" shall mean this Limited Liability Company Agreement, as
amended, modified, supplemented or restated from time to time.
"Bankruptcy" means, with respect to a Person, that either (i) an
involuntary petition under any bankruptcy or insolvency or other debtor relief
law or under the
<PAGE>
reorganization provisions of any such law has been filed with respect to such
Person or a receiver of or for the property of such Person has been appointed
without the acquiescence of such Person, which petition or appointment remains
undischarged or unstayed for an aggregate period of sixty (60) days (whether or
not consecutive) or (ii) a voluntary petition under any bankruptcy or insolvency
or other debtor relief law or under the reorganization provisions of any such
law has been filed by such Person, a voluntary assignment of such Person's
property for the benefit of creditors has been made, a written admission by such
Person of its inability to pay its debts as they mature has been made, a
receiver of or for the property of such Person has been appointed with the
acquiescence of such Person or such Person has done any similar act of like
import.
"Capital Contribution" shall mean with respect to any Initial Member the
amount set forth opposite its name on Schedule A and with respect to any New
Member the amount set forth opposite its name on Schedule A, as amended.
"Certificate" shall mean the Certificate of Formation and any and all
amendments thereto and restatements thereof filed on behalf of the Company with
the Secretary of State of the State of Delaware pursuant to the Act.
"Common Members" shall mean those persons listed on Schedule A hereto as
Common Members.
"Common Units" shall mean those Membership Units designated as Common
Units, as described in Section 3.1 hereof.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any corresponding federal tax statute enacted after the date of this
Agreement. A reference to a specific section of the Code refers not only to such
specific section but also to any corresponding provision of any federal tax
statute enacted after the date of this Agreement, as such specific section or
corresponding provision is in effect on the date of application of the
provisions of this Agreement containing such reference.
"Distribution Percentage" shall mean a percentage determined for each
holder of Common Units by dividing the aggregate Common Units of such holder by
the aggregate Common Units of all holders of Common Units entitled to
distributions at the time of such determination.
"FCC" means the Federal Communications Commission.
"Indemnified Parties" shall mean the Members, any Affiliate of the Members
and each Person serving as an Officer, employee or other agent of the Company
(including Persons who serve at the Company's request as directors, managers,
officers, employees, agents or trustees of another organization in which the
Company has any interest as a shareholder, creditor or otherwise) and their
respective successors and assigns.
2
<PAGE>
"Initial Capital Contribution" shall mean with respect to any Initial
Member the amount set forth opposite its name on Schedule A hereto.
"Initial Members" shall mean those Persons listed on Schedule A hereto as
Initial Members as of the date hereof.
"Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time, together with any successor statute, and the rules
and regulations promulgated thereunder.
"Losses" shall mean all liabilities, judgments, obligations, losses,
damages, taxes and interest and penalties thereon (other than (i) income taxes
due on income allocated to Membership Units; and (ii) taxes based on fees,
compensation or commissions received by an Indemnified Party in connection with
the administration of the Company or the Company's property), claims, actions,
suits or other proceedings (whether civil or criminal, pending or threatened,
before any-court or administrative or legislative body, and as the same are
accrued, in which an Indemnified Party may be or may have been involved as a
party or otherwise or with which he or she may be or may have been threatened,
while in office or thereafter), costs, expenses and disbursements (including,
without limitation, legal and accounting fees and expenses) of any kind and
nature whatsoever.
"Member" shall mean the Initial Members and any Person admitted as a Member
in accordance with the terms of this Agreement and named as a Member in the
record books of the Company, and includes any Person admitted pursuant to the
provisions of this Agreement when acting in his, her or its capacity as a Member
of the Company, and "Members" shall mean two (2) or more of such Persons when
acting in their capacities as Members of the Company.
"New Member" shall mean any Member who is not an Initial Member.
"Person" shall mean an individual, corporation, association, partnership
(general or limited), joint venture, trust, unincorporated organization, limited
liability company, any other entity or organization of any kind or a government
or any department, agency, authority, instrumentality or political subdivision
thereof.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time, together with any successor statute, and the rules and regulations
promulgated thereunder.
"Subscription Agreement" shall mean a subscription agreement for the
purchase of a Membership Unit in the Company, in a form acceptable to the
Members or the Majority Member, as applicable.
3
<PAGE>
"Tax Rate" means, for any taxable year of a Member, the sum of the Federal
Rate and the State Rate, with (a) the "Federal Rate" defined to mean the highest
effective federal income tax rate applicable to any individual for such year and
(b) the "State Rate" defined as the product of (i) the highest effective state
income tax rate applicable to an individual Member for such year multiplied by
(ii) a percentage equal to the difference between one hundred percent (100%) and
the Federal Rate.
"Taxable Income" and "Taxable Loss" mean, for any taxable year, the taxable
income or loss attributable to such Member's distributive share of taxable
income or loss of the Company, as determined for federal income tax purposes;
provided that in making such determination all separately stated items of
income, gain, loss and deduction (other than tax-exempt income) shall be
included; and provided further, that in calculating Taxable Income and Taxable
Loss, items of income, gain, loss and deduction attributable to the sale or
exchange of all or substantially all of the assets of the Company shall be
excluded from such calculation.
"Transfer" shall mean any sale, assignment, transfer, exchange, charge,
pledge, gift, hypothecation, conveyance or encumbrance (such meaning to be
equally applicable to verb forms of such term).
"Treasury Regulations" means the income tax regulations, including
temporary regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
The following terms shall have the meanings set forth in the indicated
Sections hereof:
Defined Term Section Number
------------ --------------
"Act" Preamble
"Capital Account" 5.02
"Company" Preamble
"Consolidated Group Securities" 3.04(a)
"Holdings" 5.03(a)
"Liquidating Trustee" 9.03
"Majority Member" 4.01(b)
"Membership Unit" 3.01
"Senior Executive Offices" 4.06
"Tax Distributions" 5.03
"Tax Matters Partner" 5.06
4
<PAGE>
ARTICLE II - ORGANIZATION AND POWERS
2.1 Organization. The name of the Company is ACME Television of Utah, LLC.
The Company has been formed by the filing of its Certificate with the Delaware
Secretary of State pursuant to the Act. The Certificate may be restated or
amended by the Members or the Majority Member, as applicable, from time to time
in accordance with the Act and subject to the terms of this Agreement. The
Company shall deliver a copy of the Certificate and any amendment thereto to any
Member who so requests.
2.2 Purposes and Powers. The principal business activity and purposes of
the Company shall initially be to acquire, develop, own and operate television
broadcast stations and to conduct any business related thereto or useful in
connection therewith. However, the business and purposes of the Company shall
not be limited to its initial principal business activity, and the Company
shall, subject to the terms of this Agreement, have authority to engage in any
other lawful business, purpose or activity permitted by the Act. Except as
otherwise provided in this Agreement, the Company, and the Members or the
Majority Member, as applicable, acting on behalf of the Company in accordance
with this Agreement, shall possess and may exercise all of the powers and
privileges granted by the Act or which may be exercised by any Person, together
with any powers incidental thereto, so far as such powers or privileges are
necessary, appropriate, proper, advisable, incidental or convenient to the
conduct, promotion or attainment of the business purposes or activities of the
Company, including without limitation the following powers:
(a) to conduct its business and operations in any state, territory or
possession of the United States or in any foreign country or jurisdiction;
(b) to purchase, receive, take, lease or otherwise acquire, own, hold,
improve, maintain, use or otherwise deal in and with, sell, convey, lease,
exchange, transfer or otherwise dispose of, mortgage, pledge, encumber or create
a security interest in all or any of its real or personal property, or any
interest therein, wherever situated;
(c) to borrow or lend money or obtain or extend credit and other
financial accommodations, to invest and reinvest its funds in any type of
security or obligation of or interest in any public, private or governmental
entity, and to give and receive interests in real and personal property as
security for the payment of funds so borrowed, loaned or invested;
(d) to make and modify contracts, including contracts of insurance,
incur liabilities and give guaranties, whether or not such guaranties are in
furtherance of the business and purposes of the Company, including without
limitation, guaranties of obligations of other Persons who are interested in the
Company or in whom the Company has an interest;
5
<PAGE>
(e) to employ and terminate Officers, employees, agents and other
Persons, to organize committees of the Company, to delegate to such Persons
and/or committees such power and authority, the performance of such duties and
the execution of such instruments in the name of the Company, to fix the
compensation and define the duties and obligations of such personnel, to
establish and carry out retirement, incentive and benefit plans for such
personnel, and to indemnify such personnel to the extent permitted by this
Agreement and the Act;
(f) to form and maintain subsidiaries and to merge with, or
consolidate into, another Delaware limited liability company or other business
entity (as defined in Section 18-209 of the Act); and
(g) to institute, prosecute, and defend any legal action or
arbitration proceeding involving the Company, and to pay, adjust, compromise,
settle, or refer to arbitration any claim by or against the Company or any of
its assets.
2.3 Principal Place of Business. The principal office and place of business
of the Company shall initially be Suite 850, 650 Town Center Drive, Costa Mesa,
California 92626. The Members or the Majority Member, as applicable, may change
the principal office or place of business of the Company at any time and may
cause the Company to establish other offices or places of business in various
jurisdictions and appoint agents for service of process in such jurisdictions.
2.4 Qualification in Other Jurisdictions. The Members or the Majority
Member, as applicable, shall cause the Company to be qualified or registered
under applicable laws of any jurisdiction in which the Company transacts
business and shall be authorized to execute, deliver and file any certificates
and documents necessary to effect such qualification or registration.
2.5 Fiscal Year. The fiscal year of the Company shall end on December 31 of
each year.
ARTICLE III - MEMBERS
3.1 Membership Units. The Members shall have no rights or powers in respect
of the Company (including, without limitation, any rights in respect of
allocations of profit and loss or distributions) other than the rights conferred
by this Agreement represented by issued and outstanding units of membership
interest (the "Membership Units"), which shall be deemed to be personal property
giving only the rights provided in this Agreement and which shall consist of one
class ("Common Units"), which shall have rights and privileges, including voting
rights as expressly set forth in this Agreement. Every Member by virtue of
having become a Member shall be held to have expressly assented and
6
<PAGE>
agreed to the terms hereof and to have become a party hereto. Ownership of a
Membership Unit shall not entitle a Member to any title in or to the whole or
any part of the property of the Company or right to call for a partition or
division of the same or for an accounting. The Initial Members of the Company,
their addresses, and the respective classes and denominations of Membership
Units held by them shall be as set forth on Schedule A hereto, and said schedule
shall be amended from time to time by the Members or the Majority Member, as
applicable, in accordance with the terms hereof to reflect the withdrawal of
Members or the admission of additional Members pursuant to this Agreement.
The Company hereby authorizes for issuance 200 Common Units. As of the date
hereof, the Company shall have issued 200 Common Units to the Initial Members,
as set forth on Schedule A hereto. Except for the Common Units issued on the
date hereof, none of the Common Units may be issued by the Company without the
prior written consent of a majority in interest of the Members.
3.2 Issuance of Membership Units: Admission of New Members.
(a) The Company is not authorized to offer and sell, or cause to be
offered and sold, additional Membership Units or to admit additional Persons as
Members except with the approval of the Members holding more than fifty percent
(50%) in interest of the Common Units.
(b) The Members or the Majority Member, as applicable, may establish
eligibility requirements for admission of a subscriber as a New Member after the
date hereof and may refuse to admit any subscriber that fails to satisfy such
eligibility requirements. The Members or the Majority Member, as applicable,
shall have the responsibility for determining whether a Person is eligible for
admission as a New Member. Each Person who first subscribes for a Membership
Unit in the Company after the date hereof shall be admitted as a New Member of
the Company at the time (i) such Person executes a Subscription Agreement
agreeing to be bound by the provisions hereof, (ii) the Members or the Majority
Member, as applicable, at their sole discretion, accepts such Subscription
Agreement on behalf of the Company and (iii) the subscriber makes the Capital
Contribution(s) required pursuant to the terms of this Agreement and its
Subscription Agreement. None of the existing Members shall have any preemptive
or similar right to subscribe to the issuance of new Membership Units in the
Company, and each of the Members acknowledges that its membership interest is
subject to adjustment (downward and upward) in the event of the admission of New
Members to the Company pursuant hereto or the withdrawal of any Member from the
Company.
7
<PAGE>
3.3 Voting Rights.
(a) Except as otherwise provided in this Agreement, no Member or
holder of a Membership Unit shall have the right to amend or terminate this
Agreement.
3.4 Restrictions. Notwithstanding anything in this Agreement to the
contrary, the following matters shall require the prior written consent of
holders of more than fifty percent (50%) in interest of the Common Units:
(a) the redemption, purchase or other acquisition for value (or
payment into or set aside for a sinking fund for such purpose) of any Membership
Unit, or other type of equity interest of the Company or any of its
Subsidiaries, or security convertible into or exchangeable or exercisable for
such Membership Units or equity interests (which are hereinafter reflected to as
"Consolidated Group Securities");
(b) the authorization or issuance (or the incurrence of any obligation
to authorize or issue) of any additional Membership Units or other Consolidated
Group Securities;
(c) the increase or decrease of the total number of authorized
Membership Units or other Consolidated Group Securities;
(d) the payment or declaration of any dividend or distribution (other
than Tax Distributions pursuant to Section 5.3) with respect to any Membership
Units or other Consolidated Group Securities;
(e) the authorization of any merger or consolidation of the Company or
any of its Subsidiaries with or into any other entity (except for mergers among
wholly-owned Subsidiaries);
(f) the authorization of the reorganization or sale of the Company or
any of its Subsidiaries or the sale of any material assets of the Company or any
of its Subsidiaries;
(g) the authorization of any reclassification or recapitalization of
the outstanding Membership Units of the Company or any other Consolidated Group
Securities;
(h) engagement by the Company or any of its Subsidiaries in any
business other than the business now conducted or contemplated by the Company or
a business or businesses similar thereto or reasonably compatible therewith;
8
<PAGE>
(i) the alteration, modification or amendment of this Agreement; or
(j) the application by the Company for or consent by it to the
appointment of a receiver, trustee, custodian or liquidator of it or any of its
property, (ii) the admission in writing by the Company of its inability to pay
its debts as they mature, (iii) the making by the Company of a general
assignment for the benefit of creditors, or (iv) the filing by the Company of a
voluntary petition in bankruptcy, or a petition or an answer seeking
reorganization or an arrangement with creditors, or any other action by the
Company to take advantage of any bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation laws or statutes, or an answer
from the Company admitting the material allegations of a petition filed against
it in any proceeding under any such law.
3.5 Limitation on Liability of Members. Except as otherwise provided in the
Act, no Member of the Company shall be obligated personally for any debt,
obligation or liability of the Company or of any other Member or otherwise have
any personal recourse hereunder, whether arising in contract, tort or otherwise,
solely by reason of being a Member. Except as expressly set forth in this
Agreement, no Member shall have any fiduciary or other duty to another Member
with respect to the business and affairs of the Company, and no Member shall be
liable to the Company or any other Member for acting in good faith reliance upon
the provisions of this Agreement. No Member shall have any responsibility to
restore any negative balance in its Capital Account or to contribute to or in
respect of the liabilities or obligations of the Company or return distributions
made by the Company except as required by this Agreement, the Act or other
applicable law; provided, however, that Members are responsible for their
failure to make required Capital Contributions in accordance with Section 5.1.
3.6 Authority. Except as otherwise expressly provided herein, in all
matters relating to or arising out of the conduct or the operation of the
Company, the decision of the Members (acting by vote of holders of more than
fifty percent (50%) in interest of the Common Units) or the Majority Member, as
applicable, shall be the decision of the Company. The Company may employ one or
more Persons from time to time, and such Persons, in their capacity as Officers
or employees of the Company, may take part in the control and management of the
business of the Company to the extent such authority and power to act for or on
behalf of the Company has been delegated to them by the Members or the Majority
Member, as applicable.
3.7 Withdrawals; Termination. No Member shall have any right to resign or
withdraw from the Company without the consent of the Members or the Majority
Member, as applicable, or to receive any distribution on its Membership Units or
the repayment of its Capital Contributions except as provided in Article V
hereof.
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3.8 No Appraisal Rights. No Member shall have any right to have its
interest in the Company appraised and paid out under the circumstances provided
in Section 18-210 of the Act or any other circumstances.
3.9 Compliance with Securities Laws and Other Laws and Obligations. Each
Member hereby represents and warrants to the Company and acknowledges that (a)
it has such knowledge and experience in financial and business matters that it
is capable of evaluating the merits and risks of an investment in the Company
and making an informed investment decision with respect thereto, (b) it is able
to bear the economic and financial risk of an investment in the Company for an
indefinite period of time and understands that it has no right to withdraw and
have its interest repurchased by the Company, (c) it is acquiring an interest in
the Company for investment only and not with a view to, or for resale in
connection with, any distribution to the public or public offering thereof, and
(d) it understands that the interests in the Company have not been registered
under the securities laws of any jurisdiction and cannot be disposed of unless
they are subsequently registered and/or qualified under applicable securities
laws or pursuant to valid exemptions from such registration/qualification
requirements and the provisions of this Agreement have been complied with.
ARTICLE VI - MANAGEMENT
4.1 Management.
(a) Except as provided in Section 4.1(b) hereof, the Company shall be
managed by the Members. No action may be taken by any Member to bind the Company
without the prior consent of Members holding more than fifty percent (50%) in
interest of the Common Units.
(b) If any Member shall own more than fifty percent (50%) in interest
of the Common Units of the Company (the "Majority Member"), management and
control of the business of the Company shall be vested exclusively in the
Majority Member for so long as such Member holds more that fifty percent (50%)
in interest of the Common Units, and such Majority Member shall have exclusive
power and authority, in the name of and on behalf of the Company, to perform all
acts and do all things which, in its sole discretion, it deems necessary or
desirable to conduct the business of the Company.
The Majority Member shall, subject to all applicable provisions of
this Agreement, be authorized in the name and on behalf of the Company: (i) to
enter into, execute, amend, supplement, acknowledge and deliver any and all
contracts, agreements, leases or other instruments for the operation of the
Company's business; and (ii) in general to do all things and execute all
documents determined by it to be necessary or appropriate to conduct the
business of the Company as more fully set forth in Section 2.2 hereof or as
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provided by law, or to protect and preserve the Company's assets. The Majority
Member may delegate any or all of the foregoing powers. The Majority Member is
an agent of the Company for the purpose of the Company's business. Any action
taken by the Majority Member, and the signature of the Majority Member on any
agreement, contract, instrument or other document on behalf of the Company,
shall be sufficient to bind the Company and shall conclusively evidence the
authority of the Majority Member and the Company with respect thereto.
(c) The Members acting pursuant to Section 4.1(a) or the Majority
Member, as applicable, shall be the "manager" (within the meaning of the Act) of
the Company, and each shall have the benefits and protections accorded
"managers" under the Act. The Members acting pursuant to Section 4.1(a) or the
Majority Member, as applicable, shall devote such time to the business and
affairs of the Company as is reasonably necessary for the performance of their
duties, but shall not be required to devote full time to the performance of such
duties and may delegate their responsibilities as provided in this Agreement.
The Majority Member shall not be personally liable to the Company or to its
Members for breach of any duty that does not involve: (i) a breach of the duty
of loyalty to the Company or its Members; (ii) an act or omission not in good
faith or which involves intentional misconduct or a knowing violation of law; or
(iii) a transaction from which the Majority Member derived an improper personal
benefit.
4.2 Reliance by Third Parties. Any person dealing with the Company or any
Member may rely upon a certificate signed by the Majority Member or any Officer
as to (i) the identity of any other Member; (ii) any factual matters relevant to
the affairs of the Company; (iii) the persons who are authorized to execute and
deliver any document on behalf of the Company; or (iv) any action taken or
omitted by the Company or any Member. The Majority Member shall not be
personally liable to the Company or to its Members for breach of any duty that
does not involve: (i) a breach of the duty of loyalty to the Company or its
other Members; (ii) an act or omission not in good faith or which involves
intentional misconduct or a knowing violation of law; or (iii) a transaction
from which the Majority Member derived an improper personal benefit.
4.3 Officers. The Members or the Majority Member, as applicable, may
designate employees of the Company as officers of the Company (the "Officers")
as they deem necessary or desirable to carry on the business of the Company and
the Members or the Majority Member, as applicable, may delegate to such Officers
such power and authority as the Members or the Majority Member, as applicable,
deem advisable. Any Officer may hold two or more offices of the Company. The
initial Officers of the Company shall be Jamie Kellner (Chairman and Chief
Executive Officer), Douglas Gealy (President and Chief Operating Officer) and
Thomas Allen (Executive Vice President and Chief Financial Officer). New offices
may be created and filled by the Members or the Majority Member, as applicable.
Each Officer shall hold office until his or her successor is designated by the
Members or the Majority Member, as applicable, or until his or her
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earlier death, resignation or removal. Any Officer may resign at any time upon
written notice to the Members or the Majority Member, as applicable. Any Officer
may be removed by the Members or the Majority Member, as applicable, with or
without cause at any time. A vacancy in any office occurring because of death,
resignation, removal or otherwise, may, but need not, be filled by the Members
or the Majority Member, as applicable. The Officers are not "managers" (within
the meaning of the Act) of the Company.
ARTICLE V - CAPITAL CONTRIBUTIONS; CAPITAL
ACCOUNTS AND ALLOCATIONS AND DISTRIBUTIONS
5.1 Capital Contributions. The Initial Members have made as of the date
hereof the Capital Contribution to the Company specified on Schedule A attached
hereto. Each New Member shall make the Capital Contribution to the Company
specified in such Member's Subscription Agreement as of the date of admission of
such New Member as a Member of the Company. Except as approved by the Members or
the Majority Member, as applicable, or as set forth on Schedule A or in a
Member's Subscription Agreement, no Member shall be entitled or required to make
any Capital Contribution or loan or advance to the Company; provided, however,
that the Company may, subject to the other terms of this Agreement, borrow from
its Members as well as from banks or other lending institutions to finance its
working capital or the acquisition of assets upon such terms and conditions as
shall be approved by the Members or the Majority Member, as applicable, and any
such loans by Members shall not be considered Capital Contributions or reflected
in their Capital Accounts. The agreed value of all non-cash Capital
Contributions made by Members shall be set forth on Schedule A or in such
Member's Subscription Agreement. No Member shall be entitled to any interest or
compensation with respect to its Capital Contributions or any services rendered
on behalf of the Company except as specifically provided in this Agreement. No
Member shall have any liability for the repayment of the Capital Contributions
of any other Member and shall look only to the assets to the Company for return
of its Capital Contributions.
5.2 Capital Accounts and Allocations.
(a) Capital Accounts. A separate capital account (a "Capital Account")
shall be established and maintained for each Member, which shall initially be
equal to the Capital Contribution of such Member as set forth on Schedule A
hereto. Such Capital Accounts shall be maintained in accordance with Section
1.704-1(b)(2)(iv) of the Treasury Regulations, and this Section 5.2 shall be
interpreted and applied in a manner consistent with said Section of the Treasury
Regulations. The Capital Accounts shall be maintained for the sole purpose of
allocating items of income, gain, loss and deduction among the Members and shall
have no effect on the amount of any distributions to any Members in liquidation
or otherwise. The amount of all distributions to Members shall be determined
pursuant to Sections 5.3, 5.4 and 5.5.
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(b) Allocation of Profits and Losses. All items of income, gain, loss
and deduction as determined for book purposes shall be allocated among the
Members and credited or debited to their respective Capital Accounts in
accordance with Treasury Regulations Section 1.704-1(b)(2)(iv), so as to ensure
to the maximum extent possible (i) that such allocations satisfy the economic
effect equivalence test of Treasury Regulations Section 1.704-1(b)(2)(ii)(i) (as
provided hereinafter) and (ii) that all allocations of items that cannot have
economic effect (including credits and nonrecourse deductions) are allocated to
the Members in proportion to their membership interests unless otherwise
required by Code Section 704(b) and the Treasury Regulations promulgated
thereunder. To the extent possible, items that can have economic effect shall be
allocated in such a manner that the balance of each Member's Capital Account at
the end of any fiscal year (increased by such Member's "share of partnership
minimum gain" as defined in Treasury Regulations Section 1.704-2) would be
positive to the extent of the amount of cash that such Member would receive (or
would be negative to the extent of the amount of cash that such Member should be
required to contribute to the Company) if the Company sold all of its property
for an amount of cash equal to the book value (as determined pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv)) of such property (reduced, but
not below zero, by the amount of nonrecourse debt to which such property is
subject) and all of the cash of the Company remaining after payment of all
liabilities (other than nonrecourse liabilities) of the Company were distributed
in liquidation immediately following the end of such fiscal year in accordance
with Section 5.3. Except to the extent otherwise required by the Code, the
"traditional method" provided for in Treasury Regulations Section 1.704-3(b)
shall apply to all tax allocations governed by Code Section 704(c) and all
"reverse Section 704(c) allocations."
(c) Other Allocations. The Members or the Majority Member, as
applicable, may adjust the Capital Accounts of the Members to reflect
reevaluations of the Company property whenever the adjustment would be permitted
under Treasury Regulations Section 1.704-1(b)(2)(iv)(f). In the event that the
Capital Accounts of the Members are so adjusted, (i) the Capital Accounts of the
Members shall be adjusted in accordance with Treasury Regulations Section
1.704l(b)(2)(iv)(g) for allocations of depreciation, depletion, amortization and
gain or loss, as computed for book purposes, with respect to such property and
(ii) the Members' distributive shares of depreciation, depletion, amortization
and gain or loss, as computed for tax purposes, with respect to such property
shall be determined so as to take account of the variation between the adjusted
tax basis and book value of such property in the same manner as under Section
704(c) of the Code. In the event that Code Section 704(c) applies to Company
property, the Capital Accounts of the Members shall be adjusted in accordance
with Treasury Regulations Section 1.704-1(b)(2)(iv)(g) for allocations of
depreciation, depletion, amortization and gain and loss, as computed for book
purposes, with respect to such property. In applying clause (ii) of the second
preceding sentence and all of the preceding sentence, the provisions of Code
Section 704(b) shall apply.
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5.3 Distributions. Subject to (i) the terms of the Act, (ii) any agreements
of the Company or any of its Affiliates with respect to indebtedness for money
borrowed to which the Company may from time to time be subject, and (iii) except
in the case of distributions pursuant to subsection (a) below, the prior written
consent of holders of a majority in interest of the Common Units, all funds of
the Company which are available for distribution (as determined by the Members
or the Majority Member, as applicable, in their discretion) shall be distributed
as follows:
(a) First, within one hundred and twenty (120) days after the end of
each taxable year during which ACME Televisions Holdings, LLC ("Holdings") shall
have any direct or indirect ownership interest in the Company, there shall be
distributed to each Member an amount equal to the product of (i) the Tax Rate
and (ii) the difference between (x) the amount of such Member's Taxable Income
with respect to such taxable year and (y) the cumulative amount of such Member's
Taxable Loss, if any, from all prior taxable years, but only to the extent such
Taxable Loss on a cumulative basis exceeds Taxable Income for all prior taxable
years on a cumulative basis (the "Tax Distributions"); provided however, that
such distribution shall in all events be sufficient to allow Holdings to make
the distributions required under Section 5.3(a) of the Limited Liability Company
Agreement of Holdings; and
(b) Second, pro rata to all Members in accordance with their
respective Distribution Percentages.
5.4 Distributions Upon Dissolution. Proceeds from a sale of all or
substantially all of the assets of the Company and amounts available upon
dissolution, after payment of, or adequate provision for, the debts and
obligations of the Company, including the expenses of its liquidation and
dissolution, shall be distributed and applied in the following priorities:
(a) First, to fund reserves as deemed reasonably necessary by the
Members, the Majority Member, as applicable, or the Liquidating Trustee for any
contingent, conditional or unmatured liabilities or other obligations of the
Company, which such reserves (i) may be paid to a bank (or other third party),
to be held in escrow for the purpose of paying any such contingent, conditional
or unmatured liabilities or other obligations, and (ii) shall at the expiration
of such period(s) as the Members, the Majority Member, as applicable, or
Liquidating Trustee may reasonably deem advisable, shall be distributed to the
Members in accordance with Section 5.3; and
(b) Second, in accordance with Section 5.3.
If any assets of the Company are to be distributed in kind in connection
with such liquidation, such assets shall be distributed on the basis of their
fair market value net
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of any liabilities encumbering such assets and, to the greatest extent possible,
shall be distributed pro-rata in accordance with the total amounts to be
distributed to each Member. Solely for purposes of Section 5.2 and immediately
prior to the effectiveness of any such distribution-in-kind, each item of gain
and loss that would have been recognized by the Company had the property being
distributed been sold at fair market value shall be determined and allocated to
those persons who were Members immediately prior to the effectiveness of such
distribution in accordance with Section 5.2.
5.5 Distribution Upon Withdrawal. No Member shall be entitled to any
distribution or payment with respect to its Membership Units upon the
resignation or withdrawal of such Member.
5.6 Tax Matters Partner. ACME Television Holdings of Utah, LLC is hereby
designated as the initial "Tax Matters Partner" of the Company for purposes of
Section 6231(a)(7) of the Code, and such Tax Matters Partner shall have the
power to manage and control, on behalf of the Company, any administrative
proceeding at the Company level with the Internal Revenue Service relating to
the determination of any item of Company income, gain, loss, deduction or credit
for federal income tax purposes. The Members or the Majority Member, as
applicable, may at any time hereafter designate a new Tax Matters Partner;
provided, however, that only a Member may be designated as the Tax Matters
Partner of the Company.
(a) Partnership Status. The Company will elect to be treated as a
pass-through entity for purposes of federal and state income tax, and each
Member covenants that it will make no election, declaration or statement on or
in any tax return, tax filing, or any book or record maintained by it which is
inconsistent with or detrimental to the Company's ongoing maintenance of
partnership tax status (or as a single-member entity, if applicable).
(b) Income Tax Compliance. The Tax Matters Partner shall prepare or
cause to be prepared and filed on behalf of the Company, when and as required by
applicable law, all federal, state and local income tax information returns or
requests for extensions thereof. Not less than thirty (30) days prior to the due
date (including extensions) for any return (but not later than August 15 of each
year), the Tax Matters Partner shall submit to each Member a copy of the return
as proposed for review and a schedule showing the Member's allocable share of
the Company's tax attributes ("Tax Attributes") sufficient to allow such Member
to include such Tax Attributes in its federal income tax return. Each Member
shall provide to the Tax Matters Partner, when and as requested, all information
concerning the affairs of such Member as may be reasonably required to permit
the filing of such returns.
(c) Tax Elections. The Tax Matters Partner shall make the following
tax elections on behalf of the Company:
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(i) Unless required to adopt a different taxable year pursuant to
Section 706(b) of the Code, adopt the calendar year as the annual accounting
period;
(ii) Adopt the accrual method of accounting;
(iii) Deduct interest expense and taxes attributable to the
construction or installation of real and personal property improvements to the
fullest extent permitted by the Code;
(iv) Compute the allowance for depreciation under the most
accelerated tax depreciation method and using the shortest life and lowest
salvage value authorized by applicable law, consistent with the election
provided for in the following clause, with respect to all depreciable assets;
(v) If allowed by the Code, and to the maximum extent allowable,
elect to take available investment tax credit on the full basis of each asset;
and
(vi) Make such other elections as the Tax Matters Partner shall
have been directed in writing by the Members or the Majority Member, as
applicable, to make. The requirement to make any of the elections set forth
above is predicated upon the assumption that current federal income tax law will
continue in force. If any legislative change is made in the Code or any other
tax statutes or by the IRS in regulations and other pronouncements or by the
courts in case law affecting any of such elections so as to materially alter the
economic result of the required election, the Tax Matters Partner shall make
such election in respect of the item so affected as directed by the Members or
the Majority Member, as applicable.
(d) Code Section 754 Election. In connection with any transfer or
assignment of any Membership Units, or any distribution with respect to which a
Member recognizes gain under Code section 731(a), the Members or the Majority
Member, as applicable, shall, upon the written request of any Member, cause the
Company to file an election under Code section 754 and the Treasury Regulations
thereunder to adjust the basis of the Company assets under Code Section 734(b)
or 743(b) and a corresponding election under the applicable sections of state
and local law.
ARTICLE VI - TRANSFERS OF INTERESTS
6.1 Restrictions on Transfers. No Membership Units of the Company may be
Transferred, nor may any Member offer to Transfer, and no Transfer by a Member
shall be binding upon the Company or any Member unless such Transfer complies
with the provisions of this Article VI and the Company receives an executed copy
of the documents effecting such Transfer.
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No Transfer shall be permitted if such Transfer would (i) violate the
registration provisions of the Securities Act or the securities laws of any
applicable jurisdiction, (ii) cause the Company to become subject to regulation
as an "investment company" under the Investment Company Act, and the rules and
regulations promulgated thereunder, (iii) result in the termination of any
material contract to which the Company is a party and which is material, or (iv)
result in the treatment of the Company as an association taxable as a
corporation or as a "publicly traded partnership" for federal income tax
purposes. The Company may require reasonable evidence as to the foregoing,
including, without limitation, a favorable opinion of counsel.
6.2 Substitute Members. If a Transferee of Membership Units does not become
(and until any such Transferee becomes) a substitute Member in accordance with
the provisions of Section 6.1 hereof, such Person shall not be entitled to
exercise or receive any of the rights, powers or benefits of a Member other than
the right to receive distributions which the assigning Member has Transferred to
such Person. The Company shall admit as a substitute Member any Person that
acquires Membership Units by Transfer from any Member pursuant to Section 6.1
hereof, but only upon the receipt of an executed instrument satisfactory to the
Company whereby such assignee becomes a party to this Agreement as a Member.
6.3 Allocation of Distributions Between Assignor and Assignee. Upon the
Transfer of Membership Units pursuant to this Article and unless the assignor
and assignee otherwise agree and so direct the Company in a written statement
signed by both the assignor and assignee (a) distributions pursuant to Article V
shall be made to the Person owning such Membership Units at the date of
distribution and (b) the assignee shall succeed to a pro-rata (based on the
percentage of such assignor's Membership Units Transferred) portion of the
assignor's Capital Account with respect to such Membership Units.
Any Membership Units Transferred shall remain subject to the provisions of
this Agreement and the transferee shall have entered into an enforceable written
agreement providing that all Membership Units so Transferred shall continue to
be subject to all provisions of this Agreement as if such Membership Units were
still held by the transferring Member, and provided further that such permitted
transferee shall not be permitted to make any further Transfer without complying
with the provisions of this Agreement. Anything to the contrary in this
Agreement notwithstanding, transferees permitted hereunder shall take any
Membership Units so Transferred subject to all obligations under this Agreement
as if such Membership Units were still held by the transferring Member whether
or not they so expressly agree.
6.4 Permitted Transfers. Subject to the provisions of Sections 6.1(a) and
6.2, holders of Common Units may Transfer such Common Units to any other holder
of Common Units or to a partner or Affiliate of such Member or to any other
investment
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fund or other entity for which such Member and/or one or more partners or
Affiliates thereof, directly or indirectly through one or more intermediaries,
serve as general partner or manager or in a like capacity.
6.5 Permitted Transfers to Lenders. Notwithstanding the provisions of this
Article VI restricting or otherwise regulating a Transfer by a Member, Section
3.2 with respect to the admission of New Members, Section 5.1 with respect to
Capital Contributions and Subscription Agreements by New Members and any other
provision contained in this Agreement to the contrary:
(a) Each Member hereby (i) consents to the collateral assignment and
pledge by each other Member of its Membership Units (including all economic
interests therein) in the Company pursuant to a Security and Pledge Agreement
dated as of November __, 1997 (as the same may be amended, restated, renewed,
replaced, supplemented or otherwise modified from time to time, the "Pledge
Agreement") between the Company and Canadian Imperial Bank of Commerce, New York
Agency, as agent for the Lenders (the "Lenders") referred to therein (together
with its successors and assigns in such capacity, the "Agent"), which Pledge
Agreement was entered into, or reaffirmed, as applicable, (x) as a condition to
the execution and delivery of the First Amended and Restated Credit Agreement
dated as of November __, 1997 among the Agent, the Lenders and ACME Television,
LLC, a Delaware limited liability company (the "Borrower"), (as the same may be
amended, restated, renewed, replaced, supplemented or otherwise modified from
time to time, the "Credit Agreement") and (y) to secure the Company's Guaranty
dated as of November __, 1997 of the Borrower's obligations under the Credit
Agreement (as the same may be amended, restated, renewed, replaced, supplemented
as otherwise modified from time to time the "Guaranty"); (ii) in connection with
the exercise by the Agent of any of its rights and remedies under the Pledge
Agreement, consents to the assignment of any of such Membership Units (including
any economic interests therein) to any other Person (and to the substitution of
such other Person as a New Member holding the Membership Units so assigned), and
(iii) agrees that no such assignment (or substitution) and no foreclosure
thereunder or other remedies in respect thereof shall effect a termination or
dissolution of the Company.
(b) Without limiting the generality of the foregoing, each Member
hereby agrees that upon the exercise of remedies pursuant to Section 12 of the
Pledge Agreement and subject to the Agent or its designee having obtained the
requisite consent from the FCC as further set forth in Section 17 of the Pledge
Agreement.
(i) with respect to each Membership Unit (and economic interest
therein) assigned by any existing Member (in each case, the "Assignor") to the
Agent under the Pledge Agreement, the Agent shall thereupon be admitted (or
shall have the right to have one or more designees of its choice admitted) as a
New Member of the Company (in each such case, such New Member admitted pursuant
to this Section 6.5
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being hereinafter referred to as the "Agent Designee Member") with no further
action by any Member or any other Person being necessary, and each Member hereby
consents to such admission and agrees to execute and deliver such instruments,
if any, as shall be necessary to effect or further evidence the foregoing;
(ii) in connection with the admission of any Agent Designee
Member to the Company, no capital contribution by such Agent Designee Member
shall be required;
(iii) no Agent Designee Member shall have any liability with
respect to the obligations of the Company under the Credit Agreement or the
Guaranty;
(iv) on and after the admission of any Agent Designee Member to
the Company, such Agent Designee Member shall have all powers, statutory and
otherwise, possessed by members under the Act and any other applicable laws and,
if any such Agent Designee Member shall then constitute the Majority Member,
such Agent Designee Member shall have the sole authority to manage the business
and affairs of the Company in accordance with Section 4.1 and, in any event and
notwithstanding any other provision contained herein or in any such laws, the
Assignor(s) to such Agent Designee Member shall have no further powers or
privileges with respect to the management of the Company;
(v) following the admission of any Agent Designee Member to the
Company (and without limiting similar restrictions contained in the Pledge
Agreement), none of the other remaining Members may Transfer or otherwise
dispose of any of their Membership Units in the Company without the prior
written consent of such Agent Designee member.
(c) The Members hereby acknowledge and agree that the Agent shall have
no obligation or liability under this Agreement, the Pledge Agreement, the
Guaranty or otherwise by reason of, or arising out of, the collateral assignment
and pledge of the Membership Units or be obligated to perform any of the
obligations, or assume any of the liabilities, of the Members arising hereunder.
(d) The provisions of clauses (a) and (b) shall terminate when all
Obligations under, and as defined in, the Credit Agreement have been paid in
full and the Commitments (as defined in the Credit Agreement) have been
terminated.
ARTICLE VII - INDEMNIFICATION
7.1 Right to Indemnification. Except as limited by law and subject to the
provisions of this Article, the Company shall indemnify each Indemnified Party
from and against any and all Losses in any way related to or arising out of this
Agreement, the
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business of the Company or the action or inaction of such Person hereunder
(including, without limitation, the actions or inactions of the Members and the
other Indemnified Parties pursuant to Article IX hereof upon dissolution of the
Company), which may be imposed on, incurred by or asserted at any time against
any such Indemnified Party, except that no indemnification shall be provided for
any Indemnified Party regarding any matter as to which it shall be finally
determined that such Indemnified Party did not act in good faith and in the
reasonable belief that its action was in the best interests of the Company, or
with respect to a criminal matter, that it had reasonable cause to believe that
its conduct was unlawful. Subject to the foregoing limitations, such
indemnification may be provided by the Company with respect to Losses in
connection with which it is claimed that such Indemnified Party received an
improper personal benefit by reason of its position, regardless of whether the
claim arises out of the Indemnified Party's service in such capacity, except for
matters as to which it is finally determined that an improper personal benefit
was received by such Indemnified Party. The indemnification contained in this
Article VII shall survive termination of this Agreement.
7.2 Award of Indemnification. The determination of whether the Company is
authorized to indemnify any Indemnified Party hereunder and any award of
indemnification shall be made in each instance by the Members; provided,
however, that as to any matter disposed of by a compromise payment, pursuant to
a consent decree or otherwise, no indemnification, either for said payment or
for any other Losses, shall be provided unless there has been obtained an
opinion in writing of legal counsel to the effect that the Person subject to
indemnification hereunder appears to have acted in good faith and that such
indemnification would not protect such Person against any liability to the
Company or the Members to which he, she or it would otherwise be subject by
reason of gross negligence, willful malfeasance or fraud in the conduct of his,
her or its office or actions not taken in good faith by such Person. The Company
shall be obliged to pay indemnification applied for by any Indemnified Party
unless there is an adverse determination (as provided above) within forty-five
(45) days after the application. If indemnification is denied, the applicant may
seek an independent determination of its right to indemnification by a court,
and in such event, the Company shall have the burden of proving that the
applicant was ineligible for indemnification under this Article. Notwithstanding
the foregoing, in the case of a proceeding by or in the right of the Company
which an Indemnified Party is adjudged liable to the Company, indemnification
hereunder shall be provided only upon a determination by a court having
jurisdiction that in view of all the circumstances of the case, the Indemnified
Party is fairly and reasonably entitled to indemnification for such Losses as
the court shall deem proper.
7.3 Successful Defense. Notwithstanding any contrary provisions of this
Article, if any Indemnified Party has been wholly successful on the merits in
the defense of any action, suit or proceeding in which it was involved by reason
of its position with the Company or as a result of serving in such capacity
(including termination of investigative or other proceedings without a finding
of fault on the part of such Indemnified Party), such
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Indemnified Party shall be indemnified by the Company against all Losses
incurred by such Indemnified Party in connection therewith.
7.4 Advance Payments. Except as limited by law, Losses incurred by an
Indemnified Party in defending any action, suit or proceeding, including a
proceeding by or in the right of the Company, shall be paid by the Company to
such Indemnified Party in advance of final disposition of the proceeding upon
receipt of its written undertaking to repay such amount if such Indemnified
Party is determined pursuant to this Article VII or adjudicated to be ineligible
for indemnification, which undertaking shall be an unlimited general obligation
but need not be secured and may be accepted without regard to the financial
ability of such Indemnified Party to make repayment; provided, however, that no
such advance payment of issues shall be made if it is determined pursuant to
Section 7.2 of this Article on the basis of the circumstances known at the time
(without further investigation) that such Indemnified Party is ineligible for
indemnification.
7.5 Insurance. The Company shall have power to purchase and maintain
insurance on behalf of any Indemnified Party against any liability or cost
incurred by such Person in any such capacity or arising out of its status as
such, whether or not the Company would have power to indemnify against such
liability or cost.
7.6 Heirs and Personal Representatives. The indemnification provided by
this Article shall inure to the benefit of the heirs and personal
representatives of the Indemnified Parties.
7.7 Non-Exclusivity. The provisions of this Article shall not be construed
to limit the power of the Company to indemnify the Members, Officers, employees
or agents to the fullest extent permitted by law or to enter into specific
agreements, commitments or arrangements for indemnification permitted by law.
The absence of any express provision for indemnification herein shall not limit
any right of indemnification existing independently of this Article.
7.8 Amendment. The provisions of this Article may be amended or repealed in
accordance with Section 10.5; provided, however, that no amendment or repeal of
such provisions that adversely affects the rights of the Members under this
Article with respect to acts or omissions occurring at any time prior to such
amendment or repeal, shall apply to any Member without such Member's consent.
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<PAGE>
ARTICLE VIII - CONFLICTS OF INTEREST
8.1 Transactions with Interested Persons; Conflicts.
(a) Unless entered into in bad faith, no contract or transaction
between the Company and one or more of its Members or any other Indemnified
Party, or between the Company and any other Person in which one or more of its
Members or any other Indemnified Party has a financial interest or is a
director, manager or officer, shall be voidable solely for this reason if such
contract or transaction is fair and reasonable to the Company; and no Member or
other Indemnified Party interested in such contract or transaction, because of
such interest, shall be liable to the Company or to any other Person or
organization for any loss or expense incurred by reason of such contract or
transaction or shall be accountable for any gain or profit realized from such
contract or transaction.
(b) Unless otherwise expressly provided herein, (i) whenever a
conflict of interest exists or arises between the Company, its Members and/or
the other Indemnified Parties or (ii) whenever this Agreement provides that any
such Person shall act in a manner that is, or provide terms that are, fair and
reasonable to the Company or any Member, such Person shall resolve such conflict
of interest, taking such action or providing such terms, considering in each
case the relative interest of each party (including its own interest) to such
conflict, agreement, transaction or situation and the benefits and burdens
relating to such interests, any customary or acceptable industry practices, and
any applicable generally acceptable accounting practices or principles. In the
absence of bad faith by the Member or other Indemnified Party, as the case may
be, the resolution, action or term so made, taken or provided by such Person
shall not constitute a breach of this Agreement or any other agreement
contemplated herein or of any duty or obligation of such Person at law or in
equity or otherwise.
8.1 Business Opportunities.
Members may engage in or possess an interest in other business ventures of
any nature, and neither the Company nor any other Member shall have any rights
by virtue of this Agreement in or to any such venture or the income or profits
derived therefrom, and the pursuit of any such venture, even if competitive with
the activities of the Company, shall not be deemed improper or wrongful. No
Member shall be obligated to present any particular investment or business
opportunity to the Company even if such opportunity is of a nature which could
be taken by the Company.
22
<PAGE>
ARTICLE IX - DISSOLUTION, LIQUIDATION, AND
TERMINATION
9.1 No Dissolution. The Company shall not be dissolved by the admission of
additional Members, the withdrawal of a Member or the written consent of all
Members, but shall continue to exist in perpetuity, except in accordance with
the terms of this Agreement. Upon the death, retirement, resignation, expulsion,
Bankruptcy or dissolution of any Member the Company shall not dissolve and its
affairs shall not be wound up except as set forth in Section 9.2 below.
9.2 Events Causing Dissolution. The Company shall be dissolved and its
affairs wound up upon the occurrence of any of the following events:
(a) if a Majority Member shall be acting as a Manager under Section
6.2 hereof, the Bankruptcy, dissolution, death, retirement, or resignation of
the Majority Member; unless the Company is continued upon the written consent of
a majority of the remaining Members, such consent to be given within ninety (90)
days following the occurrence of such event;
(b) if there shall be no Majority Member acting as a Manager under
Section 6.2 hereof, the Bankruptcy, dissolution, death, retirement, or
resignation of any Member; unless the Company is continued upon the written
consent of a majority of the remaining Members, such consent to be given within
ninety (90) days following the occurrence of such event;
(c) the entry of a decree of judicial dissolution under Section 18-802
of the Act.
9.3 Notice of Dissolution. Upon the dissolution of the Company, the Member
or the other Person or Persons (the "Liquidating Trustee") appointed by the
Members or the Majority Member, as applicable, to carry out the winding up of
the Company, shall promptly notify the Members of such dissolution.
9.4 Liquidation. Upon dissolution of the Company, the Liquidating Trustee
shall proceed diligently to liquidate the Company and wind up its affairs and to
make final distributions as provided in Section 5.4 hereof and in the Act. The
costs of dissolution and liquidation shall be borne as an expense of the
Company. Until final distribution, the Liquidating Trustee shall continue to
operate the Company properties with all of the power and authority of the
Members or the Majority Member, as applicable. As promptly as possible after
dissolution and again after final liquidation, the Liquidating Trustee shall
cause an accounting to be made by a firm of independent public accountants of
the Company's assets, liabilities and operations.
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<PAGE>
9.5 Certificate of Cancellation. On completion of the distribution of
Company assets as provided herein, the Company shall be terminated, and the
Members or the Majority Member, as applicable, (or such other Person or Persons
as the Act may require or permit) shall file a Certificate of Cancellation with
the Secretary of State of the State of Delaware under the Act, cancel any other
filings made pursuant to Sections 2.1, 2.2 and 2.4, and take such other actions
as may be necessary to terminate the existence of the Company.
ARTICLE X - GENERAL PROVISIONS
10.1 Offset. Whenever the Company is to pay any sum to any Member, any
amounts that Member owes the Company may be deducted from that sum before
payment. All amounts so deducted shall nevertheless be treated as distributions
for purposes of Sections 5.3, 5.4 and 5.5 hereof.
10.2 Notices. Except as expressly set forth to the contrary in this
Agreement, all notices, requests, or consents provided for or permitted to be
given under this Agreement must be in writing and shall be given either by
registered or certified mail, addressed to the recipient, with return receipt
requested, or by delivering the writing to the recipient in Person, by courier,
or by facsimile transmission; and a notice, request, or consent given under this
Agreement is effective upon receipt or three days after the date mailed,
whichever is sooner. All notices, requests, and consents to be given to a Member
must be sent to or delivered at the addresses given for that Member on Schedule
A, or such other address as that Member may specify by written notice to the
other Members and the Company. Any notice, request, or consent to be given to
the Company must be given to the Members or the Majority Member, as applicable,
at the address of the principal office of Company specified in Section 2.3.
Whenever any notice is required to be given by law, the Certificate or this
Agreement, a written waiver thereof, signed by the Person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
10.3 Entire Agreement. This Agreement, together with each Member's
Subscription Agreement, constitutes the entire agreement of the Members relating
to the Company and supersedes all prior contracts or agreements with respect to
the Company, whether oral or written.
10.4 Amendment or Modification; Terms. This Agreement, including any
Schedule hereto, may be amended from time to time, in whole or in part, by an
instrument in writing signed in accordance with Section 3.4 hereof. Copies of
each such amendment shall be delivered to each Member at least thirty (30) days
prior to the effective date of such amendment; provided, however, in the case of
any amendment that the Members or the Majority Member, as applicable, determine
is necessary or appropriate to prevent the
24
<PAGE>
Company from being treated as a publicly traded partnership taxed as a
corporation under section 7704 of the Code, the amendment shall be effective on
the date provided in the instrument containing the terms of such amendment.
Nothing contained in this Agreement shall permit the amendment of this Agreement
to impair the exemption from personal liability of the officers, employees and
agents of the Company or Members or to permit assessments upon the Members.
10.5 Binding Effect. Subject to the restrictions on Transfers set forth in
this Agreement, this Agreement is binding on and inures to the benefit of the
parties and their respective heirs, legal representatives, successors and
assigns.
10.6 Governing Law; Severability. This Agreement is governed by and shall
be construed in accordance with the law of the State of Delaware, exclusive of
its conflict-of-laws principles. In the event of a direct conflict between the
provisions of this Agreement and any provision of the Certificate, or any
mandatory provision of the Act, the applicable provision of the Certificate or
the Act shall control. If any provision of this Agreement or the application
thereof to any Person or circumstance is held invalid or unenforceable to any
extent, the remainder of this Agreement and the application of that provision
shall be enforced to the fullest extent permitted by law.
10.7 Further Assurances. In connection with this Agreement and the
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions, as requested by the Members or the Majority
Member, as applicable.
10.8 Waiver of Certain Rights. Each Member irrevocably waives any right it
may have to maintain any action for dissolution of the Company or for partition
of the property of the Company.
10.9 Third-Party Beneficiaries. Except with respect to the Agent and the
Lenders, who are expressly intended to be third-party beneficiaries of this
Agreement, there shall be no third-party beneficiaries of this Agreement.
10.10 Failure to Pursue Remedies. The failure of any party to seek redress
for violation of, or to insist upon the strict performance of, any provision of
this Agreement shall not prevent a subsequent act, which would have originally
constituted a violation, from having the effect of any original violation.
10.11 Cumulative Remedies. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any party
shall not preclude or waive its right to use any or all other remedies. Said
rights and remedies are
25
<PAGE>
given in addition to any other right the parties may have by law, statute,
ordinance or otherwise.
10.12 Notice to Members of Provisions of this Agreement. By executing this
Agreement, each Member acknowledges that such Member has actual notice of (a)
all of the provisions of this Agreement, including, without limitation, the
restrictions on the Transfer of Membership Units set forth in Article VI and the
limitations on participation of Members in the management of the Company set
forth in Article III, and (b) all of the provisions of the Certificate. Each
Member hereby agrees that this Agreement constitutes adequate notice of all such
provisions, and each Member hereby waives any requirement that any further
notice thereunder be given.
10.13 Interpretation. For the purposes of this Agreement, terms not defined
in this Agreement shall be defined as provided in the Act; and all nouns,
pronouns and verbs used in this Agreement shall be construed as masculine,
feminine, neuter, singular, or plural, whichever shall be applicable. Titles or
captions of Articles and Sections contained in this Agreement are inserted as a
matter of convenience and for reference, and in no way define, limit, extend or
describe the scope of this Agreement or the intent of any provision hereof.
10.14 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all signing parties had signed the same
document, and all counterparts shall be construed together and shall constitute
the same instrument.
[END OF TEXT]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date set forth above.
ACME TELEVISION OF UTAH, LLC
By /s/ Douglas E. Gealy
--------------------------------------
Name:
Title: President & COO
ACME TELEVISION HOLDINGS OF UTAH, LLC
By /s/ Douglas E. Gealy
--------------------------------------
Name:
Title: President & COO
ACME SUBSIDIARY HOLDINGS III, LLC
By /s/ Douglas E. Gealy
--------------------------------------
Name:
Title: President & COO
<PAGE>
ACME TELEVISION OF UTAH, LLC
Schedule A
Member No. of Units Capital Contribution
------ ------------ --------------------
ACME Television Holdings of Utah, LLC 199 $995.00
ACME Subsidiary Holdings III, LLC 1 $5.00
CERTIFICATE OF FORMATION
OF
ACME TELEVISION OF NEW MEXICO, L.L.C.
A LIMITED LIABILITY COMPANY
FIRST: The name of the limited liability company is:
ACME TELEVISION OF NEW MEXICO, L.L.C.
SECOND: Its registered office in the State of Delaware is to be
located at 1013 Centre Road, in the City of Wilmington, County of
New Castle, 19805, and its registered agent at such address is
CORPORATION SERVICE COMPANY.
IN WITNESS WHEREOF, the undersigned, being the individual forming
the Company, has executed, signed and acknowledged this
Certificate of Formation this twenty-first day of August, A.D.
1997.
/s/ Jonathan P. Levi
------------------------
Authorized Person
Jonathan P. Levi
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ACME TELEVISION OF NEW MEXICO, LLC
a Delaware limited liability company
LIMITED LIABILITY COMPANY AGREEMENT
Dated October 31, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I -DEFINED TERMS 1
ARTICLE II -ORGANIZATION AND POWERS 5
2.1 Organization 5
2.2 Purposes and Powers 5
2.3 Principal Place of Business 6
2.4 Qualification in Other Jurisdictions 6
2.5 Fiscal Year 6
ARTICLE III -MEMBERS 6
3.1 Membership Units 6
3.2 Issuance of Membership Units; Admission of New Members 7
3.3 Voting Rights 8
3.4 Restrictions 8
3.5 Limitation on Liability of Members 9
3.6 Authority 9
3.7 Withdrawals; Termination 9
3.8 No Appraisal Rights 10
3.9 Compliance with Securities Laws and Other Laws and
Obligations 10
ARTICLE IV -MANAGEMENT 10
4.1 Management 10
4.2 Reliance by Third Parties 11
4.3 Officers 11
ARTICLE V -CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS AND
ALLOCATIONS AND DISTRIBUTIONS 12
5.1 Capital Contributions 12
5.2 Capital Accounts and Allocations 12
5.3 Distributions 14
5.4 Distributions Upon Dissolution 14
5.5 Distribution Upon Withdrawal 15
5.6 Tax Matters Partner 15
ARTICLE VI -TRANSFERS OF INTERESTS 16
6.1 Restrictions on Transfers 16
6.2 Substitute Members 17
6.3 Allocation of Distributions Between Assignor and
Assignee 17
6.4 Permitted Transfers 17
6.5 Permitted Transfers to Lenders 18
<PAGE>
ARTICLE VII -INDEMNIFICATION 19
7.1 Right to Indemnification 19
7.2 Award of Indemnification 20
7.3 Successful Defense 20
7.4 Advance Payments 21
7.5 Insurance 21
7.6 Heirs and Personal Representatives 21
7.7 Non-Exclusivity 21
7.8 Amendment 21
ARTICLE VIII -CONFLICTS OF INTEREST 22
8.1 Transactions with Interested Persons; Conflicts 22
8.2 Business Opportunities 22
ARTICLE IX -DISSOLUTION, LIQUIDATION, AND TERMINATION 23
9.1 No Dissolution 23
9.2 Events Causing Dissolution 22
9.3 Notice of Dissolution 23
9.4 Liquidation 23
9.5 Certificate of Cancellation 24
ARTICLE XI -GENERAL PROVISIONS 24
10.1 Offset 24
10.2 Notices 24
10.3 Entire Agreement 24
10.4 Amendment or Modification; Terms 24
10.5 Binding Effect 25
10.6 Governing Law; Severability 25
10.7 Further Assurances 25
10.8 Waiver of Certain Rights 25
10.9 Third-Party Beneficiaries 25
10.10 Failure to Pursue Remedies 25
10.11 Cumulative Remedies 25
10.12 Notice of Members of Provisions of this Agreement 26
10.13 Interpretation 26
10.14 Counterparts 26
Schedule A - Membership Units
<PAGE>
ACME Television of New Mexico, LLC
Limited Liability Company Agreement
This Limited Liability Company Agreement is made as of October 31, 1997 by
and among ACME Television of New Mexico, LLC (the "Company") and each of the
Members listed on Schedule A hereto, and those Persons who become Members of the
Company in accordance with the provisions hereof and whose names are set forth
as such in the record books of the Company.
WHEREAS, the Company has been formed as a limited liability company under
the Delaware Limited Liability Company Act, Del. Code Ann. tit. 6, ss. 18.101 et
seq. (as amended from time to time, the "Act"), by filing a Certificate of
Formation of the Company with the office of the Secretary of State of the State
of Delaware on August 21, 1997; and
WHEREAS, the Members desire to set out fully their respective rights,
obligations and duties regarding the Company and its assets and liabilities as
set forth herein.
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Members hereby
agree as follows:
ARTICLE I - DEFINED TERMS
Unless the context otherwise requires, the terms defined in this Article I
shall, for the purposes of this Agreement, have the meanings herein specified
(each such meaning to be equally applicable to both the singular and plural
forms of the respective terms so defined).
"Affiliate" shall mean, with respect to a specified Person, any Person that
directly or indirectly controls, is controlled by or is under common control
with, the specified Person. As used in this definition, the term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise.
"Agreement" shall mean this Limited Liability Company Agreement, as
amended, modified, supplemented or restated from time to time.
"Bankruptcy" means, with respect to a Person, that either (i) an
involuntary petition under any bankruptcy or insolvency or other debtor relief
law or under the
<PAGE>
reorganization provisions of any such law has been filed with respect to such
Person or a receiver of or for the property of such Person has been appointed
without the acquiescence of such Person, which petition or appointment remains
undischarged or unstayed for an aggregate period of sixty (60) days (whether or
not consecutive) or (ii) a voluntary petition under any bankruptcy or insolvency
or other debtor relief law or under the reorganization provisions of any such
law has been filed by such Person, a voluntary assignment of such Person's
property for the benefit of creditors has been made, a written admission by such
Person of its inability to pay its debts as they mature has been made, a
receiver of or for the property of such Person has been appointed with the
acquiescence of such Person or such Person has done any similar act of like
import.
"Capital Contribution" shall mean with respect to any Initial Member the
amount set forth opposite its name on Schedule A and with respect to any New
Member the amount set forth opposite its name on Schedule A, as amended.
"Certificate" shall mean the Certificate of Formation and any and all
amendments thereto and restatements thereof filed on behalf of the Company with
the Secretary of State of the State of Delaware pursuant to the Act.
"Common Members" shall mean those persons listed on Schedule A hereto as
Common Members.
"Common Units" shall mean those Membership Units designated as Common
Units, as described in Section 3.1 hereof.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any corresponding federal tax statute enacted after the date of this
Agreement. A reference to a specific section of the Code refers not only to such
specific section but also to any corresponding provision of any federal tax
statute enacted after the date of this Agreement, as such specific section or
corresponding provision is in effect on the date of application of the
provisions of this Agreement containing such reference.
"Distribution Percentage" shall mean a percentage determined for each
holder of Common Units by dividing the aggregate Common Units of such holder by
the aggregate Common Units of all holders of Common Units entitled to
distributions at the time of such determination.
"FCC" means the Federal Communications Commission.
"Indemnified Parties" shall mean the Members, any Affiliate of the Members
and each Person serving as an Officer, employee or other agent of the Company
(including Persons who serve at the Company's request as directors, managers,
officers, employees, agents or trustees of another organization in which the
Company has any interest as a shareholder, creditor or otherwise) and their
respective successors and assigns.
2
<PAGE>
"Initial Capital Contribution" shall mean with respect to any Initial
Member the amount set forth opposite its name on Schedule A hereto.
"Initial Members" shall mean those Persons listed on Schedule A hereto as
Initial Members as of the date hereof.
"Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time, together with any successor statute, and the rules
and regulations promulgated thereunder.
"Losses" shall mean all liabilities, judgments, obligations, losses,
damages, taxes and interest and penalties thereon (other than (i) income taxes
due on income allocated to Membership Units; and (ii) taxes based on fees,
compensation or commissions received by an Indemnified Party in connection with
the administration of the Company or the Company's property), claims, actions,
suits or other proceedings (whether civil or criminal, pending or threatened,
before any-court or administrative or legislative body, and as the same are
accrued, in which an Indemnified Party may be or may have been involved as a
party or otherwise or with which he or she may be or may have been threatened,
while in office or thereafter), costs, expenses and disbursements (including,
without limitation, legal and accounting fees and expenses) of any kind and
nature whatsoever.
"Member" shall mean the Initial Members and any Person admitted as a Member
in accordance with the terms of this Agreement and named as a Member in the
record books of the Company, and includes any Person admitted pursuant to the
provisions of this Agreement when acting in his, her or its capacity as a Member
of the Company, and "Members" shall mean two (2) or more of such Persons when
acting in their capacities as Members of the Company.
"New Member" shall mean any Member who is not an Initial Member.
"Person" shall mean an individual, corporation, association, partnership
(general or limited), joint venture, trust, unincorporated organization, limited
liability company, any other entity or organization of any kind or a government
or any department, agency, authority, instrumentality or political subdivision
thereof.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time, together with any successor statute, and the rules and regulations
promulgated thereunder.
"Subscription Agreement" shall mean a subscription agreement for the
purchase of a Membership Unit in the Company, in a form acceptable to the
Members or the Majority Member, as applicable.
3
<PAGE>
"Tax Rate" means, for any taxable year of a Member, the sum of the Federal
Rate and the State Rate, with (a) the "Federal Rate" defined to mean the highest
effective federal income tax rate applicable to any individual for such year and
(b) the "State Rate" defined as the product of (i) the highest effective state
income tax rate applicable to an individual Member for such year multiplied by
(ii) a percentage equal to the difference between one hundred percent (100%) and
the Federal Rate.
"Taxable Income" and "Taxable Loss" mean, for any taxable year, the taxable
income or loss attributable to such Member's distributive share of taxable
income or loss of the Company, as determined for federal income tax purposes;
provided that in making such determination all separately stated items of
income, gain, loss and deduction (other than tax-exempt income) shall be
included; and provided further, that in calculating Taxable Income and Taxable
Loss, items of income, gain, loss and deduction attributable to the sale or
exchange of all or substantially all of the assets of the Company shall be
excluded from such calculation.
"Transfer" shall mean any sale, assignment, transfer, exchange, charge,
pledge, gift, hypothecation, conveyance or encumbrance (such meaning to be
equally applicable to verb forms of such term).
"Treasury Regulations" means the income tax regulations, including
temporary regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
The following terms shall have the meanings set forth in the indicated
Sections hereof:
Defined Term Section Number
------------ --------------
"Act" Preamble
"Capital Account" 5.02
"Company" Preamble
"Consolidated Group Securities" 3.04(a)
"Holdings" 5.03(a)
"Liquidating Trustee" 9.03
"Majority Member" 4.01(b)
"Membership Unit" 3.01
"Senior Executive Offices" 4.06
"Tax Distributions" 5.03
"Tax Matters Partner" 5.06
4
<PAGE>
ARTICLE II - ORGANIZATION AND POWERS
2.1 Organization. The name of the Company is ACME Television of New
Mexico, LLC. The Company has been formed by the filing of its Certificate with
the Delaware Secretary of State pursuant to the Act. The Certificate may be
restated or amended by the Members or the Majority Member, as applicable, from
time to time in accordance with the Act and subject to the terms of this
Agreement. The Company shall deliver a copy of the Certificate and any amendment
thereto to any Member who so requests.
2.2 Purposes and Powers. The principal business activity and purposes
of the Company shall initially be to acquire, develop, own and operate
television broadcast stations and to conduct any business related thereto or
useful in connection therewith. However, the business and purposes of the
Company shall not be limited to its initial principal business activity, and the
Company shall, subject to the terms of this Agreement, have authority to engage
in any other lawful business, purpose or activity permitted by the Act. Except
as otherwise provided in this Agreement, the Company, and the Members or the
Majority Member, as applicable, acting on behalf of the Company in accordance
with this Agreement, shall possess and may exercise all of the powers and
privileges granted by the Act or which may be exercised by any Person, together
with any powers incidental thereto, so far as such powers or privileges are
necessary, appropriate, proper, advisable, incidental or convenient to the
conduct, promotion or attainment of the business purposes or activities of the
Company, including without limitation the following powers:
(a) to conduct its business and operations in any state,
territory or possession of the United States or in any foreign country or
jurisdiction;
(b) to purchase, receive, take, lease or otherwise acquire, own,
hold, improve, maintain, use or otherwise deal in and with, sell, convey, lease,
exchange, transfer or otherwise dispose of, mortgage, pledge, encumber or create
a security interest in all or any of its real or personal property, or any
interest therein, wherever situated;
(c) to borrow or lend money or obtain or extend credit and other
financial accommodations, to invest and reinvest its funds in any type of
security or obligation of or interest in any public, private or governmental
entity, and to give and receive interests in real and personal property as
security for the payment of funds so borrowed, loaned or invested;
(d) to make and modify contracts, including contracts of
insurance, incur liabilities and give guaranties, whether or not such guaranties
are in furtherance of the business and purposes of the Company, including
without limitation, guaranties of
5
<PAGE>
obligations of other Persons who are interested in the Company or in whom the
Company has an interest;
(e) to employ and terminate Officers, employees, agents and other
Persons, to organize committees of the Company, to delegate to such Persons
and/or committees such power and authority, the performance of such duties and
the execution of such instruments in the name of the Company, to fix the
compensation and define the duties and obligations of such personnel, to
establish and carry out retirement, incentive and benefit plans for such
personnel, and to indemnify such personnel to the extent permitted by this
Agreement and the Act;
(f) to form and maintain subsidiaries and to merge with, or
consolidate into, another Delaware limited liability company or other business
entity (as defined in Section 18-209 of the Act); and
(g) to institute, prosecute, and defend any legal action or
arbitration proceeding involving the Company, and to pay, adjust, compromise,
settle, or refer to arbitration any claim by or against the Company or any of
its assets.
2.3 Principal Place of Business. The principal office and place of
business of the Company shall initially be Suite 850, 650 Town Center Drive,
Costa Mesa, California 92626. The Members or the Majority Member, as applicable,
may change the principal office or place of business of the Company at any time
and may cause the Company to establish other offices or places of business in
various jurisdictions and appoint agents for service of process in such
jurisdictions.
2.4 Qualification in Other Jurisdictions. The Members or the Majority
Member, as applicable, shall cause the Company to be qualified or registered
under applicable laws of any jurisdiction in which the Company transacts
business and shall be authorized to execute, deliver and file any certificates
and documents necessary to effect such qualification or registration.
2.5 Fiscal Year. The fiscal year of the Company shall end on December
31 of each year.
ARTICLE III - MEMBERS
3.1 Membership Units. The Members shall have no rights or powers in
respect of the Company (including, without limitation, any rights in respect of
allocations of profit and loss or distributions) other than the rights conferred
by this Agreement represented by issued and outstanding units of membership
interest (the "Membership Units"), which shall be deemed to be personal property
giving only the rights provided in
6
<PAGE>
this Agreement and which shall consist of one class ("Common Units"), which
shall have rights and privileges, including voting rights as expressly set forth
in this Agreement. Every Member by virtue of having become a Member shall be
held to have expressly assented and agreed to the terms hereof and to have
become a party hereto. Ownership of a Membership Unit shall not entitle a Member
to any title in or to the whole or any part of the property of the Company or
right to call for a partition or division of the same or for an accounting. The
Initial Members of the Company, their addresses, and the respective classes and
denominations of Membership Units held by them shall be as set forth on Schedule
A hereto, and said schedule shall be amended from time to time by the Members or
the Majority Member, as applicable, in accordance with the terms hereof to
reflect the withdrawal of Members or the admission of additional Members
pursuant to this Agreement.
The Company hereby authorizes for issuance 200 Common Units. As of the
date hereof, the Company shall have issued 200 Common Units to the Initial
Members, as set forth on Schedule A hereto. Except for the Common Units issued
on the date hereof, none of the Common Units may be issued by the Company
without the prior written consent of a majority in interest of the Members.
3.2 Issuance of Membership Units: Admission of New Members.
(a) The Company is not authorized to offer and sell, or cause to
be offered and sold, additional Membership Units or to admit additional Persons
as Members except with the approval of the Members holding more than fifty
percent (50%) in interest of the Common Units.
(b) The Members or the Majority Member, as applicable, may
establish eligibility requirements for admission of a subscriber as a New Member
after the date hereof and may refuse to admit any subscriber that fails to
satisfy such eligibility requirements. The Members or the Majority Member, as
applicable, shall have the responsibility for determining whether a Person is
eligible for admission as a New Member. Each Person who first subscribes for a
Membership Unit in the Company after the date hereof shall be admitted as a New
Member of the Company at the time (i) such Person executes a Subscription
Agreement agreeing to be bound by the provisions hereof, (ii) the Members or the
Majority Member, as applicable, at their sole discretion, accepts such
Subscription Agreement on behalf of the Company and (iii) the subscriber makes
the Capital Contribution(s) required pursuant to the terms of this Agreement and
its Subscription Agreement. None of the existing Members shall have any
preemptive or similar right to subscribe to the issuance of new Membership Units
in the Company, and each of the Members acknowledges that its membership
interest is subject to adjustment (downward and upward) in the event of the
admission of New Members to the Company pursuant hereto or the withdrawal of any
Member from the Company.
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3.3 Voting Rights.
(a) Except as otherwise provided in this Agreement, no Member or
holder of a Membership Unit shall have the right to amend or terminate this
Agreement.
3.4 Restrictions. Notwithstanding anything in this Agreement to the
contrary, the following matters shall require the prior written consent of
holders of more than fifty percent (50%) in interest of the Common Units:
(a) the redemption, purchase or other acquisition for value (or
payment into or set aside for a sinking fund for such purpose) of any Membership
Unit, or other type of equity interest of the Company or any of its
Subsidiaries, or security convertible into or exchangeable or exercisable for
such Membership Units or equity interests (which are hereinafter reflected to as
"Consolidated Group Securities");
(b) the authorization or issuance (or the incurrence of any
obligation to authorize or issue) of any additional Membership Units or other
Consolidated Group Securities;
(c) the increase or decrease of the total number of authorized
Membership Units or other Consolidated Group Securities;
(d) the payment or declaration of any dividend or distribution
(other than Tax Distributions pursuant to Section 5.3) with respect to any
Membership Units or other Consolidated Group Securities;
(e) the authorization of any merger or consolidation of the
Company or any of its Subsidiaries with or into any other entity (except for
mergers among wholly-owned Subsidiaries);
(f) the authorization of the reorganization or sale of the
Company or any of its Subsidiaries or the sale of any material assets of the
Company or any of its Subsidiaries;
(g) the authorization of any reclassification or recapitalization
of the outstanding Membership Units of the Company or any other Consolidated
Group Securities;
(h) engagement by the Company or any of its Subsidiaries in any
business other than the business now conducted or contemplated by the Company or
a business or businesses similar thereto or reasonably compatible therewith;
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(i) the alteration, modification or amendment of this Agreement;
or
(j) the application by the Company for or consent by it to the
appointment of a receiver, trustee, custodian or liquidator of it or any of its
property, (ii) the admission in writing by the Company of its inability to pay
its debts as they mature, (iii) the making by the Company of a general
assignment for the benefit of creditors, or (iv) the filing by the Company of a
voluntary petition in bankruptcy, or a petition or an answer seeking
reorganization or an arrangement with creditors, or any other action by the
Company to take advantage of any bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation laws or statutes, or an answer
from the Company admitting the material allegations of a petition filed against
it in any proceeding under any such law.
3.5 Limitation on Liability of Members. Except as otherwise provided
in the Act, no Member of the Company shall be obligated personally for any debt,
obligation or liability of the Company or of any other Member or otherwise have
any personal recourse hereunder, whether arising in contract, tort or otherwise,
solely by reason of being a Member. Except as expressly set forth in this
Agreement, no Member shall have any fiduciary or other duty to another Member
with respect to the business and affairs of the Company, and no Member shall be
liable to the Company or any other Member for acting in good faith reliance upon
the provisions of this Agreement. No Member shall have any responsibility to
restore any negative balance in its Capital Account or to contribute to or in
respect of the liabilities or obligations of the Company or return distributions
made by the Company except as required by this Agreement, the Act or other
applicable law; provided, however, that Members are responsible for their
failure to make required Capital Contributions in accordance with Section 5.1.
3.6 Authority. Except as otherwise expressly provided herein, in all
matters relating to or arising out of the conduct or the operation of the
Company, the decision of the Members (acting by vote of holders of more than
fifty percent (50%) in interest of the Common Units) or the Majority Member, as
applicable, shall be the decision of the Company. The Company may employ one or
more Persons from time to time, and such Persons, in their capacity as Officers
or employees of the Company, may take part in the control and management of the
business of the Company to the extent such authority and power to act for or on
behalf of the Company has been delegated to them by the Members or the Majority
Member, as applicable.
3.7 Withdrawals; Termination. No Member shall have any right to resign
or withdraw from the Company without the consent of the Members or the Majority
Member, as applicable, or to receive any distribution on its Membership Units or
the repayment of its Capital Contributions except as provided in Article V
hereof.
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3.8 No Appraisal Rights. No Member shall have any right to have its
interest in the Company appraised and paid out under the circumstances provided
in Section 18-210 of the Act or any other circumstances.
3.9 Compliance with Securities Laws and Other Laws and Obligations.
Each Member hereby represents and warrants to the Company and acknowledges that
(a) it has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of an investment in the Company
and making an informed investment decision with respect thereto, (b) it is able
to bear the economic and financial risk of an investment in the Company for an
indefinite period of time and understands that it has no right to withdraw and
have its interest repurchased by the Company, (c) it is acquiring an interest in
the Company for investment only and not with a view to, or for resale in
connection with, any distribution to the public or public offering thereof, and
(d) it understands that the interests in the Company have not been registered
under the securities laws of any jurisdiction and cannot be disposed of unless
they are subsequently registered and/or qualified under applicable securities
laws or pursuant to valid exemptions from such registration/qualification
requirements and the provisions of this Agreement have been complied with.
ARTICLE IV - MANAGEMENT
4.1 Management.
(a) Except as provided in Section 4.1(b) hereof, the Company
shall be managed by the Members. No action may be taken by any Member to bind
the Company without the prior consent of Members holding more than fifty percent
(50%) in interest of the Common Units.
(b) If any Member shall own more than fifty percent (50%) in
interest of the Common Units of the Company (the "Majority Member"), management
and control of the business of the Company shall be vested exclusively in the
Majority Member for so long as such Member holds more that fifty percent (50%)
in interest of the Common Units, and such Majority Member shall have exclusive
power and authority, in the name of and on behalf of the Company, to perform all
acts and do all things which, in its sole discretion, it deems necessary or
desirable to conduct the business of the Company.
The Majority Member shall, subject to all applicable provisions
of this Agreement, be authorized in the name and on behalf of the Company: (i)
to enter into, execute, amend, supplement, acknowledge and deliver any and all
contracts, agreements, leases or other instruments for the operation of the
Company's business; and (ii) in general to do all things and execute all
documents determined by it to be necessary or appropriate to conduct the
business of the Company as more fully set forth in Section 2.2 hereof or as
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provided by law, or to protect and preserve the Company's assets. The Majority
Member may delegate any or all of the foregoing powers. The Majority Member is
an agent of the Company for the purpose of the Company's business. Any action
taken by the Majority Member, and the signature of the Majority Member on any
agreement, contract, instrument or other document on behalf of the Company,
shall be sufficient to bind the Company and shall conclusively evidence the
authority of the Majority Member and the Company with respect thereto.
(c) The Members acting pursuant to Section 4.1(a) or the Majority
Member, as applicable, shall be the "manager" (within the meaning of the Act) of
the Company, and each shall have the benefits and protections accorded
"managers" under the Act. The Members acting pursuant to Section 4.1(a) or the
Majority Member, as applicable, shall devote such time to the business and
affairs of the Company as is reasonably necessary for the performance of their
duties, but shall not be required to devote full time to the performance of such
duties and may delegate their responsibilities as provided in this Agreement.
The Majority Member shall not be personally liable to the Company or to its
Members for breach of any duty that does not involve: (i) a breach of the duty
of loyalty to the Company or its Members; (ii) an act or omission not in good
faith or which involves intentional misconduct or a knowing violation of law; or
(iii) a transaction from which the Majority Member derived an improper personal
benefit.
4.2 Reliance by Third Parties. Any person dealing with the Company or
any Member may rely upon a certificate signed by the Majority Member or any
Officer as to (i) the identity of any other Member; (ii) any factual matters
relevant to the affairs of the Company; (iii) the persons who are authorized to
execute and deliver any document on behalf of the Company; or (iv) any action
taken or omitted by the Company or any Member. The Majority Member shall not be
personally liable to the Company or to its Members for breach of any duty that
does not involve: (i) a breach of the duty of loyalty to the Company or its
other Members; (ii) an act or omission not in good faith or which involves
intentional misconduct or a knowing violation of law; or (iii) a transaction
from which the Majority Member derived an improper personal benefit.
4.3 Officers. The Members or the Majority Member, as applicable, may
designate employees of the Company as officers of the Company (the "Officers")
as they deem necessary or desirable to carry on the business of the Company and
the Members or the Majority Member, as applicable, may delegate to such Officers
such power and authority as the Members or the Majority Member, as applicable,
deem advisable. Any Officer may hold two or more offices of the Company. The
initial Officers of the Company shall be Jamie Kellner (Chairman and Chief
Executive Officer), Douglas Gealy (President and Chief Operating Officer) and
Thomas Allen (Executive Vice President and Chief Financial Officer). New offices
may be created and filled by the Members or the Majority Member, as applicable.
Each Officer shall hold office until his or her successor is designated by the
Members or the Majority Member, as applicable, or until his or her
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earlier death, resignation or removal. Any Officer may resign at any time upon
written notice to the Members or the Majority Member, as applicable. Any Officer
may be removed by the Members or the Majority Member, as applicable, with or
without cause at any time. A vacancy in any office occurring because of death,
resignation, removal or otherwise, may, but need not, be filled by the Members
or the Majority Member, as applicable. The Officers are not "managers" (within
the meaning of the Act) of the Company.
ARTICLE V - CAPITAL CONTRIBUTIONS; CAPITAL
ACCOUNTS AND ALLOCATIONS AND DISTRIBUTIONS
5.1 Capital Contributions. The Initial Members have made as of the
date hereof the Capital Contribution to the Company specified on Schedule A
attached hereto. Each New Member shall make the Capital Contribution to the
Company specified in such Member's Subscription Agreement as of the date of
admission of such New Member as a Member of the Company. Except as approved by
the Members or the Majority Member, as applicable, or as set forth on Schedule A
or in a Member's Subscription Agreement, no Member shall be entitled or required
to make any Capital Contribution or loan or advance to the Company; provided,
however, that the Company may, subject to the other terms of this Agreement,
borrow from its Members as well as from banks or other lending institutions to
finance its working capital or the acquisition of assets upon such terms and
conditions as shall be approved by the Members or the Majority Member, as
applicable, and any such loans by Members shall not be considered Capital
Contributions or reflected in their Capital Accounts. The agreed value of all
non-cash Capital Contributions made by Members shall be set forth on Schedule A
or in such Member's Subscription Agreement. No Member shall be entitled to any
interest or compensation with respect to its Capital Contributions or any
services rendered on behalf of the Company except as specifically provided in
this Agreement. No Member shall have any liability for the repayment of the
Capital Contributions of any other Member and shall look only to the assets to
the Company for return of its Capital Contributions.
5.2 Capital Accounts and Allocations.
(a) Capital Accounts. A separate capital account (a "Capital
Account") shall be established and maintained for each Member, which shall
initially be equal to the Capital Contribution of such Member as set forth on
Schedule A hereto. Such Capital Accounts shall be maintained in accordance with
Section 1.704-1(b)(2)(iv) of the Treasury Regulations, and this Section 5.2
shall be interpreted and applied in a manner consistent with said Section of the
Treasury Regulations. The Capital Accounts shall be maintained for the sole
purpose of allocating items of income, gain, loss and deduction among the
Members and shall have no effect on the amount of any distributions to any
Members in liquidation or otherwise. The amount of all distributions to Members
shall be determined pursuant to Sections 5.3, 5.4 and 5.5.
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(b) Allocation of Profits and Losses. All items of income, gain,
loss and deduction as determined for book purposes shall be allocated among the
Members and credited or debited to their respective Capital Accounts in
accordance with Treasury Regulations Section 1.704-1(b)(2)(iv), so as to ensure
to the maximum extent possible (i) that such allocations satisfy the economic
effect equivalence test of Treasury Regulations Section 1.704-1(b)(2)(ii)(i) (as
provided hereinafter) and (ii) that all allocations of items that cannot have
economic effect (including credits and nonrecourse deductions) are allocated to
the Members in proportion to their membership interests unless otherwise
required by Code Section 704(b) and the Treasury Regulations promulgated
thereunder. To the extent possible, items that can have economic effect shall be
allocated in such a manner that the balance of each Member's Capital Account at
the end of any fiscal year (increased by such Member's "share of partnership
minimum gain" as defined in Treasury Regulations Section 1.704-2) would be
positive to the extent of the amount of cash that such Member would receive (or
would be negative to the extent of the amount of cash that such Member should be
required to contribute to the Company) if the Company sold all of its property
for an amount of cash equal to the book value (as determined pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv)) of such property (reduced, but
not below zero, by the amount of nonrecourse debt to which such property is
subject) and all of the cash of the Company remaining after payment of all
liabilities (other than nonrecourse liabilities) of the Company were distributed
in liquidation immediately following the end of such fiscal year in accordance
with Section 5.3. Except to the extent otherwise required by the Code, the
"traditional method" provided for in Treasury Regulations Section 1.704-3(b)
shall apply to all tax allocations governed by Code Section 704(c) and all
"reverse Section 704(c) allocations."
(c) Other Allocations. The Members or the Majority Member, as
applicable, may adjust the Capital Accounts of the Members to reflect
reevaluations of the Company property whenever the adjustment would be permitted
under Treasury Regulations Section 1.704-1(b)(2)(iv)(f). In the event that the
Capital Accounts of the Members are so adjusted, (i) the Capital Accounts of the
Members shall be adjusted in accordance with Treasury Regulations Section
1.704l(b)(2)(iv)(g) for allocations of depreciation, depletion, amortization and
gain or loss, as computed for book purposes, with respect to such property and
(ii) the Members' distributive shares of depreciation, depletion, amortization
and gain or loss, as computed for tax purposes, with respect to such property
shall be determined so as to take account of the variation between the adjusted
tax basis and book value of such property in the same manner as under Section
704(c) of the Code. In the event that Code Section 704(c) applies to Company
property, the Capital Accounts of the Members shall be adjusted in accordance
with Treasury Regulations Section 1.704-1(b)(2)(iv)(g) for allocations of
depreciation, depletion, amortization and gain and loss, as computed for book
purposes, with respect to such property. In applying clause (ii) of the second
preceding sentence and all of the preceding sentence, the provisions of Code
Section 704(b) shall apply.
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5.3 Distributions. Subject to (i) the terms of the Act, (ii) any
agreements of the Company or any of its Affiliates with respect to indebtedness
for money borrowed to which the Company may from time to time be subject, and
(iii) except in the case of distributions pursuant to subsection (a) below, the
prior written consent of holders of a majority in interest of the Common Units,
all funds of the Company which are available for distribution (as determined by
the Members or the Majority Member, as applicable, in their discretion) shall be
distributed as follows:
(a) First, within one hundred and twenty (120) days after the end
of each taxable year during which ACME Televisions Holdings, LLC ("Holdings")
shall have any direct or indirect ownership interest in the Company, there shall
be distributed to each Member an amount equal to the product of (i) the Tax Rate
and (ii) the difference between (x) the amount of such Member's Taxable Income
with respect to such taxable year and (y) the cumulative amount of such Member's
Taxable Loss, if any, from all prior taxable years, but only to the extent such
Taxable Loss on a cumulative basis exceeds Taxable Income for all prior taxable
years on a cumulative basis (the "Tax Distributions"); provided however, that
such distribution shall in all events be sufficient to allow Holdings to make
the distributions required under Section 5.3(a) of the Limited Liability Company
Agreement of Holdings; and
(b) Second, pro rata to all Members in accordance with their
respective Distribution Percentages.
5.4 Distributions Upon Dissolution. Proceeds from a sale of all or
substantially all of the assets of the Company and amounts available upon
dissolution, after payment of, or adequate provision for, the debts and
obligations of the Company, including the expenses of its liquidation and
dissolution, shall be distributed and applied in the following priorities:
(a) First, to fund reserves as deemed reasonably necessary by the
Members, the Majority Member, as applicable, or the Liquidating Trustee for any
contingent, conditional or unmatured liabilities or other obligations of the
Company, which such reserves (i) may be paid to a bank (or other third party),
to be held in escrow for the purpose of paying any such contingent, conditional
or unmatured liabilities or other obligations, and (ii) shall at the expiration
of such period(s) as the Members, the Majority Member, as applicable, or
Liquidating Trustee may reasonably deem advisable, shall be distributed to the
Members in accordance with Section 5.3; and
(b) Second, in accordance with Section 5.3.
If any assets of the Company are to be distributed in kind in
connection with such liquidation, such assets shall be distributed on the basis
of their fair market value net
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of any liabilities encumbering such assets and, to the greatest extent possible,
shall be distributed pro-rata in accordance with the total amounts to be
distributed to each Member. Solely for purposes of Section 5.2 and immediately
prior to the effectiveness of any such distribution-in-kind, each item of gain
and loss that would have been recognized by the Company had the property being
distributed been sold at fair market value shall be determined and allocated to
those persons who were Members immediately prior to the effectiveness of such
distribution in accordance with Section 5.2.
5.5 Distribution Upon Withdrawal. No Member shall be entitled to any
distribution or payment with respect to its Membership Units upon the
resignation or withdrawal of such Member.
5.6 Tax Matters Partner. ACME Television Holdings of New Mexico, LLC
is hereby designated as the initial "Tax Matters Partner" of the Company for
purposes of Section 6231(a)(7) of the Code, and such Tax Matters Partner shall
have the power to manage and control, on behalf of the Company, any
administrative proceeding at the Company level with the Internal Revenue Service
relating to the determination of any item of Company income, gain, loss,
deduction or credit for federal income tax purposes. The Members or the Majority
Member, as applicable, may at any time hereafter designate a new Tax Matters
Partner; provided, however, that only a Member may be designated as the Tax
Matters Partner of the Company.
(a) Partnership Status. The Company will elect to be treated as a
pass-through entity for purposes of federal and state income tax, and each
Member covenants that it will make no election, declaration or statement on or
in any tax return, tax filing, or any book or record maintained by it which is
inconsistent with or detrimental to the Company's ongoing maintenance of
partnership tax status (or as a single-member entity, if applicable).
(b) Income Tax Compliance. The Tax Matters Partner shall prepare
or cause to be prepared and filed on behalf of the Company, when and as required
by applicable law, all federal, state and local income tax information returns
or requests for extensions thereof. Not less than thirty (30) days prior to the
due date (including extensions) for any return (but not later than August 15 of
each year), the Tax Matters Partner shall submit to each Member a copy of the
return as proposed for review and a schedule showing the Member's allocable
share of the Company's tax attributes ("Tax Attributes") sufficient to allow
such Member to include such Tax Attributes in its federal income tax return.
Each Member shall provide to the Tax Matters Partner, when and as requested, all
information concerning the affairs of such Member as may be reasonably required
to permit the filing of such returns.
(c) Tax Elections. The Tax Matters Partner shall make the
following tax elections on behalf of the Company:
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(i) Unless required to adopt a different taxable year
pursuant to Section 706(b) of the Code, adopt the calendar year as the annual
accounting period;
(ii) Adopt the accrual method of accounting;
(iii) Deduct interest expense and taxes attributable to the
construction or installation of real and personal property improvements to the
fullest extent permitted by the Code;
(iv) Compute the allowance for depreciation under the most
accelerated tax depreciation method and using the shortest life and lowest
salvage value authorized by applicable law, consistent with the election
provided for in the following clause, with respect to all depreciable assets;
(v) If allowed by the Code, and to the maximum extent
allowable, elect to take available investment tax credit on the full basis of
each asset; and
(vi) Make such other elections as the Tax Matters Partner
shall have been directed in writing by the Members or the Majority Member, as
applicable, to make. The requirement to make any of the elections set forth
above is predicated upon the assumption that current federal income tax law will
continue in force. If any legislative change is made in the Code or any other
tax statutes or by the IRS in regulations and other pronouncements or by the
courts in case law affecting any of such elections so as to materially alter the
economic result of the required election, the Tax Matters Partner shall make
such election in respect of the item so affected as directed by the Members or
the Majority Member, as applicable.
(d) Code Section 754 Election. In connection with any transfer or
assignment of any Membership Units, or any distribution with respect to which a
Member recognizes gain under Code section 731(a), the Members or the Majority
Member, as applicable, shall, upon the written request of any Member, cause the
Company to file an election under Code section 754 and the Treasury Regulations
thereunder to adjust the basis of the Company assets under Code Section 734(b)
or 743(b) and a corresponding election under the applicable sections of state
and local law.
ARTICLE VI - TRANSFERS OF INTERESTS
6.1 Restrictions on Transfers. No Membership Units of the Company may
be Transferred, nor may any Member offer to Transfer, and no Transfer by a
Member shall be binding upon the Company or any Member unless such Transfer
complies with the provisions of this Article VI and the Company receives an
executed copy of the documents effecting such Transfer.
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No Transfer shall be permitted if such Transfer would (i) violate the
registration provisions of the Securities Act or the securities laws of any
applicable jurisdiction, (ii) cause the Company to become subject to regulation
as an "investment company" under the Investment Company Act, and the rules and
regulations promulgated thereunder, (iii) result in the termination of any
material contract to which the Company is a party and which is material, or (iv)
result in the treatment of the Company as an association taxable as a
corporation or as a "publicly traded partnership" for federal income tax
purposes. The Company may require reasonable evidence as to the foregoing,
including, without limitation, a favorable opinion of counsel.
6.2 Substitute Members. If a Transferee of Membership Units does not
become (and until any such Transferee becomes) a substitute Member in accordance
with the provisions of Section 6.1 hereof, such Person shall not be entitled to
exercise or receive any of the rights, powers or benefits of a Member other than
the right to receive distributions which the assigning Member has Transferred to
such Person. The Company shall admit as a substitute Member any Person that
acquires Membership Units by Transfer from any Member pursuant to Section 6.1
hereof, but only upon the receipt of an executed instrument satisfactory to the
Company whereby such assignee becomes a party to this Agreement as a Member.
6.3 Allocation of Distributions Between Assignor and Assignee. Upon
the Transfer of Membership Units pursuant to this Article and unless the
assignor and assignee otherwise agree and so direct the Company in a written
statement signed by both the assignor and assignee (a) distributions pursuant to
Article V shall be made to the Person owning such Membership Units at the date
of distribution and (b) the assignee shall succeed to a pro-rata (based on the
percentage of such assignor's Membership Units Transferred) portion of the
assignor's Capital Account with respect to such Membership Units.
Any Membership Units Transferred shall remain subject to the
provisions of this Agreement and the transferee shall have entered into an
enforceable written agreement providing that all Membership Units so Transferred
shall continue to be subject to all provisions of this Agreement as if such
Membership Units were still held by the transferring Member, and provided
further that such permitted transferee shall not be permitted to make any
further Transfer without complying with the provisions of this Agreement.
Anything to the contrary in this Agreement notwithstanding, transferees
permitted hereunder shall take any Membership Units so Transferred subject to
all obligations under this Agreement as if such Membership Units were still held
by the transferring Member whether or not they so expressly agree.
6.4 Permitted Transfers. Subject to the provisions of Sections 6.1(a)
and 6.2, holders of Common Units may Transfer such Common Units to any other
holder of Common Units or to a partner or Affiliate of such Member or to any
other investment
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fund or other entity for which such Member and/or one or more partners or
Affiliates thereof, directly or indirectly through one or more intermediaries,
serve as general partner or manager or in a like capacity.
6.5 Permitted Transfers to Lenders. Notwithstanding the provisions of
this Article VI restricting or otherwise regulating a Transfer by a Member,
Section 3.2 with respect to the admission of New Members, Section 5.1 with
respect to Capital Contributions and Subscription Agreements by New Members and
any other provision contained in this Agreement to the contrary:
(a) Each Member hereby (i) consents to the collateral assignment
and pledge by each other Member of its Membership Units (including all economic
interests therein) in the Company pursuant to a Security and Pledge Agreement
dated as of November __, 1997 (as the same may be amended, restated, renewed,
replaced, supplemented or otherwise modified from time to time, the "Pledge
Agreement") between the Company and Canadian Imperial Bank of Commerce, New York
Agency, as agent for the Lenders (the "Lenders") referred to therein (together
with its successors and assigns in such capacity, the "Agent"), which Pledge
Agreement was entered into, or reaffirmed, as applicable, (x) as a condition to
the execution and delivery of the First Amended and Restated Credit Agreement
dated as of November __, 1997 among the Agent, the Lenders and ACME Television,
LLC, a Delaware limited liability company (the "Borrower"), (as the same may be
amended, restated, renewed, replaced, supplemented or otherwise modified from
time to time, the "Credit Agreement") and (y) to secure the Company's Guaranty
dated as of November __, 1997 of the Borrower's obligations under the Credit
Agreement (as the same may be amended, restated, renewed, replaced, supplemented
as otherwise modified from time to time the "Guaranty"); (ii) in connection with
the exercise by the Agent of any of its rights and remedies under the Pledge
Agreement, consents to the assignment of any of such Membership Units (including
any economic interests therein) to any other Person (and to the substitution of
such other Person as a New Member holding the Membership Units so assigned), and
(iii) agrees that no such assignment (or substitution) and no foreclosure
thereunder or other remedies in respect thereof shall effect a termination or
dissolution of the Company.
(b) Without limiting the generality of the foregoing, each Member
hereby agrees that upon the exercise of remedies pursuant to Section 12 of the
Pledge Agreement and subject to the Agent or its designee having obtained the
requisite consent from the FCC as further set forth in Section 17 of the Pledge
Agreement.
(i) with respect to each Membership Unit (and economic
interest therein) assigned by any existing Member (in each case, the "Assignor")
to the Agent under the Pledge Agreement, the Agent shall thereupon be admitted
(or shall have the right to have one or more designees of its choice admitted)
as a New Member of the Company (in each such case, such New Member admitted
pursuant to this Section 6.5
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being hereinafter referred to as the "Agent Designee Member") with no further
action by any Member or any other Person being necessary, and each Member hereby
consents to such admission and agrees to execute and deliver such instruments,
if any, as shall be necessary to effect or further evidence the foregoing;
(ii) in connection with the admission of any Agent Designee
Member to the Company, no capital contribution by such Agent Designee Member
shall be required;
(iii) no Agent Designee Member shall have any liability with
respect to the obligations of the Company under the Credit Agreement or the
Guaranty;
(iv) on and after the admission of any Agent Designee Member
to the Company, such Agent Designee Member shall have all powers, statutory and
otherwise, possessed by members under the Act and any other applicable laws and,
if any such Agent Designee Member shall then constitute the Majority Member,
such Agent Designee Member shall have the sole authority to manage the business
and affairs of the Company in accordance with Section 4.1 and, in any event and
notwithstanding any other provision contained herein or in any such laws, the
Assignor(s) to such Agent Designee Member shall have no further powers or
privileges with respect to the management of the Company;
(v) following the admission of any Agent Designee Member to
the Company (and without limiting similar restrictions contained in the Pledge
Agreement), none of the other remaining Members may Transfer or otherwise
dispose of any of their Membership Units in the Company without the prior
written consent of such Agent Designee member.
(c) The Members hereby acknowledge and agree that the Agent shall
have no obligation or liability under this Agreement, the Pledge Agreement, the
Guaranty or otherwise by reason of, or arising out of, the collateral assignment
and pledge of the Membership Units or be obligated to perform any of the
obligations, or assume any of the liabilities, of the Members arising hereunder.
(d) The provisions of clauses (a) and (b) shall terminate when
all Obligations under, and as defined in, the Credit Agreement have been paid in
full and the Commitments (as defined in the Credit Agreement) have been
terminated.
ARTICLE VII - INDEMNIFICATION
7.1 Right to Indemnification. Except as limited by law and subject to
the provisions of this Article, the Company shall indemnify each Indemnified
Party from and against any and all Losses in any way related to or arising out
of this Agreement, the
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business of the Company or the action or inaction of such Person hereunder
(including, without limitation, the actions or inactions of the Members and the
other Indemnified Parties pursuant to Article IX hereof upon dissolution of the
Company), which may be imposed on, incurred by or asserted at any time against
any such Indemnified Party, except that no indemnification shall be provided for
any Indemnified Party regarding any matter as to which it shall be finally
determined that such Indemnified Party did not act in good faith and in the
reasonable belief that its action was in the best interests of the Company, or
with respect to a criminal matter, that it had reasonable cause to believe that
its conduct was unlawful. Subject to the foregoing limitations, such
indemnification may be provided by the Company with respect to Losses in
connection with which it is claimed that such Indemnified Party received an
improper personal benefit by reason of its position, regardless of whether the
claim arises out of the Indemnified Party's service in such capacity, except for
matters as to which it is finally determined that an improper personal benefit
was received by such Indemnified Party. The indemnification contained in this
Article VII shall survive termination of this Agreement.
7.2 Award of Indemnification. The determination of whether the Company
is authorized to indemnify any Indemnified Party hereunder and any award of
indemnification shall be made in each instance by the Members; provided,
however, that as to any matter disposed of by a compromise payment, pursuant to
a consent decree or otherwise, no indemnification, either for said payment or
for any other Losses, shall be provided unless there has been obtained an
opinion in writing of legal counsel to the effect that the Person subject to
indemnification hereunder appears to have acted in good faith and that such
indemnification would not protect such Person against any liability to the
Company or the Members to which he, she or it would otherwise be subject by
reason of gross negligence, willful malfeasance or fraud in the conduct of his,
her or its office or actions not taken in good faith by such Person. The Company
shall be obliged to pay indemnification applied for by any Indemnified Party
unless there is an adverse determination (as provided above) within forty-five
(45) days after the application. If indemnification is denied, the applicant may
seek an independent determination of its right to indemnification by a court,
and in such event, the Company shall have the burden of proving that the
applicant was ineligible for indemnification under this Article. Notwithstanding
the foregoing, in the case of a proceeding by or in the right of the Company
which an Indemnified Party is adjudged liable to the Company, indemnification
hereunder shall be provided only upon a determination by a court having
jurisdiction that in view of all the circumstances of the case, the Indemnified
Party is fairly and reasonably entitled to indemnification for such Losses as
the court shall deem proper.
7.3 Successful Defense. Notwithstanding any contrary provisions of
this Article, if any Indemnified Party has been wholly successful on the merits
in the defense of any action, suit or proceeding in which it was involved by
reason of its position with the Company or as a result of serving in such
capacity (including termination of investigative or other proceedings without a
finding of fault on the part of such Indemnified Party), such
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<PAGE>
Indemnified Party shall be indemnified by the Company against all Losses
incurred by such Indemnified Party in connection therewith.
7.4 Advance Payments. Except as limited by law, Losses incurred by an
Indemnified Party in defending any action, suit or proceeding, including a
proceeding by or in the right of the Company, shall be paid by the Company to
such Indemnified Party in advance of final disposition of the proceeding upon
receipt of its written undertaking to repay such amount if such Indemnified
Party is determined pursuant to this Article VII or adjudicated to be ineligible
for indemnification, which undertaking shall be an unlimited general obligation
but need not be secured and may be accepted without regard to the financial
ability of such Indemnified Party to make repayment; provided, however, that no
such advance payment of issues shall be made if it is determined pursuant to
Section 7.2 of this Article on the basis of the circumstances known at the time
(without further investigation) that such Indemnified Party is ineligible for
indemnification.
7.5 Insurance. The Company shall have power to purchase and maintain
insurance on behalf of any Indemnified Party against any liability or cost
incurred by such Person in any such capacity or arising out of its status as
such, whether or not the Company would have power to indemnify against such
liability or cost.
7.6 Heirs and Personal Representatives. The indemnification provided
by this Article shall inure to the benefit of the heirs and personal
representatives of the Indemnified Parties.
7.7 Non-Exclusivity. The provisions of this Article shall not be
construed to limit the power of the Company to indemnify the Members, Officers,
employees or agents to the fullest extent permitted by law or to enter into
specific agreements, commitments or arrangements for indemnification permitted
by law. The absence of any express provision for indemnification herein shall
not limit any right of indemnification existing independently of this Article.
7.8 Amendment. The provisions of this Article may be amended or
repealed in accordance with Section 10.5; provided, however, that no amendment
or repeal of such provisions that adversely affects the rights of the Members
under this Article with respect to acts or omissions occurring at any time prior
to such amendment or repeal, shall apply to any Member without such Member's
consent.
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ARTICLE VIII - CONFLICTS OF INTEREST
8.1 Transactions with Interested Persons; Conflicts.
(a) Unless entered into in bad faith, no contract or transaction
between the Company and one or more of its Members or any other Indemnified
Party, or between the Company and any other Person in which one or more of its
Members or any other Indemnified Party has a financial interest or is a
director, manager or officer, shall be voidable solely for this reason if such
contract or transaction is fair and reasonable to the Company; and no Member or
other Indemnified Party interested in such contract or transaction, because of
such interest, shall be liable to the Company or to any other Person or
organization for any loss or expense incurred by reason of such contract or
transaction or shall be accountable for any gain or profit realized from such
contract or transaction.
(b) Unless otherwise expressly provided herein, (i) whenever a
conflict of interest exists or arises between the Company, its Members and/or
the other Indemnified Parties or (ii) whenever this Agreement provides that any
such Person shall act in a manner that is, or provide terms that are, fair and
reasonable to the Company or any Member, such Person shall resolve such conflict
of interest, taking such action or providing such terms, considering in each
case the relative interest of each party (including its own interest) to such
conflict, agreement, transaction or situation and the benefits and burdens
relating to such interests, any customary or acceptable industry practices, and
any applicable generally acceptable accounting practices or principles. In the
absence of bad faith by the Member or other Indemnified Party, as the case may
be, the resolution, action or term so made, taken or provided by such Person
shall not constitute a breach of this Agreement or any other agreement
contemplated herein or of any duty or obligation of such Person at law or in
equity or otherwise.
8.2 Business Opportunities.
Members may engage in or possess an interest in other business
ventures of any nature, and neither the Company nor any other Member shall have
any rights by virtue of this Agreement in or to any such venture or the income
or profits derived therefrom, and the pursuit of any such venture, even if
competitive with the activities of the Company, shall not be deemed improper or
wrongful. No Member shall be obligated to present any particular investment or
business opportunity to the Company even if such opportunity is of a nature
which could be taken by the Company.
22
<PAGE>
ARTICLE IX - DISSOLUTION, LIQUIDATION, AND
TERMINATION
9.1 No Dissolution. The Company shall not be dissolved by the
admission of additional Members, the withdrawal of a Member or the written
consent of all Members, but shall continue to exist in perpetuity, except in
accordance with the terms of this Agreement. Upon the death, retirement,
resignation, expulsion, Bankruptcy or dissolution of any Member the Company
shall not dissolve and its affairs shall not be wound up except as set forth in
Section 9.2 below.
9.2 Events Causing Dissolution. The Company shall be dissolved and its
affairs wound up upon the occurrence of any of the following events:
(a) if a Majority Member shall be acting as a Manager under
Section 6.2 hereof, the Bankruptcy, dissolution, death, retirement, or
resignation of the Majority Member; unless the Company is continued upon the
written consent of a majority of the remaining Members, such consent to be given
within ninety (90) days following the occurrence of such event;
(b) if there shall be no Majority Member acting as a Manager
under Section 6.2 hereof, the Bankruptcy, dissolution, death, retirement, or
resignation of any Member; unless the Company is continued upon the written
consent of a majority of the remaining Members, such consent to be given within
ninety (90) days following the occurrence of such event;
(c) the entry of a decree of judicial dissolution under Section
18-802 of the Act.
9.3 Notice of Dissolution. Upon the dissolution of the Company, the
Member or the other Person or Persons (the "Liquidating Trustee") appointed by
the Members or the Majority Member, as applicable, to carry out the winding up
of the Company, shall promptly notify the Members of such dissolution.
9.4 Liquidation. Upon dissolution of the Company, the Liquidating
Trustee shall proceed diligently to liquidate the Company and wind up its
affairs and to make final distributions as provided in Section 5.4 hereof and in
the Act. The costs of dissolution and liquidation shall be borne as an expense
of the Company. Until final distribution, the Liquidating Trustee shall continue
to operate the Company properties with all of the power and authority of the
Members or the Majority Member, as applicable. As promptly as possible after
dissolution and again after final liquidation, the Liquidating Trustee shall
cause an accounting to be made by a firm of independent public accountants of
the Company's assets, liabilities and operations.
23
<PAGE>
9.5 Certificate of Cancellation. On completion of the distribution of
Company assets as provided herein, the Company shall be terminated, and the
Members or the Majority Member, as applicable, (or such other Person or Persons
as the Act may require or permit) shall file a Certificate of Cancellation with
the Secretary of State of the State of Delaware under the Act, cancel any other
filings made pursuant to Sections 2.1, 2.2 and 2.4, and take such other actions
as may be necessary to terminate the existence of the Company.
ARTICLE X - GENERAL PROVISIONS
10.1 Offset. Whenever the Company is to pay any sum to any Member, any
amounts that Member owes the Company may be deducted from that sum before
payment. All amounts so deducted shall nevertheless be treated as distributions
for purposes of Sections 5.3, 5.4 and 5.5 hereof.
10.2 Notices. Except as expressly set forth to the contrary in this
Agreement, all notices, requests, or consents provided for or permitted to be
given under this Agreement must be in writing and shall be given either by
registered or certified mail, addressed to the recipient, with return receipt
requested, or by delivering the writing to the recipient in Person, by courier,
or by facsimile transmission; and a notice, request, or consent given under this
Agreement is effective upon receipt or three days after the date mailed,
whichever is sooner. All notices, requests, and consents to be given to a Member
must be sent to or delivered at the addresses given for that Member on Schedule
A, or such other address as that Member may specify by written notice to the
other Members and the Company. Any notice, request, or consent to be given to
the Company must be given to the Members or the Majority Member, as applicable,
at the address of the principal office of Company specified in Section 2.3.
Whenever any notice is required to be given by law, the Certificate or this
Agreement, a written waiver thereof, signed by the Person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
10.3 Entire Agreement. This Agreement, together with each Member's
Subscription Agreement, constitutes the entire agreement of the Members relating
to the Company and supersedes all prior contracts or agreements with respect to
the Company, whether oral or written.
10.4 Amendment or Modification; Terms. This Agreement, including any
Schedule hereto, may be amended from time to time, in whole or in part, by an
instrument in writing signed in accordance with Section 3.4 hereof. Copies of
each such amendment shall be delivered to each Member at least thirty (30) days
prior to the effective date of such amendment; provided, however, in the case of
any amendment that the Members or the Majority Member, as applicable, determine
is necessary or appropriate to prevent the
24
<PAGE>
Company from being treated as a publicly traded partnership taxed as a
corporation under section 7704 of the Code, the amendment shall be effective on
the date provided in the instrument containing the terms of such amendment.
Nothing contained in this Agreement shall permit the amendment of this Agreement
to impair the exemption from personal liability of the officers, employees and
agents of the Company or Members or to permit assessments upon the Members.
10.5 Binding Effect. Subject to the restrictions on Transfers set
forth in this Agreement, this Agreement is binding on and inures to the benefit
of the parties and their respective heirs, legal representatives, successors and
assigns.
10.6 Governing Law; Severability. This Agreement is governed by and
shall be construed in accordance with the law of the State of Delaware,
exclusive of its conflict-of-laws principles. In the event of a direct conflict
between the provisions of this Agreement and any provision of the Certificate,
or any mandatory provision of the Act, the applicable provision of the
Certificate or the Act shall control. If any provision of this Agreement or the
application thereof to any Person or circumstance is held invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of that provision shall be enforced to the fullest extent permitted by law.
10.7 Further Assurances. In connection with this Agreement and the
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions, as requested by the Members or the Majority
Member, as applicable.
10.8 Waiver of Certain Rights. Each Member irrevocably waives any
right it may have to maintain any action for dissolution of the Company or for
partition of the property of the Company.
10.9 Third-Party Beneficiaries. Except with respect to the Agent and
the Lenders, who are expressly intended to be third-party beneficiaries of this
Agreement, there shall be no third-party beneficiaries of this Agreement.
10.10 Failure to Pursue Remedies. The failure of any party to seek
redress for violation of, or to insist upon the strict performance of, any
provision of this Agreement shall not prevent a subsequent act, which would have
originally constituted a violation, from having the effect of any original
violation.
10.11 Cumulative Remedies. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any party
shall not preclude or waive its right to use any or all other remedies. Said
rights and remedies are
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<PAGE>
given in addition to any other right the parties may have by law, statute,
ordinance or otherwise.
10.12 Notice to Members of Provisions of this Agreement. By executing
this Agreement, each Member acknowledges that such Member has actual notice of
(a) all of the provisions of this Agreement, including, without limitation, the
restrictions on the Transfer of Membership Units set forth in Article VI and the
limitations on participation of Members in the management of the Company set
forth in Article III, and (b) all of the provisions of the Certificate. Each
Member hereby agrees that this Agreement constitutes adequate notice of all such
provisions, and each Member hereby waives any requirement that any further
notice thereunder be given.
10.13 Interpretation. For the purposes of this Agreement, terms not
defined in this Agreement shall be defined as provided in the Act; and all
nouns, pronouns and verbs used in this Agreement shall be construed as
masculine, feminine, neuter, singular, or plural, whichever shall be applicable.
Titles or captions of Articles and Sections contained in this Agreement are
inserted as a matter of convenience and for reference, and in no way define,
limit, extend or describe the scope of this Agreement or the intent of any
provision hereof.
10.14 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all signing parties had signed the same
document, and all counterparts shall be construed together and shall constitute
the same instrument.
[END OF TEXT]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date set forth above.
ACME TELEVISION OF NEW MEXICO,
LLC
By /s/ Douglas E. Gealy
--------------------------------
Name:
Title: Pres. & COO
ACME TELEVISION HOLDINGS OF
NEW MEXICO, LLC
By /s/ Douglas E. Gealy
--------------------------------
Name:
Title: Pres. & COO
ACME SUBSIDIARY HOLDINGS III, LLC
By /s/ Douglas E. Gealy
--------------------------------
Name:
Title: Pres. & COO
27
<PAGE>
ACME TELEVISION OF NEW MEXICO, LLC
Schedule A
Member No. of Units Capital Contribution
------ ------------ --------------------
ACME Television Holdings of New Mexico, LLC 199 $995.00
ACME Subsidiary Holdings III, LLC 1 $5.00
28
CERTIFICATE OF FORMATION
OF
ACME TELEVISION LICENSES OF UTAH, L.L.C.
A LIMITED LIABILITY COMPANY
FIRST: The name of the limited liability company is:
ACME TELEVISION LICENSES OF UTAH, L.L.C.
SECOND: Its registered office in the State of Delaware is to be
located at 1013 Centre Road, in the City of Wilmington, County of New
Castle, 19805, and its registered agent at such address is CORPORATION
SERVICE COMPANY.
IN WITNESS WHEREOF, the undersigned, being the individual forming the
Company, has executed, signed and acknowledged this Certificate of
Formation this twenty-first day of August, A.D. 1997.
/s/ Jonathan P. Levi
- ------------------------------
Authorized Person
Jonathan P. Levi
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ACME TELEVISION LICENSES OF UTAH, LLC
a Delaware limited liability company
LIMITED LIABILITY COMPANY AGREEMENT
Dated October 31, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINED TERMS 1
ARTICLE II ORGANIZATION AND POWERS 5
2.1 Organization 5
2.2 Purposes and Powers 5
2.3 Principal Place of Business 6
2.4 Qualification in Other Jurisdictions 6
2.5 Fiscal Year 6
ARTICLE III MEMBERS 6
3.1 Membership Units 6
3.2 Issuance of Membership Units; Admission of New Members 7
3.3 Voting Rights 8
3.4 Restrictions 8
3.5 Limitation on Liability of Members 9
3.6 Authority 9
3.7 Withdrawals; Termination 9
3.8 No Appraisal Rights 10
3.9 Compliance with Securities Laws and Other Laws and
Obligations 10
ARTICLE IV MANAGEMENT 10
4.1 Management 10
4.2 Reliance by Third Parties 11
4.3 Officers 11
ARTICLE V CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS AND
ALLOCATIONS AND DISTRIBUTIONS 12
5.1 Capital Contributions 12
5.2 Capital Accounts and Allocations 12
5.3 Distributions 14
5.4 Distributions Upon Dissolution 14
5.5 Distribution Upon Withdrawal 15
5.6 Tax Matters Partner 15
ARTICLE VI TRANSFERS OF INTERESTS 16
6.1 Restrictions on Transfers 16
6.2 Substitute Members 17
6.3 Allocation of Distributions Between Assignor and
Assignee 17
6.4 Permitted Transfers 17
6.5 Permitted Transfers to Lenders 18
<PAGE>
ARTICLE VII INDEMNIFICATION 19
7.1 Right to Indemnification 19
7.2 Award of Indemnification 20
7.3 Successful Defense 20
7.4 Advance Payments 21
7.5 Insurance 21
7.6 Heirs and Personal Representatives 21
7.7 Non-Exclusivity 21
7.8 Amendment 21
ARTICLE VIII CONFLICTS OF INTEREST 22
8.1 Transactions with Interested Persons; Conflicts 22
8.2 Business Opportunities 22
ARTICLE IX DISSOLUTION, LIQUIDATION, AND TERMINATION 23
9.1 No Dissolution 23
9.2 Events Causing Dissolution 22
9.3 Notice of Dissolution 23
9.4 Liquidation 23
9.5 Certificate of Cancellation 24
ARTICLE XI GENERAL PROVISIONS 24
10.1 Offset 24
10.2 Notices 24
10.3 Entire Agreement 24
10.4 Amendment or Modification; Terms 24
10.5 Binding Effect 25
10.6 Governing Law; Severability 25
10.7 Further Assurances 25
10.8 Waiver of Certain Rights 25
10.9 Third-Party Beneficiaries 25
10.10 Failure to Pursue Remedies 25
10.11 Cumulative Remedies 25
10.12 Notice of Members of Provisions of this Agreement 26
10.13 Interpretation 26
10.14 Counterparts 26
Schedule A - Membership Units
<PAGE>
ACME Television Licenses of Utah, LLC
Limited Liability Company Agreement
This Limited Liability Company Agreement is made as of October 31,
1997 by and among ACME Television Licenses of Utah, LLC (the "Company") and each
of the Members listed on Schedule A hereto, and those Persons who become Members
of the Company in accordance with the provisions hereof and whose names are set
forth as such in the record books of the Company.
WHEREAS, the Company has been formed as a limited liability company
under the Delaware Limited Liability Company Act, Del. Code Ann. tit. 6, ss.
18.101 et seq. (as amended from time to time, the "Act"), by filing a
Certificate of Formation of the Company with the office of the Secretary of
State of the State of Delaware on August 21, 1997; and
WHEREAS, the Members desire to set out fully their respective rights,
obligations and duties regarding the Company and its assets and liabilities as
set forth herein.
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Members hereby
agree as follows:
ARTICLE I - DEFINED TERMS
Unless the context otherwise requires, the terms defined in this
Article I shall, for the purposes of this Agreement, have the meanings herein
specified (each such meaning to be equally applicable to both the singular and
plural forms of the respective terms so defined).
"Affiliate" shall mean, with respect to a specified Person, any Person
that directly or indirectly controls, is controlled by or is under common
control with, the specified Person. As used in this definition, the term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through ownership of voting securities, by contract or otherwise.
"Agreement" shall mean this Limited Liability Company Agreement, as
amended, modified, supplemented or restated from time to time.
"Bankruptcy" means, with respect to a Person, that either (i) an
involuntary petition under any bankruptcy or insolvency or other debtor relief
law or under the
<PAGE>
reorganization provisions of any such law has been filed with respect to such
Person or a receiver of or for the property of such Person has been appointed
without the acquiescence of such Person, which petition or appointment remains
undischarged or unstayed for an aggregate period of sixty (60) days (whether or
not consecutive) or (ii) a voluntary petition under any bankruptcy or insolvency
or other debtor relief law or under the reorganization provisions of any such
law has been filed by such Person, a voluntary assignment of such Person's
property for the benefit of creditors has been made, a written admission by such
Person of its inability to pay its debts as they mature has been made, a
receiver of or for the property of such Person has been appointed with the
acquiescence of such Person or such Person has done any similar act of like
import.
"Capital Contribution" shall mean with respect to any Initial Member
the amount set forth opposite its name on Schedule A and with respect to any New
Member the amount set forth opposite its name on Schedule A, as amended.
"Certificate" shall mean the Certificate of Formation and any and all
amendments thereto and restatements thereof filed on behalf of the Company with
the Secretary of State of the State of Delaware pursuant to the Act.
"Common Members" shall mean those persons listed on Schedule A hereto
as Common Members.
"Common Units" shall mean those Membership Units designated as Common
Units, as described in Section 3.1 hereof.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, or any corresponding federal tax statute enacted after the date of this
Agreement. A reference to a specific section of the Code refers not only to such
specific section but also to any corresponding provision of any federal tax
statute enacted after the date of this Agreement, as such specific section or
corresponding provision is in effect on the date of application of the
provisions of this Agreement containing such reference.
"Distribution Percentage" shall mean a percentage determined for each
holder of Common Units by dividing the aggregate Common Units of such holder by
the aggregate Common Units of all holders of Common Units entitled to
distributions at the time of such determination.
"FCC" means the Federal Communications Commission.
"Indemnified Parties" shall mean the Members, any Affiliate of the
Members and each Person serving as an Officer, employee or other agent of the
Company (including Persons who serve at the Company's request as directors,
managers, officers, employees, agents or trustees of another organization in
which the Company has any interest as a shareholder, creditor or otherwise) and
their respective successors and assigns.
2
<PAGE>
"Initial Capital Contribution" shall mean with respect to any Initial
Member the amount set forth opposite its name on Schedule A hereto.
"Initial Members" shall mean those Persons listed on Schedule A hereto
as Initial Members as of the date hereof.
"Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time, together with any successor statute, and the rules
and regulations promulgated thereunder.
"Losses" shall mean all liabilities, judgments, obligations, losses,
damages, taxes and interest and penalties thereon (other than (i) income taxes
due on income allocated to Membership Units; and (ii) taxes based on fees,
compensation or commissions received by an Indemnified Party in connection with
the administration of the Company or the Company's property), claims, actions,
suits or other proceedings (whether civil or criminal, pending or threatened,
before any-court or administrative or legislative body, and as the same are
accrued, in which an Indemnified Party may be or may have been involved as a
party or otherwise or with which he or she may be or may have been threatened,
while in office or thereafter), costs, expenses and disbursements (including,
without limitation, legal and accounting fees and expenses) of any kind and
nature whatsoever.
"Member" shall mean the Initial Members and any Person admitted as a
Member in accordance with the terms of this Agreement and named as a Member in
the record books of the Company, and includes any Person admitted pursuant to
the provisions of this Agreement when acting in his, her or its capacity as a
Member of the Company, and "Members" shall mean two (2) or more of such Persons
when acting in their capacities as Members of the Company.
"New Member" shall mean any Member who is not an Initial Member.
"Person" shall mean an individual, corporation, association,
partnership (general or limited), joint venture, trust, unincorporated
organization, limited liability company, any other entity or organization of any
kind or a government or any department, agency, authority, instrumentality or
political subdivision thereof.
"Securities Act" shall mean the Securities Act of 1933, as amended
from time to time, together with any successor statute, and the rules and
regulations promulgated thereunder.
"Subscription Agreement" shall mean a subscription agreement for the
purchase of a Membership Unit in the Company, in a form acceptable to the
Members or the Majority Member, as applicable.
3
<PAGE>
"Tax Rate" means, for any taxable year of a Member, the sum of the
Federal Rate and the State Rate, with (a) the "Federal Rate" defined to mean the
highest effective federal income tax rate applicable to any individual for such
year and (b) the "State Rate" defined as the product of (i) the highest
effective state income tax rate applicable to an individual Member for such year
multiplied by (ii) a percentage equal to the difference between one hundred
percent (100%) and the Federal Rate.
"Taxable Income" and "Taxable Loss" mean, for any taxable year, the
taxable income or loss attributable to such Member's distributive share of
taxable income or loss of the Company, as determined for federal income tax
purposes; provided that in making such determination all separately stated items
of income, gain, loss and deduction (other than tax-exempt income) shall be
included; and provided further, that in calculating Taxable Income and Taxable
Loss, items of income, gain, loss and deduction attributable to the sale or
exchange of all or substantially all of the assets of the Company shall be
excluded from such calculation.
"Transfer" shall mean any sale, assignment, transfer, exchange,
charge, pledge, gift, hypothecation, conveyance or encumbrance (such meaning to
be equally applicable to verb forms of such term).
"Treasury Regulations" means the income tax regulations, including
temporary regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
The following terms shall have the meanings set forth in the indicated
Sections hereof:
Defined Term Section Number
"Act" Preamble
"Capital Account" 5.02
"Company" Preamble
"Consolidated Group Securities" 3.04(a)
"Holdings" 5.03(a)
"Liquidating Trustee" 9.03
"Majority Member" 4.01(b)
"Membership Unit" 3.01
"Senior Executive Offices" 4.06
"Tax Distributions" 5.03
"Tax Matters Partner" 5.06
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ARTICLE II - ORGANIZATION AND POWERS
2.1 Organization. The name of the Company is ACME Television Licenses
of Utah, LLC. The Company has been formed by the filing of its Certificate with
the Delaware Secretary of State pursuant to the Act. The Certificate may be
restated or amended by the Members or the Majority Member, as applicable, from
time to time in accordance with the Act and subject to the terms of this
Agreement. The Company shall deliver a copy of the Certificate and any amendment
thereto to any Member who so requests.
2.2 Purposes and Powers. The principal business activity and purposes
of the Company shall initially be to acquire, develop, own and operate
television broadcast stations and to conduct any business related thereto or
useful in connection therewith. However, the business and purposes of the
Company shall not be limited to its initial principal business activity, and the
Company shall, subject to the terms of this Agreement, have authority to engage
in any other lawful business, purpose or activity permitted by the Act. Except
as otherwise provided in this Agreement, the Company, and the Members or the
Majority Member, as applicable, acting on behalf of the Company in accordance
with this Agreement, shall possess and may exercise all of the powers and
privileges granted by the Act or which may be exercised by any Person, together
with any powers incidental thereto, so far as such powers or privileges are
necessary, appropriate, proper, advisable, incidental or convenient to the
conduct, promotion or attainment of the business purposes or activities of the
Company, including without limitation the following powers:
(a) to conduct its business and operations in any state,
territory or possession of the United States or in any foreign country or
jurisdiction;
(b) to purchase, receive, take, lease or otherwise acquire, own,
hold, improve, maintain, use or otherwise deal in and with, sell, convey, lease,
exchange, transfer or otherwise dispose of, mortgage, pledge, encumber or create
a security interest in all or any of its real or personal property, or any
interest therein, wherever situated;
(c) to borrow or lend money or obtain or extend credit and other
financial accommodations, to invest and reinvest its funds in any type of
security or obligation of or interest in any public, private or governmental
entity, and to give and receive interests in real and personal property as
security for the payment of funds so borrowed, loaned or invested;
(d) to make and modify contracts, including contracts of
insurance, incur liabilities and give guaranties, whether or not such guaranties
are in furtherance of the business and purposes of the Company, including
without limitation, guaranties of
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obligations of other Persons who are interested in the Company or in whom the
Company has an interest;
(e) to employ and terminate Officers, employees, agents and other
Persons, to organize committees of the Company, to delegate to such Persons
and/or committees such power and authority, the performance of such duties and
the execution of such instruments in the name of the Company, to fix the
compensation and define the duties and obligations of such personnel, to
establish and carry out retirement, incentive and benefit plans for such
personnel, and to indemnify such personnel to the extent permitted by this
Agreement and the Act;
(f) to form and maintain subsidiaries and to merge with, or
consolidate into, another Delaware limited liability company or other business
entity (as defined in Section 18-209 of the Act); and
(g) to institute, prosecute, and defend any legal action or
arbitration proceeding involving the Company, and to pay, adjust, compromise,
settle, or refer to arbitration any claim by or against the Company or any of
its assets.
2.3 Principal Place of Business. The principal office and place of
business of the Company shall initially be Suite 850, 650 Town Center Drive,
Costa Mesa, California 92626. The Members or the Majority Member, as applicable,
may change the principal office or place of business of the Company at any time
and may cause the Company to establish other offices or places of business in
various jurisdictions and appoint agents for service of process in such
jurisdictions.
2.4 Qualification in Other Jurisdictions. The Members or the Majority
Member, as applicable, shall cause the Company to be qualified or registered
under applicable laws of any jurisdiction in which the Company transacts
business and shall be authorized to execute, deliver and file any certificates
and documents necessary to effect such qualification or registration.
2.5 Fiscal Year. The fiscal year of the Company shall end on December
31 of each year.
ARTICLE III - MEMBERS
3.1 Membership Units. The Members shall have no rights or powers in
respect of the Company (including, without limitation, any rights in respect of
allocations of profit and loss or distributions) other than the rights conferred
by this Agreement represented by issued and outstanding units of membership
interest (the "Membership Units"), which shall be deemed to be personal property
giving only the rights provided in
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this Agreement and which shall consist of one class ("Common Units"), which
shall have rights and privileges, including voting rights as expressly set forth
in this Agreement. Every Member by virtue of having become a Member shall be
held to have expressly assented and agreed to the terms hereof and to have
become a party hereto. Ownership of a Membership Unit shall not entitle a Member
to any title in or to the whole or any part of the property of the Company or
right to call for a partition or division of the same or for an accounting. The
Initial Members of the Company, their addresses, and the respective classes and
denominations of Membership Units held by them shall be as set forth on Schedule
A hereto, and said schedule shall be amended from time to time by the Members or
the Majority Member, as applicable, in accordance with the terms hereof to
reflect the withdrawal of Members or the admission of additional Members
pursuant to this Agreement.
The Company hereby authorizes for issuance 200 Common Units. As of the
date hereof, the Company shall have issued 200 Common Units to the Initial
Members, as set forth on Schedule A hereto. Except for the Common Units issued
on the date hereof, none of the Common Units may be issued by the Company
without the prior written consent of a majority in interest of the Members.
3.2 Issuance of Membership Units: Admission of New Members.
(a) The Company is not authorized to offer and sell, or cause to
be offered and sold, additional Membership Units or to admit additional Persons
as Members except with the approval of the Members holding more than fifty
percent (50%) in interest of the Common Units.
(b) The Members or the Majority Member, as applicable, may
establish eligibility requirements for admission of a subscriber as a New Member
after the date hereof and may refuse to admit any subscriber that fails to
satisfy such eligibility requirements. The Members or the Majority Member, as
applicable, shall have the responsibility for determining whether a Person is
eligible for admission as a New Member. Each Person who first subscribes for a
Membership Unit in the Company after the date hereof shall be admitted as a New
Member of the Company at the time (i) such Person executes a Subscription
Agreement agreeing to be bound by the provisions hereof, (ii) the Members or the
Majority Member, as applicable, at their sole discretion, accepts such
Subscription Agreement on behalf of the Company and (iii) the subscriber makes
the Capital Contribution(s) required pursuant to the terms of this Agreement and
its Subscription Agreement. None of the existing Members shall have any
preemptive or similar right to subscribe to the issuance of new Membership Units
in the Company, and each of the Members acknowledges that its membership
interest is subject to adjustment (downward and upward) in the event of the
admission of New Members to the Company pursuant hereto or the withdrawal of any
Member from the Company.
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3.3 Voting Rights.
(a) Except as otherwise provided in this Agreement, no Member or
holder of a Membership Unit shall have the right to amend or terminate this
Agreement.
3.4 Restrictions. Notwithstanding anything in this Agreement to the
contrary, the following matters shall require the prior written consent of
holders of more than fifty percent (50%) in interest of the Common Units:
(a) the redemption, purchase or other acquisition for value (or
payment into or set aside for a sinking fund for such purpose) of any Membership
Unit, or other type of equity interest of the Company or any of its
Subsidiaries, or security convertible into or exchangeable or exercisable for
such Membership Units or equity interests (which are hereinafter reflected to as
"Consolidated Group Securities");
(b) the authorization or issuance (or the incurrence of any
obligation to authorize or issue) of any additional Membership Units or other
Consolidated Group Securities;
(c) the increase or decrease of the total number of authorized
Membership Units or other Consolidated Group Securities;
(d) the payment or declaration of any dividend or distribution
(other than Tax Distributions pursuant to Section 5.3) with respect to any
Membership Units or other Consolidated Group Securities;
(e) the authorization of any merger or consolidation of the
Company or any of its Subsidiaries with or into any other entity (except for
mergers among wholly-owned Subsidiaries);
(f) the authorization of the reorganization or sale of the
Company or any of its Subsidiaries or the sale of any material assets of the
Company or any of its Subsidiaries;
(g) the authorization of any reclassification or recapitalization
of the outstanding Membership Units of the Company or any other Consolidated
Group Securities;
(h) engagement by the Company or any of its Subsidiaries in any
business other than the business now conducted or contemplated by the Company or
a business or businesses similar thereto or reasonably compatible therewith;
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(i) the alteration, modification or amendment of this Agreement;
or
(j) the application by the Company for or consent by it to the
appointment of a receiver, trustee, custodian or liquidator of it or any of its
property, (ii) the admission in writing by the Company of its inability to pay
its debts as they mature, (iii) the making by the Company of a general
assignment for the benefit of creditors, or (iv) the filing by the Company of a
voluntary petition in bankruptcy, or a petition or an answer seeking
reorganization or an arrangement with creditors, or any other action by the
Company to take advantage of any bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation laws or statutes, or an answer
from the Company admitting the material allegations of a petition filed against
it in any proceeding under any such law.
3.5 Limitation on Liability of Members. Except as otherwise provided
in the Act, no Member of the Company shall be obligated personally for any debt,
obligation or liability of the Company or of any other Member or otherwise have
any personal recourse hereunder, whether arising in contract, tort or otherwise,
solely by reason of being a Member. Except as expressly set forth in this
Agreement, no Member shall have any fiduciary or other duty to another Member
with respect to the business and affairs of the Company, and no Member shall be
liable to the Company or any other Member for acting in good faith reliance upon
the provisions of this Agreement. No Member shall have any responsibility to
restore any negative balance in its Capital Account or to contribute to or in
respect of the liabilities or obligations of the Company or return distributions
made by the Company except as required by this Agreement, the Act or other
applicable law; provided, however, that Members are responsible for their
failure to make required Capital Contributions in accordance with Section 5.1.
3.6 Authority. Except as otherwise expressly provided herein, in all
matters relating to or arising out of the conduct or the operation of the
Company, the decision of the Members (acting by vote of holders of more than
fifty percent (50%) in interest of the Common Units) or the Majority Member, as
applicable, shall be the decision of the Company. The Company may employ one or
more Persons from time to time, and such Persons, in their capacity as Officers
or employees of the Company, may take part in the control and management of the
business of the Company to the extent such authority and power to act for or on
behalf of the Company has been delegated to them by the Members or the Majority
Member, as applicable.
3.7 Withdrawals; Termination. No Member shall have any right to resign
or withdraw from the Company without the consent of the Members or the Majority
Member, as applicable, or to receive any distribution on its Membership Units or
the repayment of its Capital Contributions except as provided in Article V
hereof.
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3.8 No Appraisal Rights. No Member shall have any right to have its
interest in the Company appraised and paid out under the circumstances provided
in Section 18-210 of the Act or any other circumstances.
3.9 Compliance with Securities Laws and Other Laws and Obligations.
Each Member hereby represents and warrants to the Company and acknowledges that
(a) it has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of an investment in the Company
and making an informed investment decision with respect thereto, (b) it is able
to bear the economic and financial risk of an investment in the Company for an
indefinite period of time and understands that it has no right to withdraw and
have its interest repurchased by the Company, (c) it is acquiring an interest in
the Company for investment only and not with a view to, or for resale in
connection with, any distribution to the public or public offering thereof, and
(d) it understands that the interests in the Company have not been registered
under the securities laws of any jurisdiction and cannot be disposed of unless
they are subsequently registered and/or qualified under applicable securities
laws or pursuant to valid exemptions from such registration/qualification
requirements and the provisions of this Agreement have been complied with.
ARTICLE IV - MANAGEMENT
4.1 Management.
(a) Except as provided in Section 4.1(b) hereof, the Company
shall be managed by the Members. No action may be taken by any Member to bind
the Company without the prior consent of Members holding more than fifty percent
(50%) in interest of the Common Units.
(b) If any Member shall own more than fifty percent (50%) in
interest of the Common Units of the Company (the "Majority Member"), management
and control of the business of the Company shall be vested exclusively in the
Majority Member for so long as such Member holds more that fifty percent (50%)
in interest of the Common Units, and such Majority Member shall have exclusive
power and authority, in the name of and on behalf of the Company, to perform all
acts and do all things which, in its sole discretion, it deems necessary or
desirable to conduct the business of the Company.
The Majority Member shall, subject to all applicable provisions
of this Agreement, be authorized in the name and on behalf of the Company: (i)
to enter into, execute, amend, supplement, acknowledge and deliver any and all
contracts, agreements, leases or other instruments for the operation of the
Company's business; and (ii) in general to do all things and execute all
documents determined by it to be necessary or appropriate to conduct the
business of the Company as more fully set forth in Section 2.2 hereof or as
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provided by law, or to protect and preserve the Company's assets. The Majority
Member may delegate any or all of the foregoing powers. The Majority Member is
an agent of the Company for the purpose of the Company's business. Any action
taken by the Majority Member, and the signature of the Majority Member on any
agreement, contract, instrument or other document on behalf of the Company,
shall be sufficient to bind the Company and shall conclusively evidence the
authority of the Majority Member and the Company with respect thereto.
(c) The Members acting pursuant to Section 4.1(a) or the Majority
Member, as applicable, shall be the "manager" (within the meaning of the Act) of
the Company, and each shall have the benefits and protections accorded
"managers" under the Act. The Members acting pursuant to Section 4.1(a) or the
Majority Member, as applicable, shall devote such time to the business and
affairs of the Company as is reasonably necessary for the performance of their
duties, but shall not be required to devote full time to the performance of such
duties and may delegate their responsibilities as provided in this Agreement.
The Majority Member shall not be personally liable to the Company or to its
Members for breach of any duty that does not involve: (i) a breach of the duty
of loyalty to the Company or its Members; (ii) an act or omission not in good
faith or which involves intentional misconduct or a knowing violation of law; or
(iii) a transaction from which the Majority Member derived an improper personal
benefit.
4.2 Reliance by Third Parties. Any person dealing with the Company or
any Member may rely upon a certificate signed by the Majority Member or any
Officer as to (i) the identity of any other Member; (ii) any factual matters
relevant to the affairs of the Company; (iii) the persons who are authorized to
execute and deliver any document on behalf of the Company; or (iv) any action
taken or omitted by the Company or any Member. The Majority Member shall not be
personally liable to the Company or to its Members for breach of any duty that
does not involve: (i) a breach of the duty of loyalty to the Company or its
other Members; (ii) an act or omission not in good faith or which involves
intentional misconduct or a knowing violation of law; or (iii) a transaction
from which the Majority Member derived an improper personal benefit.
4.3 Officers. The Members or the Majority Member, as applicable, may
designate employees of the Company as officers of the Company (the "Officers")
as they deem necessary or desirable to carry on the business of the Company and
the Members or the Majority Member, as applicable, may delegate to such Officers
such power and authority as the Members or the Majority Member, as applicable,
deem advisable. Any Officer may hold two or more offices of the Company. The
initial Officers of the Company shall be Jamie Kellner (Chairman and Chief
Executive Officer), Douglas Gealy (President and Chief Operating Officer) and
Thomas Allen (Executive Vice President and Chief Financial Officer). New offices
may be created and filled by the Members or the Majority Member, as applicable.
Each Officer shall hold office until his or her successor is designated by the
Members or the Majority Member, as applicable, or until his or her
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earlier death, resignation or removal. Any Officer may resign at any time upon
written notice to the Members or the Majority Member, as applicable. Any Officer
may be removed by the Members or the Majority Member, as applicable, with or
without cause at any time. A vacancy in any office occurring because of death,
resignation, removal or otherwise, may, but need not, be filled by the Members
or the Majority Member, as applicable. The Officers are not "managers" (within
the meaning of the Act) of the Company.
ARTICLE V - CAPITAL CONTRIBUTIONS; CAPITAL
ACCOUNTS AND ALLOCATIONS AND DISTRIBUTIONS
5.1 Capital Contributions. The Initial Members have made as of the
date hereof the Capital Contribution to the Company specified on Schedule A
attached hereto. Each New Member shall make the Capital Contribution to the
Company specified in such Member's Subscription Agreement as of the date of
admission of such New Member as a Member of the Company. Except as approved by
the Members or the Majority Member, as applicable, or as set forth on Schedule A
or in a Member's Subscription Agreement, no Member shall be entitled or required
to make any Capital Contribution or loan or advance to the Company; provided,
however, that the Company may, subject to the other terms of this Agreement,
borrow from its Members as well as from banks or other lending institutions to
finance its working capital or the acquisition of assets upon such terms and
conditions as shall be approved by the Members or the Majority Member, as
applicable, and any such loans by Members shall not be considered Capital
Contributions or reflected in their Capital Accounts. The agreed value of all
non-cash Capital Contributions made by Members shall be set forth on Schedule A
or in such Member's Subscription Agreement. No Member shall be entitled to any
interest or compensation with respect to its Capital Contributions or any
services rendered on behalf of the Company except as specifically provided in
this Agreement. No Member shall have any liability for the repayment of the
Capital Contributions of any other Member and shall look only to the assets to
the Company for return of its Capital Contributions.
5.2 Capital Accounts and Allocations.
(a) Capital Accounts. A separate capital account (a "Capital
Account") shall be established and maintained for each Member, which shall
initially be equal to the Capital Contribution of such Member as set forth on
Schedule A hereto. Such Capital Accounts shall be maintained in accordance with
Section 1.704-1(b)(2)(iv) of the Treasury Regulations, and this Section 5.2
shall be interpreted and applied in a manner consistent with said Section of the
Treasury Regulations. The Capital Accounts shall be maintained for the sole
purpose of allocating items of income, gain, loss and deduction among the
Members and shall have no effect on the amount of any distributions to any
Members in liquidation or otherwise. The amount of all distributions to Members
shall be determined pursuant to Sections 5.3, 5.4 and 5.5.
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(b) Allocation of Profits and Losses. All items of income, gain,
loss and deduction as determined for book purposes shall be allocated among the
Members and credited or debited to their respective Capital Accounts in
accordance with Treasury Regulations Section 1.704-1(b)(2)(iv), so as to ensure
to the maximum extent possible (i) that such allocations satisfy the economic
effect equivalence test of Treasury Regulations Section 1.704-1(b)(2)(ii)(i) (as
provided hereinafter) and (ii) that all allocations of items that cannot have
economic effect (including credits and nonrecourse deductions) are allocated to
the Members in proportion to their membership interests unless otherwise
required by Code Section 704(b) and the Treasury Regulations promulgated
thereunder. To the extent possible, items that can have economic effect shall be
allocated in such a manner that the balance of each Member's Capital Account at
the end of any fiscal year (increased by such Member's "share of partnership
minimum gain" as defined in Treasury Regulations Section 1.704-2) would be
positive to the extent of the amount of cash that such Member would receive (or
would be negative to the extent of the amount of cash that such Member should be
required to contribute to the Company) if the Company sold all of its property
for an amount of cash equal to the book value (as determined pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv)) of such property (reduced, but
not below zero, by the amount of nonrecourse debt to which such property is
subject) and all of the cash of the Company remaining after payment of all
liabilities (other than nonrecourse liabilities) of the Company were distributed
in liquidation immediately following the end of such fiscal year in accordance
with Section 5.3. Except to the extent otherwise required by the Code, the
"traditional method" provided for in Treasury Regulations Section 1.704-3(b)
shall apply to all tax allocations governed by Code Section 704(c) and all
"reverse Section 704(c) allocations."
(c) Other Allocations. The Members or the Majority Member, as
applicable, may adjust the Capital Accounts of the Members to reflect
reevaluations of the Company property whenever the adjustment would be permitted
under Treasury Regulations Section 1.704-1(b)(2)(iv)(f). In the event that the
Capital Accounts of the Members are so adjusted, (i) the Capital Accounts of the
Members shall be adjusted in accordance with Treasury Regulations Section
1.704l(b)(2)(iv)(g) for allocations of depreciation, depletion, amortization and
gain or loss, as computed for book purposes, with respect to such property and
(ii) the Members' distributive shares of depreciation, depletion, amortization
and gain or loss, as computed for tax purposes, with respect to such property
shall be determined so as to take account of the variation between the adjusted
tax basis and book value of such property in the same manner as under Section
704(c) of the Code. In the event that Code Section 704(c) applies to Company
property, the Capital Accounts of the Members shall be adjusted in accordance
with Treasury Regulations Section 1.704-1(b)(2)(iv)(g) for allocations of
depreciation, depletion, amortization and gain and loss, as computed for book
purposes, with respect to such property. In applying clause (ii) of the second
preceding sentence and all of the preceding sentence, the provisions of Code
Section 704(b) shall apply.
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5.3 Distributions. Subject to (i) the terms of the Act, (ii) any
agreements of the Company or any of its Affiliates with respect to indebtedness
for money borrowed to which the Company may from time to time be subject, and
(iii) except in the case of distributions pursuant to subsection (a) below, the
prior written consent of holders of a majority in interest of the Common Units,
all funds of the Company which are available for distribution (as determined by
the Members or the Majority Member, as applicable, in their discretion) shall be
distributed as follows:
(a) First, within one hundred and twenty (120) days after the end
of each taxable year during which ACME Televisions Holdings, LLC ("Holdings")
shall have any direct or indirect ownership interest in the Company, there shall
be distributed to each Member an amount equal to the product of (i) the Tax Rate
and (ii) the difference between (x) the amount of such Member's Taxable Income
with respect to such taxable year and (y) the cumulative amount of such Member's
Taxable Loss, if any, from all prior taxable years, but only to the extent such
Taxable Loss on a cumulative basis exceeds Taxable Income for all prior taxable
years on a cumulative basis (the "Tax Distributions"); provided however, that
such distribution shall in all events be sufficient to allow Holdings to make
the distributions required under Section 5.3(a) of the Limited Liability Company
Agreement of Holdings; and
(b) Second, pro rata to all Members in accordance with their
respective Distribution Percentages.
5.4 Distributions Upon Dissolution. Proceeds from a sale of all or
substantially all of the assets of the Company and amounts available upon
dissolution, after payment of, or adequate provision for, the debts and
obligations of the Company, including the expenses of its liquidation and
dissolution, shall be distributed and applied in the following priorities:
(a) First, to fund reserves as deemed reasonably necessary by the
Members, the Majority Member, as applicable, or the Liquidating Trustee for any
contingent, conditional or unmatured liabilities or other obligations of the
Company, which such reserves (i) may be paid to a bank (or other third party),
to be held in escrow for the purpose of paying any such contingent, conditional
or unmatured liabilities or other obligations, and (ii) shall at the expiration
of such period(s) as the Members, the Majority Member, as applicable, or
Liquidating Trustee may reasonably deem advisable, shall be distributed to the
Members in accordance with Section 5.3; and
(b) Second, in accordance with Section 5.3.
If any assets of the Company are to be distributed in kind in
connection with such liquidation, such assets shall be distributed on the basis
of their fair market value net
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of any liabilities encumbering such assets and, to the greatest extent possible,
shall be distributed pro-rata in accordance with the total amounts to be
distributed to each Member. Solely for purposes of Section 5.2 and immediately
prior to the effectiveness of any such distribution-in-kind, each item of gain
and loss that would have been recognized by the Company had the property being
distributed been sold at fair market value shall be determined and allocated to
those persons who were Members immediately prior to the effectiveness of such
distribution in accordance with Section 5.2.
5.5 Distribution Upon Withdrawal. No Member shall be entitled to any
distribution or payment with respect to its Membership Units upon the
resignation or withdrawal of such Member.
5.6 Tax Matters Partner. ACME Television Holdings of Utah, LLC is
hereby designated as the initial "Tax Matters Partner" of the Company for
purposes of Section 6231(a)(7) of the Code, and such Tax Matters Partner shall
have the power to manage and control, on behalf of the Company, any
administrative proceeding at the Company level with the Internal Revenue Service
relating to the determination of any item of Company income, gain, loss,
deduction or credit for federal income tax purposes. The Members or the Majority
Member, as applicable, may at any time hereafter designate a new Tax Matters
Partner; provided, however, that only a Member may be designated as the Tax
Matters Partner of the Company.
(a) Partnership Status. The Company will elect to be treated as a
pass-through entity for purposes of federal and state income tax, and each
Member covenants that it will make no election, declaration or statement on or
in any tax return, tax filing, or any book or record maintained by it which is
inconsistent with or detrimental to the Company's ongoing maintenance of
partnership tax status (or as a single-member entity, if applicable).
(b) Income Tax Compliance. The Tax Matters Partner shall prepare
or cause to be prepared and filed on behalf of the Company, when and as required
by applicable law, all federal, state and local income tax information returns
or requests for extensions thereof. Not less than thirty (30) days prior to the
due date (including extensions) for any return (but not later than August 15 of
each year), the Tax Matters Partner shall submit to each Member a copy of the
return as proposed for review and a schedule showing the Member's allocable
share of the Company's tax attributes ("Tax Attributes") sufficient to allow
such Member to include such Tax Attributes in its federal income tax return.
Each Member shall provide to the Tax Matters Partner, when and as requested, all
information concerning the affairs of such Member as may be reasonably required
to permit the filing of such returns.
(c) Tax Elections. The Tax Matters Partner shall make the
following tax elections on behalf of the Company:
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(i) Unless required to adopt a different taxable year
pursuant to Section 706(b) of the Code, adopt the calendar year as the annual
accounting period;
(ii) Adopt the accrual method of accounting;
(iii) Deduct interest expense and taxes attributable to the
construction or installation of real and personal property improvements to the
fullest extent permitted by the Code;
(iv) Compute the allowance for depreciation under the most
accelerated tax depreciation method and using the shortest life and lowest
salvage value authorized by applicable law, consistent with the election
provided for in the following clause, with respect to all depreciable assets;
(v) If allowed by the Code, and to the maximum extent
allowable, elect to take available investment tax credit on the full basis of
each asset; and
(vi) Make such other elections as the Tax Matters Partner
shall have been directed in writing by the Members or the Majority Member, as
applicable, to make. The requirement to make any of the elections set forth
above is predicated upon the assumption that current federal income tax law will
continue in force. If any legislative change is made in the Code or any other
tax statutes or by the IRS in regulations and other pronouncements or by the
courts in case law affecting any of such elections so as to materially alter the
economic result of the required election, the Tax Matters Partner shall make
such election in respect of the item so affected as directed by the Members or
the Majority Member, as applicable.
(d) Code Section 754 Election. In connection with any transfer or
assignment of any Membership Units, or any distribution with respect to which a
Member recognizes gain under Code section 731(a), the Members or the Majority
Member, as applicable, shall, upon the written request of any Member, cause the
Company to file an election under Code section 754 and the Treasury Regulations
thereunder to adjust the basis of the Company assets under Code Section 734(b)
or 743(b) and a corresponding election under the applicable sections of state
and local law.
ARTICLE VI - TRANSFERS OF INTERESTS
6.1 Restrictions on Transfers. No Membership Units of the Company may
be Transferred, nor may any Member offer to Transfer, and no Transfer by a
Member shall be binding upon the Company or any Member unless such Transfer
complies with the provisions of this Article VI and the Company receives an
executed copy of the documents effecting such Transfer.
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No Transfer shall be permitted if such Transfer would (i) violate the
registration provisions of the Securities Act or the securities laws of any
applicable jurisdiction, (ii) cause the Company to become subject to regulation
as an "investment company" under the Investment Company Act, and the rules and
regulations promulgated thereunder, (iii) result in the termination of any
material contract to which the Company is a party and which is material, or (iv)
result in the treatment of the Company as an association taxable as a
corporation or as a "publicly traded partnership" for federal income tax
purposes. The Company may require reasonable evidence as to the foregoing,
including, without limitation, a favorable opinion of counsel.
6.2 Substitute Members. If a Transferee of Membership Units does not
become (and until any such Transferee becomes) a substitute Member in accordance
with the provisions of Section 6.1 hereof, such Person shall not be entitled to
exercise or receive any of the rights, powers or benefits of a Member other than
the right to receive distributions which the assigning Member has Transferred to
such Person. The Company shall admit as a substitute Member any Person that
acquires Membership Units by Transfer from any Member pursuant to Section 6.1
hereof, but only upon the receipt of an executed instrument satisfactory to the
Company whereby such assignee becomes a party to this Agreement as a Member.
6.3 Allocation of Distributions Between Assignor and Assignee. Upon
the Transfer of Membership Units pursuant to this Article and unless the
assignor and assignee otherwise agree and so direct the Company in a written
statement signed by both the assignor and assignee (a) distributions pursuant to
Article V shall be made to the Person owning such Membership Units at the date
of distribution and (b) the assignee shall succeed to a pro-rata (based on the
percentage of such assignor's Membership Units Transferred) portion of the
assignor's Capital Account with respect to such Membership Units.
Any Membership Units Transferred shall remain subject to the
provisions of this Agreement and the transferee shall have entered into an
enforceable written agreement providing that all Membership Units so Transferred
shall continue to be subject to all provisions of this Agreement as if such
Membership Units were still held by the transferring Member, and provided
further that such permitted transferee shall not be permitted to make any
further Transfer without complying with the provisions of this Agreement.
Anything to the contrary in this Agreement notwithstanding, transferees
permitted hereunder shall take any Membership Units so Transferred subject to
all obligations under this Agreement as if such Membership Units were still held
by the transferring Member whether or not they so expressly agree.
6.4 Permitted Transfers. Subject to the provisions of Sections 6.1(a)
and 6.2, holders of Common Units may Transfer such Common Units to any other
holder of Common Units or to a partner or Affiliate of such Member or to any
other investment
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fund or other entity for which such Member and/or one or more partners or
Affiliates thereof, directly or indirectly through one or more intermediaries,
serve as general partner or manager or in a like capacity.
6.5 Permitted Transfers to Lenders. Notwithstanding the provisions of
this Article VI restricting or otherwise regulating a Transfer by a Member,
Section 3.2 with respect to the admission of New Members, Section 5.1 with
respect to Capital Contributions and Subscription Agreements by New Members and
any other provision contained in this Agreement to the contrary:
(a) Each Member hereby (i) consents to the collateral assignment
and pledge by each other Member of its Membership Units (including all economic
interests therein) in the Company pursuant to a Security and Pledge Agreement
dated as of November __, 1997 (as the same may be amended, restated, renewed,
replaced, supplemented or otherwise modified from time to time, the "Pledge
Agreement") between the Company and Canadian Imperial Bank of Commerce, New York
Agency, as agent for the Lenders (the "Lenders") referred to therein (together
with its successors and assigns in such capacity, the "Agent"), which Pledge
Agreement was entered into, or reaffirmed, as applicable, (x) as a condition to
the execution and delivery of the First Amended and Restated Credit Agreement
dated as of November __, 1997 among the Agent, the Lenders and ACME Television,
LLC, a Delaware limited liability company (the "Borrower"), (as the same may be
amended, restated, renewed, replaced, supplemented or otherwise modified from
time to time, the "Credit Agreement") and (y) to secure the Company's Guaranty
dated as of November __, 1997 of the Borrower's obligations under the Credit
Agreement (as the same may be amended, restated, renewed, replaced, supplemented
as otherwise modified from time to time the "Guaranty"); (ii) in connection with
the exercise by the Agent of any of its rights and remedies under the Pledge
Agreement, consents to the assignment of any of such Membership Units (including
any economic interests therein) to any other Person (and to the substitution of
such other Person as a New Member holding the Membership Units so assigned), and
(iii) agrees that no such assignment (or substitution) and no foreclosure
thereunder or other remedies in respect thereof shall effect a termination or
dissolution of the Company.
(b) Without limiting the generality of the foregoing, each Member
hereby agrees that upon the exercise of remedies pursuant to Section 12 of the
Pledge Agreement and subject to the Agent or its designee having obtained the
requisite consent from the FCC as further set forth in Section 17 of the Pledge
Agreement.
(i) with respect to each Membership Unit (and economic
interest therein) assigned by any existing Member (in each case, the "Assignor")
to the Agent under the Pledge Agreement, the Agent shall thereupon be admitted
(or shall have the right to have one or more designees of its choice admitted)
as a New Member of the Company (in each such case, such New Member admitted
pursuant to this Section 6.5
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being hereinafter referred to as the "Agent Designee Member") with no further
action by any Member or any other Person being necessary, and each Member hereby
consents to such admission and agrees to execute and deliver such instruments,
if any, as shall be necessary to effect or further evidence the foregoing;
(ii) in connection with the admission of any Agent Designee
Member to the Company, no capital contribution by such Agent Designee Member
shall be required;
(iii) no Agent Designee Member shall have any liability with
respect to the obligations of the Company under the Credit Agreement or the
Guaranty;
(iv) on and after the admission of any Agent Designee Member
to the Company, such Agent Designee Member shall have all powers, statutory and
otherwise, possessed by members under the Act and any other applicable laws and,
if any such Agent Designee Member shall then constitute the Majority Member,
such Agent Designee Member shall have the sole authority to manage the business
and affairs of the Company in accordance with Section 4.1 and, in any event and
notwithstanding any other provision contained herein or in any such laws, the
Assignor(s) to such Agent Designee Member shall have no further powers or
privileges with respect to the management of the Company;
(v) following the admission of any Agent Designee Member to
the Company (and without limiting similar restrictions contained in the Pledge
Agreement), none of the other remaining Members may Transfer or otherwise
dispose of any of their Membership Units in the Company without the prior
written consent of such Agent Designee member.
(c) The Members hereby acknowledge and agree that the Agent shall
have no obligation or liability under this Agreement, the Pledge Agreement, the
Guaranty or otherwise by reason of, or arising out of, the collateral assignment
and pledge of the Membership Units or be obligated to perform any of the
obligations, or assume any of the liabilities, of the Members arising hereunder.
(d) The provisions of clauses (a) and (b) shall terminate when
all Obligations under, and as defined in, the Credit Agreement have been paid in
full and the Commitments (as defined in the Credit Agreement) have been
terminated.
ARTICLE VII - INDEMNIFICATION
7.1 Right to Indemnification. Except as limited by law and subject to
the provisions of this Article, the Company shall indemnify each Indemnified
Party from and against any and all Losses in any way related to or arising out
of this Agreement, the
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business of the Company or the action or inaction of such Person hereunder
(including, without limitation, the actions or inactions of the Members and the
other Indemnified Parties pursuant to Article IX hereof upon dissolution of the
Company), which may be imposed on, incurred by or asserted at any time against
any such Indemnified Party, except that no indemnification shall be provided for
any Indemnified Party regarding any matter as to which it shall be finally
determined that such Indemnified Party did not act in good faith and in the
reasonable belief that its action was in the best interests of the Company, or
with respect to a criminal matter, that it had reasonable cause to believe that
its conduct was unlawful. Subject to the foregoing limitations, such
indemnification may be provided by the Company with respect to Losses in
connection with which it is claimed that such Indemnified Party received an
improper personal benefit by reason of its position, regardless of whether the
claim arises out of the Indemnified Party's service in such capacity, except for
matters as to which it is finally determined that an improper personal benefit
was received by such Indemnified Party. The indemnification contained in this
Article VII shall survive termination of this Agreement.
7.2 Award of Indemnification. The determination of whether the Company
is authorized to indemnify any Indemnified Party hereunder and any award of
indemnification shall be made in each instance by the Members; provided,
however, that as to any matter disposed of by a compromise payment, pursuant to
a consent decree or otherwise, no indemnification, either for said payment or
for any other Losses, shall be provided unless there has been obtained an
opinion in writing of legal counsel to the effect that the Person subject to
indemnification hereunder appears to have acted in good faith and that such
indemnification would not protect such Person against any liability to the
Company or the Members to which he, she or it would otherwise be subject by
reason of gross negligence, willful malfeasance or fraud in the conduct of his,
her or its office or actions not taken in good faith by such Person. The Company
shall be obliged to pay indemnification applied for by any Indemnified Party
unless there is an adverse determination (as provided above) within forty-five
(45) days after the application. If indemnification is denied, the applicant may
seek an independent determination of its right to indemnification by a court,
and in such event, the Company shall have the burden of proving that the
applicant was ineligible for indemnification under this Article. Notwithstanding
the foregoing, in the case of a proceeding by or in the right of the Company
which an Indemnified Party is adjudged liable to the Company, indemnification
hereunder shall be provided only upon a determination by a court having
jurisdiction that in view of all the circumstances of the case, the Indemnified
Party is fairly and reasonably entitled to indemnification for such Losses as
the court shall deem proper.
7.3 Successful Defense. Notwithstanding any contrary provisions of
this Article, if any Indemnified Party has been wholly successful on the merits
in the defense of any action, suit or proceeding in which it was involved by
reason of its position with the Company or as a result of serving in such
capacity (including termination of investigative or other proceedings without a
finding of fault on the part of such Indemnified Party), such
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Indemnified Party shall be indemnified by the Company against all Losses
incurred by such Indemnified Party in connection therewith.
7.4 Advance Payments. Except as limited by law, Losses incurred by an
Indemnified Party in defending any action, suit or proceeding, including a
proceeding by or in the right of the Company, shall be paid by the Company to
such Indemnified Party in advance of final disposition of the proceeding upon
receipt of its written undertaking to repay such amount if such Indemnified
Party is determined pursuant to this Article VII or adjudicated to be ineligible
for indemnification, which undertaking shall be an unlimited general obligation
but need not be secured and may be accepted without regard to the financial
ability of such Indemnified Party to make repayment; provided, however, that no
such advance payment of issues shall be made if it is determined pursuant to
Section 7.2 of this Article on the basis of the circumstances known at the time
(without further investigation) that such Indemnified Party is ineligible for
indemnification.
7.5 Insurance. The Company shall have power to purchase and maintain
insurance on behalf of any Indemnified Party against any liability or cost
incurred by such Person in any such capacity or arising out of its status as
such, whether or not the Company would have power to indemnify against such
liability or cost.
7.6 Heirs and Personal Representatives. The indemnification provided
by this Article shall inure to the benefit of the heirs and personal
representatives of the Indemnified Parties.
7.7 Non-Exclusivity. The provisions of this Article shall not be
construed to limit the power of the Company to indemnify the Members, Officers,
employees or agents to the fullest extent permitted by law or to enter into
specific agreements, commitments or arrangements for indemnification permitted
by law. The absence of any express provision for indemnification herein shall
not limit any right of indemnification existing independently of this Article.
7.8 Amendment. The provisions of this Article may be amended or
repealed in accordance with Section 10.5; provided, however, that no amendment
or repeal of such provisions that adversely affects the rights of the Members
under this Article with respect to acts or omissions occurring at any time prior
to such amendment or repeal, shall apply to any Member without such Member's
consent.
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ARTICLE VIII - CONFLICTS OF INTEREST
8.1 Transactions with Interested Persons; Conflicts.
(a) Unless entered into in bad faith, no contract or transaction
between the Company and one or more of its Members or any other Indemnified
Party, or between the Company and any other Person in which one or more of its
Members or any other Indemnified Party has a financial interest or is a
director, manager or officer, shall be voidable solely for this reason if such
contract or transaction is fair and reasonable to the Company; and no Member or
other Indemnified Party interested in such contract or transaction, because of
such interest, shall be liable to the Company or to any other Person or
organization for any loss or expense incurred by reason of such contract or
transaction or shall be accountable for any gain or profit realized from such
contract or transaction.
(b) Unless otherwise expressly provided herein, (i) whenever a
conflict of interest exists or arises between the Company, its Members and/or
the other Indemnified Parties or (ii) whenever this Agreement provides that any
such Person shall act in a manner that is, or provide terms that are, fair and
reasonable to the Company or any Member, such Person shall resolve such conflict
of interest, taking such action or providing such terms, considering in each
case the relative interest of each party (including its own interest) to such
conflict, agreement, transaction or situation and the benefits and burdens
relating to such interests, any customary or acceptable industry practices, and
any applicable generally acceptable accounting practices or principles. In the
absence of bad faith by the Member or other Indemnified Party, as the case may
be, the resolution, action or term so made, taken or provided by such Person
shall not constitute a breach of this Agreement or any other agreement
contemplated herein or of any duty or obligation of such Person at law or in
equity or otherwise.
8.2 Business Opportunities.
Members may engage in or possess an interest in other business
ventures of any nature, and neither the Company nor any other Member shall have
any rights by virtue of this Agreement in or to any such venture or the income
or profits derived therefrom, and the pursuit of any such venture, even if
competitive with the activities of the Company, shall not be deemed improper or
wrongful. No Member shall be obligated to present any particular investment or
business opportunity to the Company even if such opportunity is of a nature
which could be taken by the Company.
22
<PAGE>
ARTICLE IX - DISSOLUTION, LIQUIDATION, AND
TERMINATION
9.1 No Dissolution. The Company shall not be dissolved by the
admission of additional Members, the withdrawal of a Member or the written
consent of all Members, but shall continue to exist in perpetuity, except in
accordance with the terms of this Agreement. Upon the death, retirement,
resignation, expulsion, Bankruptcy or dissolution of any Member the Company
shall not dissolve and its affairs shall not be wound up except as set forth in
Section 9.2 below.
9.2 Events Causing Dissolution. The Company shall be dissolved and its
affairs wound up upon the occurrence of any of the following events:
(a) if a Majority Member shall be acting as a Manager under
Section 6.2 hereof, the Bankruptcy, dissolution, death, retirement, or
resignation of the Majority Member; unless the Company is continued upon the
written consent of a majority of the remaining Members, such consent to be given
within ninety (90) days following the occurrence of such event;
(b) if there shall be no Majority Member acting as a Manager
under Section 6.2 hereof, the Bankruptcy, dissolution, death, retirement, or
resignation of any Member; unless the Company is continued upon the written
consent of a majority of the remaining Members, such consent to be given within
ninety (90) days following the occurrence of such event;
(c) the entry of a decree of judicial dissolution under Section
18-802 of the Act.
9.3 Notice of Dissolution. Upon the dissolution of the Company, the
Member or the other Person or Persons (the "Liquidating Trustee") appointed by
the Members or the Majority Member, as applicable, to carry out the winding up
of the Company, shall promptly notify the Members of such dissolution.
9.4 Liquidation. Upon dissolution of the Company, the Liquidating
Trustee shall proceed diligently to liquidate the Company and wind up its
affairs and to make final distributions as provided in Section 5.4 hereof and in
the Act. The costs of dissolution and liquidation shall be borne as an expense
of the Company. Until final distribution, the Liquidating Trustee shall continue
to operate the Company properties with all of the power and authority of the
Members or the Majority Member, as applicable. As promptly as possible after
dissolution and again after final liquidation, the Liquidating Trustee shall
cause an accounting to be made by a firm of independent public accountants of
the Company's assets, liabilities and operations.
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<PAGE>
9.5 Certificate of Cancellation. On completion of the distribution of
Company assets as provided herein, the Company shall be terminated, and the
Members or the Majority Member, as applicable, (or such other Person or Persons
as the Act may require or permit) shall file a Certificate of Cancellation with
the Secretary of State of the State of Delaware under the Act, cancel any other
filings made pursuant to Sections 2.1, 2.2 and 2.4, and take such other actions
as may be necessary to terminate the existence of the Company.
ARTICLE X - GENERAL PROVISIONS
10.1 Offset. Whenever the Company is to pay any sum to any Member, any
amounts that Member owes the Company may be deducted from that sum before
payment. All amounts so deducted shall nevertheless be treated as distributions
for purposes of Sections 5.3, 5.4 and 5.5 hereof.
10.2 Notices. Except as expressly set forth to the contrary in this
Agreement, all notices, requests, or consents provided for or permitted to be
given under this Agreement must be in writing and shall be given either by
registered or certified mail, addressed to the recipient, with return receipt
requested, or by delivering the writing to the recipient in Person, by courier,
or by facsimile transmission; and a notice, request, or consent given under this
Agreement is effective upon receipt or three days after the date mailed,
whichever is sooner. All notices, requests, and consents to be given to a Member
must be sent to or delivered at the addresses given for that Member on Schedule
A, or such other address as that Member may specify by written notice to the
other Members and the Company. Any notice, request, or consent to be given to
the Company must be given to the Members or the Majority Member, as applicable,
at the address of the principal office of Company specified in Section 2.3.
Whenever any notice is required to be given by law, the Certificate or this
Agreement, a written waiver thereof, signed by the Person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
10.3 Entire Agreement. This Agreement, together with each Member's
Subscription Agreement, constitutes the entire agreement of the Members relating
to the Company and supersedes all prior contracts or agreements with respect to
the Company, whether oral or written.
10.4 Amendment or Modification; Terms. This Agreement, including any
Schedule hereto, may be amended from time to time, in whole or in part, by an
instrument in writing signed in accordance with Section 3.4 hereof. Copies of
each such amendment shall be delivered to each Member at least thirty (30) days
prior to the effective date of such amendment; provided, however, in the case of
any amendment that the Members or the Majority Member, as applicable, determine
is necessary or appropriate to prevent the
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<PAGE>
Company from being treated as a publicly traded partnership taxed as a
corporation under section 7704 of the Code, the amendment shall be effective on
the date provided in the instrument containing the terms of such amendment.
Nothing contained in this Agreement shall permit the amendment of this Agreement
to impair the exemption from personal liability of the officers, employees and
agents of the Company or Members or to permit assessments upon the Members.
10.5 Binding Effect. Subject to the restrictions on Transfers set
forth in this Agreement, this Agreement is binding on and inures to the benefit
of the parties and their respective heirs, legal representatives, successors and
assigns.
10.6 Governing Law; Severability. This Agreement is governed by and
shall be construed in accordance with the law of the State of Delaware,
exclusive of its conflict-of-laws principles. In the event of a direct conflict
between the provisions of this Agreement and any provision of the Certificate,
or any mandatory provision of the Act, the applicable provision of the
Certificate or the Act shall control. If any provision of this Agreement or the
application thereof to any Person or circumstance is held invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of that provision shall be enforced to the fullest extent permitted by law.
10.7 Further Assurances. In connection with this Agreement and the
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions, as requested by the Members or the Majority
Member, as applicable.
10.8 Waiver of Certain Rights. Each Member irrevocably waives any
right it may have to maintain any action for dissolution of the Company or for
partition of the property of the Company.
10.9 Third-Party Beneficiaries. Except with respect to the Agent and
the Lenders, who are expressly intended to be third-party beneficiaries of this
Agreement, there shall be no third-party beneficiaries of this Agreement.
10.10 Failure to Pursue Remedies. The failure of any party to seek
redress for violation of, or to insist upon the strict performance of, any
provision of this Agreement shall not prevent a subsequent act, which would have
originally constituted a violation, from having the effect of any original
violation.
10.11 Cumulative Remedies. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any party
shall not preclude or waive its right to use any or all other remedies. Said
rights and remedies are
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given in addition to any other right the parties may have by law, statute,
ordinance or otherwise.
10.12 Notice to Members of Provisions of this Agreement. By executing
this Agreement, each Member acknowledges that such Member has actual notice of
(a) all of the provisions of this Agreement, including, without limitation, the
restrictions on the Transfer of Membership Units set forth in Article VI and the
limitations on participation of Members in the management of the Company set
forth in Article III, and (b) all of the provisions of the Certificate. Each
Member hereby agrees that this Agreement constitutes adequate notice of all such
provisions, and each Member hereby waives any requirement that any further
notice thereunder be given.
10.13 Interpretation. For the purposes of this Agreement, terms not
defined in this Agreement shall be defined as provided in the Act; and all
nouns, pronouns and verbs used in this Agreement shall be construed as
masculine, feminine, neuter, singular, or plural, whichever shall be applicable.
Titles or captions of Articles and Sections contained in this Agreement are
inserted as a matter of convenience and for reference, and in no way define,
limit, extend or describe the scope of this Agreement or the intent of any
provision hereof.
10.14 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all signing parties had signed the same
document, and all counterparts shall be construed together and shall constitute
the same instrument.
[END OF TEXT]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date set forth above.
ACME TELEVISION LICENSES OF UTAH,
LLC
By /s/ Douglas E. Gealy
----------------------------------
Name:
Title: Pres. & COO
ACME TELEVISION HOLDINGS OF
UTAH, LLC
By /s/ Douglas E. Gealy
----------------------------------
Name:
Title: Pres. & COO
ACME SUBSIDIARY HOLDINGS III, LLC
By /s/ Douglas E. Gealy
----------------------------------
Name:
Title: Pres. & COO
<PAGE>
ACME TELEVISION LICENSES OF UTAH, LLC
Schedule A
Member No. of Units Capital Contribution
------ ------------ --------------------
ACME Television Holdings of Utah, LLC 199 $995.00
ACME Subsidiary Holdings III, LLC 1 $5.00
STATION AFFILIATION AGREEMENT
Dated as of August 18, 1997
ACME Holdings of Knoxville, LLC
1900 North Winston Road, Suite 600
Knoxville, Tennessee 37919
Attention: Doug Gealy
The following shall comprise the agreement between The WB Television Network
Partners, L.P. dba The WB Television Network ("WB," "we," or "us"), and ACME
Holdings of Knoxville, LLC ("Affiliate" or "you") for the affiliation of your
television station WINT ("Station") with WB for carriage of WB programming. The
Federal Communications Commission ("FCC") has issued a broadcast license
("License") to you to operate Station in Crossville, Tennessee, the community in
which Station is licensed by the FCC ("Community of License"). All references in
this Agreement to "WB program(s)" and "WB programming" and any variations
thereof shall mean the programming made available by WB under this Agreement.
1. WB PROGRAMMING: WB will make available to Affiliate WB programs for
free over-the-air broadcast and broadcast by any other means by Station
in the Community of License during the term of this Agreement. During
such term, except as otherwise provided herein, WB grants Affiliate the
exclusive right to have Station broadcast the WB programming in the
Community of License only as scheduled by WB over free over-the-air
television and by such other technological means as are available to
Affiliate for broadcast in the Community of License so long as Station
broadcasts the WB programming for over-the-air television.
Notwithstanding the foregoing, for an initial period, until such time
that WB offers exclusivity against the signal of WGN to its affiliates,
WB may allow the signal of WGN to be imported into the Community of
License. WB shall have the sole discretion to select, schedule,
substitute and/or withdraw WB programming or any portion(s) thereof.
WB shall also have the right to authorize any television broadcasting
station, regardless of the community in which it is licensed by the
FCC, to broadcast any presentation of a subject we deem to be of
immediate national significance including, but not limited to, a
Presidential
<PAGE>
address. Except as provided herein, during the term of this Agreement
Affiliate shall be the sole affiliate of WB for transmission for exhibition
on television of WB programming in the Community of License.
2. PROGRAM CARRIAGE:
(a) We agree to make available for broadcast by Station WB
programming for the hours programmed by WB at the times and dates
scheduled by WB throughout the term of this Agreement. You
acknowledge that the times and roll-out dates set forth in this
Agreement are approximate only and you agree to have Station
broadcast WB programs irrespective of whether WB meets, fails to
meet or otherwise varies from the anticipated program schedule
set forth herein; provided, however, that WB hereby agrees not to
accelerate such anticipated program schedule. To the extent WB
makes available such WB programming for broadcast, this Agreement
both obligates us to make available such WB programs to Station
and obligates Station to broadcast such WB programs over-the-air
pursuant to the terms of this Agreement.
(b) Subject to the exceptions set forth in subparagraph 2(e) and the
right of preemption set forth in subparagraph 2(f), Station shall
broadcast WB programs on the dates and at the times scheduled by
WB. Station shall broadcast WB programs in their entirety,
including but not limited to WB commercial announcements, WB
identifications, program promotional material, and credit
announcements contained in such programs, without interruption or
deletion or addition of any kind, except for the commercial
announcements that Station is allowed to add pursuant to
Paragraph 5. Notwithstanding the foregoing, you may substitute
other WB promotional announcements in lieu of program promotional
material that is inaccurate as it pertains to Station's schedule.
No commercial announcement, promotional announcement or public
service announcement will be broadcast by Station during any
interval within a WB program, which interval is designated by WB
as being for the sole purpose of making a station identification
announcement.
(c) The initial Scheduled Program Times of WB programming and the
anticipated roll-out dates of that programming are set forth as
follows (the specified times apply for
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the Eastern and Pacific Time Zones; the Mountain and Central Time
Zones are one hour earlier for Prime Time and Latenight programming
only, except as otherwise agreed by us):
Prime Time: 7:00 p.m. - 10:00 p.m. Sunday
8:00 p.m. - 10:00 p.m. Monday through Saturday.
Two nights, to be designated by us, during the
1994/1995 broadcast year (one night in January
1995 with the second night commencing during the
third quarter of 1995); one additional night
commencing during the 1995/1996 broadcast year;
and one additional night during each broadcast
year thereafter until seven nights of programming
are made available.
Children's: 7:00 a.m. - 8:00 a.m.; 7:30 a.m. - 8:30 a.m.; or 8:00
a.m. - 9:00 a.m. (at WB's election) Monday
through Friday;
3:00 p.m. - 5:00 p.m. Monday through Friday;
8:00 a.m. - 12:00 noon Saturday;
Weekday mornings (one hour) and Saturday
mornings (three hours) commencing September
1995; One additional Saturday hour commencing
September 1996; Monday through Friday
afternoons (two hours) commencing September
1997. It is anticipated that the additional
Children's programming will commence in
approximately the second week of September.
Latenight: 11:00 p.m. - 12:00 midnight Monday through
Friday, commencing not earlier than 1997 and
subject to the approval of the WB Affiliate's
Council (as defined in Paragraph 13 below).
(d) Notwithstanding the roll-out schedule for Children's afternoon
programming in subparagraph (c) above, WB's supply of Children's
afternoon programming shall be subject to the expiration of the
current agreements between WB affiliates and suppliers of Children's
3
<PAGE>
afternoon programming. Station agrees not to extend or renew any
agreement it may have with such suppliers for such programming
during the term of this Agreement if such renewal or extension would
interfere with the broadcast of the WB Children's afternoon
programming.
(e) You confirm that as of the date of this Agreement you have no
commitments, except those listed in Schedule 1 hereto, which
would impede Station's broadcasting all WB programming made
available during the term of this Agreement. If any WB
programming is not broadcast by you because of any such
commitment expressly described in Schedule 1 (but excluding
extensions by exercise of options by Affiliate [but not by the
programming licensor] or otherwise), then such programming shall
be broadcast in a time period upon which you and we shall
mutually agree and which shall be of quality and rating value
comparable to that of the Scheduled Program Times. These programs
will not be considered preempted for purposes of subparagraph
2(f).
(f) Notwithstanding anything in this Agreement to the contrary,
nothing in this Agreement shall be construed to prevent or hinder
Affiliate from (i) rejecting or refusing any WB program which
Affiliate reasonably believes to be unsatisfactory or unsuitable
or contrary to the public interest or (ii) substituting a program
which, in Affiliate's opinion, is of greater local or national
importance. In such an event, you shall provide us with advance
written notice of any such rejection, refusal or substitution, no
later than 14 days prior to the air date of such programming,
except where the nature of the substitute program makes such
notice impracticable (e.g., coverage of breaking news or other
unscheduled events) or the programming has not been made
available to you by such date, in which cases you agree to give
us as much advance notice as the circumstances permit. Such
notice shall include a statement of the reasons you believe that
the rejected WB programming is unsatisfactory or unsuitable or
contrary to the public interest, and/or that a substituted
program is of greater local or national importance. In view of
the limited amount of WB programming to be supplied pursuant to
this Agreement
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(at least until such time as the full WB programming schedule has
been rolled out) you acknowledge that you do not foresee any need to
substitute programming of greater local or national importance for
WB programming, except in those circumstances requiring live
coverage of fast-breaking news events or very infrequent special
events.
To the extent you substitute another program for a WB program as
permitted under subparagraph 2(f)(ii), then you will broadcast such
omitted program and the commercial announcements contained therein
(or any replacement programming provided by WB and the commercial
announcements contained therein) during a time period upon which you
and we shall promptly and mutually agree and which shall be of
quality and rating value comparable to that of the preempted
program's Scheduled Program Time. In the event that the parties do
not promptly agree upon such a time period after reasonable
consultation in good faith and after taking into account the
practical alternatives under the circumstances, then, without
limiting any other rights of WB under this Agreement or otherwise,
we shall have the right to license the broadcast rights to the
applicable omitted programming (or replacement programming) to
another television station located in the Community of License.
In addition, if three or more episodes of a program series are
preempted by you as permitted hereunder in any thirteen-week period,
for any reasons other than force majeure as provided in Paragraph 6,
we shall have the right, upon 60 days prior written notice, to
terminate your right to broadcast that program series and to
withdraw all future episodes of that series. Such thirteen-week
periods shall be measured consecutively from the first broadcast
date of the program series in question. If we subsequently place
such a series on another station in the Community of License, we
reserve the right not to offer you the broadcast rights to that
series for subsequent broadcast seasons.
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In addition to all other remedies, to the extent one or more
episodes of a program series is preempted by you in violation of
(i.e., other than as permitted under) this Paragraph 2, we shall
have the right, upon 30 days prior written notice, to terminate your
right to broadcast the remainder of the program series and withdraw
all future episodes of that series from you.
(g) Nothing in this Agreement shall be construed to prevent or hinder
WB from (i) substituting one or more WB programs for previously
scheduled WB programs, in which event WB will make the
substituted programs available to Station pursuant to the
provisions of Paragraph 1 and Paragraph 3; (ii) cancelling one or
more WB programs; or (iii) postponing any scheduled roll-out
dates of WB programming. Further, nothing in this Agreement
shall be construed to obligate WB (x) to provide a minimum or
specific number of WB programs; (y) to commence providing WB
programming on any particular date; or (z) to expand the amount
of WB programming pursuant to a specified timetable.
3. DELIVERY: WB agrees to make available the WB programming for satellite
transmission. WB shall incur no costs regarding the satellite downlink
and broadcast by Station; Station shall incur no up-link costs with
regard to the delivery of the WB programming.
4. PROMOTION:
(a) We will provide you with on-air promotional announcements ("WB
Promos") for WB programming, which WB Promos are intended for
broadcast during Station's broadcast of non-WB programming. You
agree to provide an on-air promotional schedule consistent with
our recommendations. You shall maintain complete and accurate
records of all WB Promos that are broadcast. Upon request by WB
for those records, you shall provide copies of all such records
to WB within two weeks of such request.
(b) You shall budget Station's advertising availabilities in such a
manner as to enable Station to broadcast additional WB Promos during
periods in which Station is deemed a "Subperformer." Station shall
be deemed to be
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a "Subperformer" from the time its "sweeps rating" is below the
average prime time rating for all WB affiliated broadcast stations
until such time as Station's sweeps rating is no longer below the
average prime time rating for all WB affiliated broadcast stations.
The Station's sweeps rating means the Station's average A.C. Nielsen
rating for the most recently completed sweeps period for adults
18-49 for all prime time hours programmed by WB. For such time as
Station remains a Subperformer, Station shall: (i) broadcast, during
each one-half hour of all periods of each day that Station is
broadcasting non-WB programming, at least one (1) 30-second Promo
(or Promos aggregating 30 seconds, to the extent we so elect) for
Station's local, syndicated or WB programming; and (ii) broadcast
during all periods when Station is broadcasting non-WB programming
WB Promos for not less than:
Prime Time Hours Programmed by WB
2 hours - 20% of 100% 4 hours - 25% " 6 hours - 30% " 8 hours
- 35% " 10 hours - 40% " 12 hours* - 45% "
(* 12 or more hours)
(the "Applicable Percentage") of the total, aggregate gross ratings
points ("GRPs") for all the promotional announcements broadcast by
Station ("Aggregate Promotional GRPs") within the periods in which
non-WB programming is being broadcast. The specific WB Promos
broadcast by Station and the number of broadcasts of each WB Promo
may be specified by WB and the broadcast of the WB Promos shall be
made so that the Aggregate Promotional GRPs allocated to WB Promos
are distributed fairly and reasonably across the periods when non-WB
programming is being broadcast. For such time as Station's sweeps
rating ranks Station within the bottom 50% (ranked highest to
lowest) of those WB affiliated broadcast stations that are
Subperformers, then the
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Applicable Percentage for Station shall be not less than 55% of 100%
of the Aggregate Promotional GRPs. The WB Promos broadcast during
each half-hour of non-WB programming, as required by this
subparagraph 4(b), may be counted toward Station's Applicable
Percentage.
Station shall continue to air WB Promos under this schedule until
Station is no longer a Subperformer, as defined above.
(c) In addition to providing WB Promos, we shall make available for
your use, at reasonable cost, such other promotional and sales
materials as we and you may mutually consider appropriate. You
shall not delete any copyright, trademark, logo or other notice,
or any credit included in any such materials relating to WB, and
you shall not exhibit, display, distribute or otherwise use any
trademark, logo or other material or item delivered pursuant to
this Paragraph 4 or otherwise, except as instructed by us at the
time.
(d) Commencing on the first date that WB programming is aired by
Station and for the remaining term of this Agreement, Station
shall identify itself as a WB affiliate, both on and
off-the-air. Prior to the "Launch Date" (as defined in
subparagraph 9(b)), Station shall identify itself as a WB
affiliate only after WB gives Affiliate permission to do so and
only in a manner reasonably directed by WB. Prior to the Launch
Date, Affiliate shall not, without the express written permission
of WB, make any disclosures to the press or business community or
issue any press announcements about Station's affiliation with WB.
5. COMMERCIAL ANNOUNCEMENTS:
(a) With respect to WB programming, the parties to this Agreement shall
be entitled to insert the following number of commercial
announcements (Station's allotment includes station breaks but
excludes 5-second prime time station identification breaks at the
beginning of each hour):
(1) Prime Time (as defined in subparagraph 2(c)) hour (pro-rated
for half-hour programs):
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You shall have the right to insert six 30-second
commercial announcements. WB shall have the right to
insert eighteen 30-second commercial announcements.
(2) Children's:
Weekday half-hour:
You shall have the right to insert six 30-second
commercial announcements (or other material constituting
"commercial matter" under the FCC's regulations). WB
shall have the right to insert six 30-second commercial
announcements.
Weekend half-hour:
You shall have the right to insert five 30-second
commercial announcements (or other material constituting
"commercial matter" under the FCC's regulations). WB
shall have the right to insert five 30-second commercial
announcements and one 15-second commercial.
(3) Latenight (as defined in subparagraph 2(c)):
You will receive half the total number of commercial
announcements as specified by WB or less as mutually
agreed to.
(b) If the amount of commercial advertising, commercial matter or
other non-program time included in WB programming is reduced for
any reason (including but not limited to the adoption or
modification of statutes or regulations or any other governmental
action), then we shall be entitled to reduce the number of
commercial announcements available to you to the extent necessary
to provide WB and Affiliate with the same proportionate amount of
commercial time (inclusive of station breaks with respect to
Affiliate) that each party is entitled to under this Agreement.
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(c) Your broadcast over Station of the commercial announcements included
by us in WB programming is of the essence to this Agreement, and
nothing contained in this Agreement (other than in subparagraph
2(f)) shall limit our rights or remedies relating to your failure to
so broadcast said commercial announcements. You shall maintain
complete and accurate records of all commercial announcements
broadcast as provided herein. Within two weeks following each
request by us therefor, you will submit copies of all such records
to WB.
6. FORCE MAJEURE: WB shall not be liable for failure to make available
any programming or any portion(s) thereof, and Station shall not be
liable for failure to broadcast any such programming or any portion(s)
thereof, by reason of any act of God, equipment failure, action or
claims by any third person, labor dispute, law, governmental regulation
or order, or other cause beyond either party's reasonable control
("force majeure event"). If due to any force majeure event, we
substantially fail to make available all of the programming to be
delivered to Affiliate under the terms of this Agreement, or you
substantially fail to broadcast such programming as scheduled by WB for
four consecutive weeks, or for six weeks in the aggregate during any
12-month period, then the "non-failing" party may terminate this
Agreement upon thirty 30 days prior written notice to the "failing"
party so long as such notice is given at any time prior to the
"non-failing" party's receipt of actual notice that the force majeure
event(s) has ended; provided further, however, that notwithstanding the
above provisions, you shall not have any right to so terminate this
Agreement, upon a force majeure event or otherwise, if we: (i) fail to
make available a minimum or specific number of WB programs; (ii) fail
to commence making available WB programming on any particular date;
(iii) fail to expand the amount of WB programming pursuant to a
specified timetable; (iv) substitute one or more WB programs for
previously scheduled WB programs; (v) cancel one or more WB programs;
or (vi) postpone the roll-out of any WB programming.
7. ASSIGNMENT OR TRANSFER OF AFFILIATE AGREEMENT AND/OR STATION LICENSE:
(a) Assignment or Transfer of Affiliation Agreement: This Agreement
shall not be assigned by Licensee without the
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prior written consent of WB. Any purported assignment by Licensee
without such consent shall be null and void, shall not be
enforceable against WB, and shall not relieve Licensee of all its
obligations hereunder.
(b) Assignment or Transfer of Station License: If any application is
made to the Federal Communications Commission (FCC) concerning a
purported, attempted or actual transfer of control or assignment of
the Station license, you shall notify us immediately in writing of
the filing of such application. Unless the transfer of control or
assignment is one provided for by Section 73.3540 (f) of the FCC's
current rules and regulations (a "short form" assignment or transfer
of control that does not involve a material assignment or transfer
of control), we shall have the right to terminate this Agreement
upon twenty (20) days' advance notice to you, at any time after the
filing of such application. If WB does not terminate this Agreement
on or before twenty days before the effective date of such transfer,
this Agreement shall be deemed to have been fully assigned to the
transferee or assignee of Station's license and such transferee or
assignee will assume and perform all of the obligations and duties
contained in this Agreement without limitation of any kind, as of
the effective date of transfer. In addition, if Licensee fails,
prior to the effective date of the transfer, to procure in a written
form satisfactory to WB the agreement of the assignee or transferee
to assume and perform this Agreement in its entirety without
limitation of any kind, or fails to immediately notify WB of the
application to transfer control or assign the Station license, then
Licensee shall remain fully responsible for the full performance of
all provisions of the Agreement during the full term of the
Agreement as set forth in Paragraph 9, and in the event of
non-performance, Licensee shall be considered in material breach of
this Agreement and WB shall have all rights and remedies available
for such breach, including but not limited to specific performance
and damages.
8. UNAUTHORIZED COPYING: You shall not, and shall not cause or authorize
others to record, copy or duplicate any programming or other material
we furnish pursuant to this Agreement, in
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whole or in part, and you shall take all reasonable precautions to prevent
any such recording, copying or duplication. Notwithstanding the foregoing,
if Station is located in the Mountain Time Zone you may pre-record WB
programming for later broadcast at the times scheduled by us. You shall
erase all such pre-recorded programming promptly after its scheduled
broadcast. Notwithstanding the above provisions, Station may make a
non-broadcast quality recording of its entire broadcast day for archival,
file and reference purposes and uses only, which copy shall be kept in
Station's possession at all times.
9. TERM:
(a) The term of this Agreement shall commence on September 22, 1997
(the "Launch Date") and shall continue for 36 months thereafter
(the "initial period"). The term of this Agreement may be
extended for additional successive periods of two years each, by
us, in our sole discretion, giving written notice of such
extension to you at least 120 days prior to the expiration of the
then-current period; provided, however, that if, within 30 days
of your receipt of the notice of extension, you, in your sole
discretion, give us written notice that you reject such
extension, then the extension notice shall not be effective and
this Agreement shall terminate upon expiration of the
then-current period.
(b) The "Launch Date" shall be the date on which WB first makes WB
programming available to Affiliate for broadcast by Station on a
regularly scheduled basis.
(c) Each "Contract Year" hereunder shall be an annual period during the
term of this Agreement. The First Contract Year is the annual period
beginning on the Launch Date; the Second Contract Year is the annual
period commencing one year after the Launch Date, etc.
(d) WB shall, within its sole discretion and without liability, have the
right to terminate this Agreement so long as we (i) provide sixty
days prior written notice to you and (ii) are either: (A) ceasing
operation as a
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television network; or (B) substantially restructuring the ownership
of the television network.
(e) Notwithstanding anything to the contrary contained in this
Agreement, upon the termination or expiration of the term of this
Agreement, all of your rights to broadcast or otherwise use any WB
program or any trademark, logo or other material or item hereunder
shall immediately cease and neither you nor Station shall have any
further rights whatsoever with respect to any such program,
trademark, logo, material or item.
10. APPLICABLE LAW: The obligations of you and WB under this Agreement are
subject to all applicable federal, state, and local laws, rules and
regulations (including, but not limited to, the Communications Act of
1934, as amended, and the rules, regulations and policies of the FCC)
and this Agreement and all matters or issues collateral thereto shall
be governed by the laws of the State of California without regard to
California's conflict of law rules. The California State Courts and
the U.S. District Courts located in California shall have jurisdiction
over the interpretation of this Agreement or with regard to any dispute
arising under this Agreement. The venue for any such action concerning
this Agreement shall be in the County of Los Angeles, California.
11. STATION ACQUISITION BY WB: During the term of this Agreement, WB agrees
that neither we nor Time Warner Inc. nor any of its subsidiary companies
will acquire, as defined by the attribution rules of the FCC, a television
broadcast station licensed in the Community of License.
12. CHANGE IN OPERATIONS: In the event that Station's transmitter
location, power, frequency, programming format or hours of operation
are materially changed at any time during the term of this Agreement so
that Station is of materially less value to us as a broadcaster of WB
programming than at the date of this Agreement, then we shall have the
right to terminate this Agreement upon 30 days prior written notice.
You shall notify WB immediately in writing if application is made to
the FCC to modify in a material manner the transmitter location, power
or frequency of Station or if Affiliate plans to modify in a material
manner the hours of operation of Station. If you fail to notify us as
required herein, then we shall have the right to terminate this
Agreement by giving you 30 days prior written notice.
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At any time during the term if Station is off the air, or operating at
less than fifty percent (50%) of its licensed power, for a period of 12
hours or longer, Station must immediately notify WB. WB may terminate this
agreement upon thirty (30) days prior written notice in the event that
Station is off the air for a period exceeding seven (7) days or if is
operating at less than fifty percent (50%) of its full licensed power for
a period exceeding seven (7) days.
Affiliate will install a satellite antenna and receiver of sufficient
quality, in the exclusive judgment of WB, to receive a network quality
signal from WB. Affiliate shall also use switches, microwaves and all
other transmission equipment necessary to telecast a network quality
picture. If, in the exclusive judgment of WB, the picture or sound quality
of Station's transmission is insufficient, WB will provide Station with
notice of the deficiency, and Station shall have thirty (30) days to cure.
In the event that Station should fail to cure then WB may cancel this
agreement upon thirty (30) days written notice.
13. WB AFFILIATES COUNCIL: You, with the other affiliates of WB, shall form a
WB Affiliates Council (the "Council"), which shall be comprised of
representatives from five different affiliates of WB.
14. NON-LIABILITY OF COUNCIL MEMBERS: To the extent the Council and its
members are acting in their capacity as such, then the Council and each
member so acting shall not have any obligation or legal or other
liability whatsoever to you in connection with this Agreement,
including without limitation, with respect to the Council's or such
member's approval or non-approval of any matter, exercise or
non-exercise of any right or taking of or failing to take any other
action in connection therewith.
15. WARRANTIES AND INDEMNITIES:
(a) WB agrees to indemnify, defend and hold Affiliate harmless
against and from all claims, damages, liabilities, costs and
expenses arising out of the use by Station under this Agreement
of any WB program or other material furnished by WB under this
Agreement, provided that Affiliate promptly notifies WB of any
claim or litigation to which this indemnity shall apply, and
provided further that Affiliate cooperates fully with WB in the
defense or settlement of such claim or
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litigation. Affiliate agrees to indemnify, defend and hold WB
harmless against and from all claims, damages, liabilities, costs
and expenses with respect to Affiliate's operation of the Station or
any material furnished, added or deleted to or from WB programming
by Affiliate. This indemnity shall not apply to litigation expenses,
including attorneys' fees, that the indemnified party elects to
incur on its own behalf. Except as otherwise provided in this
Agreement, neither Affiliate nor WB shall have any rights against
the other for claims by third persons, or for the failure to operate
facilities or to furnish WB programs if such failure is the result
of a force majeure event as defined in Paragraph 6. Furthermore,
notwithstanding any other provisions of this Agreement, Affiliate
shall not have any rights against WB for claims by third parties or
Affiliate arising out of any actions or omissions of WB permitted
under subparagraph 2(g).
(b) You agree to maintain for Station such licenses, including
performing rights licenses as now are or hereafter may be in
general use by television broadcasting stations and are necessary
for you to broadcast the television programs which we furnish to
you hereunder. We will clear all music in the repertory of
SESAC, ASCAP and BMI used in our programs, thereby licensing the
broadcasting of such music in such programs over Station. You
will be responsible for all music license requirements (and all
other permissions) for any commercial or other material inserted
by you within or adjacent to WB programs in accordance with this
Agreement.
(c) You warrant that the License is in good standing and you agree to
comply with all relevant statutes and FCC rules and requirements
so as to maintain the License in good standing. In the event you
are found to have materially violated any laws or FCC rules or
requirements (after the exhaustion of all appeals so long as
Station retains the License during the pendency of such appeal),
the effect of which is that Station is of materially less value
to us as a broadcaster of WB programming than as of the date of
this Agreement, then we shall have the right to terminate this
Agreement upon 30 days prior written notice. You shall notify us
immediately of any action by the FCC imposing any forfeitures or
other
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sanction(s) on Station or you including but not limited to
short-term renewals, revocation or denial of renewal.
(d) You warrant that all information delivered by you to us in
connection with this Agreement shall be true and correct in all
material respects.
(e) You warrant that execution of this Agreement and performance of
its obligations will not violate or result in a default under (i)
any material agreement or instrument to which you are party or
(ii) any statute, ordinance, governmental rule or regulation in
any material respect, or order, judgment, injunction, decree or
ruling of any court or administrative agency applicable to you,
which default would materially interfere with the performance of
your obligations hereunder.
(f) You warrant that you are not a party to any legal action or other
proceeding before any court or administrative agency which could
prohibit the performance of your obligations under this Agreement.
16. RETRANSMISSION CONSENT: If any law, governmental regulation or other
action permits you to elect to require any cable television system or
other multichannel video program distributor to obtain your consent to
such system's or distributor's retransmission of Station's broadcast of
either Station's signal as a whole or any WB programming included
therein, then Affiliate and WB agree to negotiate in good faith
regarding whether such consent is to be given (including without
limitation, whether you shall or shall not, in lieu of requiring
consent, elect to require any cable system to comply with any "must
carry" rules, regulations or laws) and, if so, the terms under which
such consent is to be given (including without limitation, the amount
and type of compensation, if any, to be paid by the system or
distributor for such consent and whether any of that compensation shall
be shared between you and us).
17. NETWORK NON-DUPLICATION PROTECTION: During the term of this Agreement,
Affiliate shall be entitled to network non-duplication protection, as
provided by Sections 76.92 through 76.97 of the FCC's rules, against
the presentation of any WB program by a cable system during the period
commencing one
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day before and ending fourteen (14) days after receipt of such WB program
by Station. The geographic zone of network non-duplication protection
shall be the Designated Market Area ("DMA") (as defined by Nielsen) in
which your Station is located or any lesser zone mandated by Sections
76.92 and 73.658(m) of the FCC's rules as those rules exist as of the date
of this Agreement. Network non-duplication protection shall extend only to
WB programs that Station is carrying in accordance with the terms of this
Agreement and such protection shall be subject to the terms and provisions
of subparagraph 2(f). You are under no obligation to exercise in whole or
in part the network non-duplication rights granted herein. Notwithstanding
anything to the contrary in this paragraph, no non-duplication protection
is provided against the signal of WGN until such time that WB offers
exclusivity against the signal of WGN to its affiliates.
18. AFFILIATION RATINGS PAYMENTS. Affiliate agrees to pay to WB an annual
payment, based on the Station's television market ratings, for WB prime
time programming, commencing with the initial broadcast by Station of such
programming, all as defined and set forth in the "Annual Ratings Payment"
Exhibit attached hereto. These payments are intended to compensate WB for
the WB programming and are in no way intended to, nor do they, confer on
WB any ownership or other equity interest in Station.
19. NOTICES AND REPORTS:
(a) In addition to any other reports or forms requested herein, you will
provide to us in writing, in the manner reasonably requested by WB,
such reports covering WB programs broadcast by Station as we may
request from time to time. To the extent we provide you forms for
such purpose, you shall provide such reports on these forms.
(b) All notices, reports or forms required or permitted hereunder to
be in writing shall be deemed given when personally delivered
(including, without limitation, by overnight courier or other
messenger or upon confirmed receipt of facsimile copy) or on the
date of mailing postage prepaid, addressed as specified below, or
addressed to such other address as such party may hereafter
specify in a written notice. Notice to
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Affiliate shall be to the address set forth for Affiliate on page 1 of
this Agreement. Notice to WB shall be to: The WB Television Network, 4000
Warner Boulevard, Burbank, California, 91522, Attention: General Counsel.
20. MISCELLANEOUS:
(a) Nothing contained in this Agreement shall create any partnership,
association, joint venture, fiduciary or agency relationship between
the parties hereto.
(b) Nothing contained in this Agreement nor the conduct of any
officer, director, agent or employee of either WB or Affiliate
shall be deemed to create or to constitute ownership by WB, in
whole or in part, of Affiliate, Station or the License or in any
way constitute a derogation of the rights, duties and
responsibilities imposed upon Affiliate. Nothing in this
Agreement shall be deemed to delegate to WB, directly or
indirectly, any right to control the operations of Station.
(c) You shall at all times permit us, in connection with WB programming,
without charge, to place on, maintain and use at Station's premises,
at our expense, such equipment as WB shall reasonably require.
Station shall operate such equipment for us, to the extent we
reasonably request, and no fee shall be charged by Station therefor.
(d) No waiver of any failure of any condition or of the breach of any
obligation hereunder shall be deemed to be a waiver of any preceding
or succeeding failure of the same or any other condition, or a
waiver of any preceding or succeeding breach of the same or any
other obligation.
(e) Each and all of the rights and remedies of WB and Affiliate under
this Agreement shall be cumulative, and the exercise of one or
more of said rights or remedies shall not preclude the exercise
of any other right or remedy under this Agreement, at law or in
equity. Notwithstanding anything to the contrary contained in
this Agreement, in no event shall either party hereto be entitled
to recover any lost profits or consequential damages because of a
breach or failure by the other
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party, and except as expressly provided in this Agreement to the
contrary, neither WB nor Affiliate shall have any right against the
other with respect to claims by any third person or other third
entity.
(f) Paragraph headings are included in this Agreement for convenience
only and shall not be used to interpret this Agreement or any of the
provisions hereof, nor shall they be given any legal or other
effect.
(g) This Agreement, including all Exhibits attached hereto,
constitutes the entire understanding between WB and Affiliate
concerning the subject matter hereof and shall not be amended,
modified, changed, renewed, extended or discharged except by an
instrument in writing signed by the parties or as otherwise
expressly provided herein. No inducement, representations or
warranties except as specifically set forth herein have been made
by either party to this Agreement to the other. This Agreement
replaces any and all prior and contemporaneous agreements,
whether oral or written, pertaining to the subject matter hereof.
(h) This Agreement may be executed in counterparts, with the Agreement
being effective when each party hereto has executed a copy and
delivered that copy to the other party hereto.
(i) The parties hereto agree that Station will be treated in a manner
which is the same as, or similar to, other WB affiliates with
respect to the following terms and conditions of this Agreement:
Station's allotment of commercial announcements, promotion
announcement procedures, WB program carriage (except as to items
identified in each Station's Schedule 1), delivery requirements,
assignment restrictions and retransmission consent. The parties
hereto acknowledge that the "most favored" protection that is
granted to Station in this subparagraph (i) relates only to the
Affiliation Agreement and not to any agreements of any other nature
that may exist between WB and any third party. Notwithstanding the
provisions of this subparagraph (i) Station acknowledges that the
Affiliation Agreement for "Superstation" WGN may contain terms in
addition to and different from the terms contained in this
Affiliation
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Agreement. The premises and rationale for preparation of the "Annual
Ratings Payment" Exhibit will be the same for all WB affiliates,
however it is acknowledged that each affiliate will have a different
schedule of payment amounts under these Plans based on each
station's base year calculation. Additionally, guarantee payments
will only be required of stations in the top 15 markets.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first written above.
THE WB TELEVISION NETWORK PARTNERS ACME HOLDINGS OF KNOXVILLE, LLC
L.P. dba THE WB TELEVISION NETWORK
("WB") ("Affiliate")
By: /s/ John Maatta By: Douglas E. Gealy
----------------------- ---------------------------
Title: Authorized Agent Title: President & COO
Date:________________________ Date: 10/22/97
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ANNUAL RATINGS PAYMENT EXHIBIT
As part of the consideration to WB for the WB programming, Licensee agrees to
make annual payments to WB based on Station's television market ratings (the
"TMR Payments") for adults 18-49 for the prime time broadcast periods of WB
programming commencing with the initial broadcast by Station of WB programming.
Such payments shall partially compensate WB for the WB programming by
calculating the value and/or profitability added to Station as a result of its
affiliation with WB and pay to WB 25% of such added value and/or profitability.
Such payments are not intended to, nor do they, confer in WB any ownership
interest in Station. All defined terms used herein shall have the same meaning
as set forth in the Agreement unless otherwise defined herein. The TMR Payments
shall be calculated and paid as follows:
A. CALCULATION OF TMR PAYMENT AMOUNT: At the end of each successive
Contract Year commencing on the Launch Date, the "Average Rating"
for each such Contract Year shall be determined by taking the
average of Station's television ratings (adults 18-49) for the prior
November, February, and May sweeps periods of such Contract Year as
reported on the Nielsen Station Index ("NSI"), as processed,
refined, re-formatted or re-configured by that application commonly
known as the "SNAP System," but only with respect to those prime
time hours programmed by WB under the Agreement. Based on the
Station's Average Rating for each Contract Year and the number of
hours programmed by WB in that Year, Station shall owe WB the amount
(the "TMR Amount") set forth in the table attached hereto as the
Annual Ratings Payment Exhibit-Table. For example, in the particular
case of Station, if the adults 18-49 rating for WB programmed hours
is for a particular Contract Year, and WB is programming 11 hours
per week during such Year, then the TMR payment that will be due and
owing for such Year is $ . In the event that the TMR Payment for any
particular Contract Year has increased or decreased from the prior
year's TMR Payment disproportionately in comparison to the increase
or decrease over such period in the profitability of Station's WB
furnished prime time programming (after giving effect to any
increase in the number of WB prime time programming hours between
the two periods), then
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either WB or Station may request that the Station's financial
results and operational information be audited and reviewed by WB.
Promptly after such audit and review, WB and Station shall meet to
discuss such financial results and operational information of
Station and in good faith seek to adjust the then currently due TMR
Payment to reflect the intent of these Payments as set forth in the
introductory paragraph to this Exhibit.
B. TMR PAYMENT: The TMR Amount for each Contract Year shall be payable
by Licensee to WB within 15 days following WB's delivery to Licensee
of an invoice for the TMR Amount, which invoice shall be delivered
by WB not earlier than the release by NSI or any successor ratings
index of the ratings for the fourth and final sweeps period of such
Contract Year.
C. NO NSI RATINGS: In the event there are no NSI ratings available,
then Licensee and WB shall use those standard television market
ratings which are generally available and used by national and/or
regional advertisers for purposes of calculating advertising
payments to television stations.
D. CONTINUING OBLIGATION. Licensee's obligation to make the above TMR
Payments on the basis set forth herein shall survive any termination
of this Agreement by WB, any sale or transfer of any Station assets
and/or any ownership interest in the Station and shall remain
binding on any successor Station owner, which successor remains an
affiliate and is approved by WB in its discretion as otherwise set
forth in the Agreement.
E. CALCULATION OF BASELINE. It is recognized that Station is a
start-up, and that ratings data is not available to track Station's
historical performance during three previous ratings periods. The
parties have agreed that notwithstanding anything to the contrary
set forth above, the Baseline for the calculation of the TMR
payments will be calculated as follows: During the November, 1997,
February and May 1998 sweeps periods the average ratings (Adults
18-49) for the nights that are not programmed by WB will set the
baseline number for the computation of the TMR payment. The
difference between the baseline and the average rating for WB
programmed nights during the November, February and May sweeps
period will determine the amount that is due to
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WB, during the first year and during all subsequent years. The
calculation of ratings under this paragraph shall be as reported on
the Nielsen Station Index ("NSI") as processed, refined,
reformatted, or reconfigured by that application commonly known as
the "SNAP System".
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STATION AFFILIATION AGREEMENT
Dated as of September 24, 1997
ACME Holdings of St. Louis, LLC
4935 Lindell Blvd.
St. Louis, Missouri 63108
Attention: Doug Gealy
The following shall comprise the agreement between The WB Television Network
Partners, L.P. dba The WB Television Network ("WB," "we," or "us"), and ACME
Holdings of St. Louis, LLC ("Affiliate", "ACME" or "you") for the affiliation of
television station KPLR ("Station") with WB for carriage of WB programming. The
Federal Communications Commission ("FCC") has issued a broadcast license
("License") to Koplar Communications, Inc. ("KCI") to operate Station in St.
Louis, the community in which Station is licensed by the FCC ("Community of
License"). All references in this Agreement to "WB program(s)" and "WB
programming" and any variations thereof shall mean the programming made
available by WB under this Agreement. ACME programs Station KPLR pursuant to a
Local Marketing Agreement with Koplar Communications, Inc. ACME represents and
warrants that it has the right to enter into this Station Affiliation Agreement
and to perform each and every of the terms and conditions set forth herein in
its capacity as the holder of the Local Marketing Agreement.
1. WB Programming: WB will make available to Affiliate WB programs for
free over-the-air broadcast and broadcast by any other means by
Station in the Community of License during the term of this Agreement.
During such term, except as otherwise provided herein, WB grants
Affiliate the exclusive right to have Station broadcast the WB
programming in the Community of License only as scheduled by WB over
free over-the-air television and by such other technological means as
are available to Affiliate for broadcast in the Community of License
so long as Station broadcasts the WB programming for over-the-air
television. Notwithstanding the foregoing, for an initial period,
until such time that WB offers exclusivity against the signal of WGN
to its affiliates, WB may allow the signal of WGN to be imported into
the Community of License. WB shall have the sole discretion to select,
schedule, substitute and/or withdraw WB programming or any portion(s)
thereof. WB shall also have the right to authorize any television
broadcasting station, regardless of the community in which it is
licensed by the FCC, to broadcast any presentation of a subject we
deem to be of immediate national significance including, but not
limited to, a Presidential
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address. Except as provided herein, during the term of this Agreement Affiliate
shall be the sole affiliate of WB for transmission for exhibition on television
of WB programming in the Community of License.
2. Program Carriage:
(a) We agree to make available for broadcast by Station WB
programming for the hours programmed by WB at the times and dates
scheduled by WB throughout the term of this Agreement. You
acknowledge that the times and roll-out dates set forth in this
Agreement are approximate only and you agree to have Station
broadcast WB programs irrespective of whether WB meets, fails to
meet or otherwise varies from the anticipated program schedule
set forth herein; provided, however, that WB hereby agrees not to
accelerate such anticipated program schedule. To the extent WB
makes available such WB programming for broadcast, this Agreement
both obligates us to make available such WB programs to Station
and obligates Station to broadcast such WB programs over-the-air
pursuant to the terms of this Agreement.
(b) Subject to the exceptions set forth in subparagraph 2(e) and the
right of preemption set forth in subparagraph 2(f), Station shall
broadcast WB programs on the dates and at the times scheduled by
WB. Station shall broadcast WB programs in their entirety,
including but not limited to WB commercial announcements, WB
identifications, program promotional material, and credit
announcements contained in such programs, without interruption or
deletion or addition of any kind, except for the commercial
announcements that Station is allowed to add pursuant to
Paragraph 5. Notwithstanding the foregoing, you may substitute
other WB promotional announcements in lieu of program promotional
material that is inaccurate as it pertains to Station's schedule.
No commercial announcement, promotional announcement or public
service announcement will be broadcast by Station during any
interval within a WB program, which interval is designated by WB
as being for the sole purpose of making a station identification
announcement.
(c) The initial Scheduled Program Times of WB programming and the
anticipated roll-out dates of that programming are set forth as
follows (the specified times apply for the Eastern and Pacific Time
Zones; the Mountain and Central Time Zones are one hour earlier for
Prime Time and Latenight programming only, except as otherwise
agreed by us):
Prime Time: 7:00 p.m. - 10:00 p.m. Sunday;
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8:00 p.m. - 10:00 p.m. Monday through Saturday.
Two nights, to be designated by us, during the
1994/1995 broadcast year (one night in January
1995 with the second night commencing during the
third quarter of 1995); one additional night
commencing during the 1995/1996 broadcast year;
and one additional night during each broadcast
year thereafter until seven nights of programming
are made available.
Children's: 7:00 a.m. - 8:00 a.m.; 7:30 a.m. - 8:30 a.m.; or 8:00
a.m. - 9:00 a.m. (at WB's election) Monday
through Friday;
3:00 p.m. - 5:00 p.m. Monday through Friday;
8:00 a.m. - 12:00 noon Saturday;
Weekday mornings (one hour) and Saturday
mornings (three hours) commencing September
1995; One additional Saturday hour commencing
September 1996; Monday through Friday
afternoons (two hours) commencing September
1997. It is anticipated that the additional
Children's programming will commence in
approximately the second week of September.
Latenight: 11:00 p.m. - 12:00 midnight Monday through Friday,
commencing not earlier than 1997 and subject to
the approval of the WB Affiliate's Council (as
defined in Paragraph 13 below).
(d) Notwithstanding the roll-out schedule for Children's afternoon
programming in subparagraph (c) above, WB's supply of Children's
afternoon programming shall be subject to the expiration of the
current agreements between WB affiliates and suppliers of Children's
afternoon programming. Station agrees not to extend or renew any
agreement it may have with such suppliers for such programming
during the term of this Agreement if such renewal or extension would
interfere with the broadcast of the WB Children's afternoon
programming.
(e) You confirm that as of the date of this Agreement you have no
commitments, except those listed in Schedule 1 hereto, which
would impede Station's broadcasting all WB programming made
available during the term of this Agreement. If any WB
programming is not broadcast by you because of any such
commitment expressly described in Schedule 1 (but excluding
extensions by exercise of
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options by Affiliate [but not by the programming licensor] or
otherwise), then such programming shall be broadcast in a time
period upon which you and we shall mutually agree and which
shall be of quality and rating value comparable to that of the
Scheduled Program Times. These programs will not be considered
preempted for purposes of subparagraph 2(f).
(f) Notwithstanding anything in this Agreement to the contrary,
nothing in this Agreement shall be construed to prevent or hinder
Affiliate from (i) rejecting or refusing any WB program which
Affiliate reasonably believes to be unsatisfactory or unsuitable
or contrary to the public interest or (ii) substituting a program
which, in Affiliate's opinion, is of greater local or national
importance. In such an event, you shall provide us with advance
written notice of any such rejection, refusal or substitution, no
later than 14 days prior to the air date of such programming,
except where the nature of the substitute program makes such
notice impracticable (e.g., coverage of breaking news or other
unscheduled events) or the programming has not been made
available to you by such date, in which cases you agree to give
us as much advance notice as the circumstances permit. Such
notice shall include a statement of the reasons you believe that
the rejected WB programming is unsatisfactory or unsuitable or
contrary to the public interest, and/or that a substituted
program is of greater local or national importance. In view of
the limited amount of WB programming to be supplied pursuant to
this Agreement (at least until such time as the full WB
programming schedule has been rolled out) you acknowledge that
you do not foresee any need to substitute programming of greater
local or national importance for WB programming, except in those
circumstances requiring live coverage of fast-breaking news
events or very infrequent special events. To the extent you
substitute another program for a WB program as permitted under
subparagraph 2(f)(ii), then you will broadcast such omitted
program and the commercial announcements contained therein (or any
replacement programming provided by WB and the commercial
announcements contained therein) during a time period upon which
you and we shall promptly and mutually agree and which shall be
of quality and rating value comparable to that of the preempted
program's Scheduled Program Time. In the event that the parties do
not promptly agree upon such a time period after reasonable
consultation in good faith and after taking into account the
practical alternatives under the
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circumstances, then, without limiting any other rights of WB under
this Agreement or otherwise, we shall have the right to license
the broadcast rights to the applicable omitted programming (or
replacement programming) to another television station located in
the Community of License.
In addition, if three or more episodes of a program series are
preempted by you as permitted hereunder in any thirteen-week period,
for any reasons other than force majeure as provided in Paragraph 6,
we shall have the right, upon 60 days prior written notice, to
terminate your right to broadcast that program series and to
withdraw all future episodes of that series. Such thirteen-week
periods shall be measured consecutively from the first broadcast
date of the program series in question. If we subsequently place
such a series on another station in the Community of License, we
reserve the right not to offer you the broadcast rights to that
series for subsequent broadcast seasons.
In addition to all other remedies, to the extent one or more
episodes of a program series is preempted by you in violation of
(i.e., other than as permitted under) this Paragraph 2, we shall
have the right, upon 30 days prior written notice, to terminate your
right to broadcast the remainder of the program series and withdraw
all future episodes of that series from you.
(g) Nothing in this Agreement shall be construed to prevent or hinder WB
from (i) substituting one or more WB programs for previously
scheduled WB programs, in which event WB will make the substituted
programs available to Station pursuant to the provisions of
Paragraph 1 and Paragraph 3; (ii) cancelling one or more WB
programs; or (iii) postponing any scheduled roll-out dates of WB
programming. Further, nothing in this Agreement shall be construed
to obligate WB (x) to provide a minimum or specific number of WB
programs; (y) to commence providing WB programming on any particular
date; or (z) to expand the amount of WB programming pursuant to a
specified timetable.
3. Delivery: WB agrees to make available the WB programming for satellite
transmission. WB shall incur no costs regarding the satellite downlink
and broadcast by Station; Station shall incur no up-link costs with
regard to the delivery of the WB programming.
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4. Promotion:
(a) We will provide you with on-air promotional announcements ("WB
Promos") for WB programming, which WB Promos are intended for
broadcast during Station's broadcast of non-WB programming. You
agree to provide an on-air promotional schedule consistent with
our recommendations. You shall maintain complete and accurate
records of all WB Promos that are broadcast. Upon request by WB
for those records, you shall provide copies of all such records
to WB within two weeks of such request.
(b) You shall budget Station's advertising availabilities in such a
manner as to enable Station to broadcast additional WB Promos
during periods in which Station is deemed a "Subperformer."
Station shall be deemed to be a "Subperformer" from the time its
"sweeps rating" is below the average prime time rating for all WB
affiliated broadcast stations until such time as Station's sweeps
rating is no longer below the average prime time rating for all
WB affiliated broadcast stations. The Station's sweeps rating
means the Station's average A.C. Nielsen rating for the most
recently completed sweeps period for adults 18-49 for all prime
time hours programmed by WB. For such time as Station remains a
Subperformer, Station shall: (i) broadcast, during each one-half
hour of all periods of each day that Station is broadcasting
non-WB programming, at least one (1) 30-second Promo (or Promos
aggregating 30 seconds, to the extent we so elect) for Station's
local, syndicated or WB programming; and (ii) broadcast during
all periods when Station is broadcasting non-WB programming WB
Promos for not less than:
Prime Time Hours Programmed by WB
2 hours - 20% of 100% 4 hours - 25% " 6 hours - 30% " 8 hours
- 35% " 10 hours - 40% " 12 hours* - 45% "
(* 12 or more hours)
(the "Applicable Percentage") of the total, aggregate gross ratings
points ("GRPs") for all the promotional announcements broadcast by
Station ("Aggregate Promotional GRPs") within the periods in which
non-WB
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programming is being broadcast. The specific WB Promos broadcast by
Station and the number of broadcasts of each WB Promo may be
specified by WB and the broadcast of the WB Promos shall be made so
that the Aggregate Promotional GRPs allocated to WB Promos are
distributed fairly and reasonably across the periods when non-WB
programming is being broadcast. For such time as Station's sweeps
rating ranks Station within the bottom 50% (ranked highest to
lowest) of those WB affiliated broadcast stations that are
Subperformers, then the Applicable Percentage for Station shall be
not less than 55% of 100% of the Aggregate Promotional GRPs. The WB
Promos broadcast during each half-hour of non-WB programming, as
required by this subparagraph 4(b), may be counted toward Station's
Applicable Percentage. Station shall continue to air WB Promos under
this schedule until Station is no longer a Subperformer, as defined
above.
(c) In addition to providing WB Promos, we shall make available for
your use, at reasonable cost, such other promotional and sales
materials as we and you may mutually consider appropriate. You
shall not delete any copyright, trademark, logo or other notice,
or any credit included in any such materials relating to WB, and
you shall not exhibit, display, distribute or otherwise use any
trademark, logo or other material or item delivered pursuant to
this Paragraph 4 or otherwise, except as instructed by us at the
time.
(d) Commencing on the first date that WB programming is aired by Station
and for the remaining term of this Agreement, Station shall identify
itself as a WB affiliate, both on and off-the-air. Prior to the
"Launch Date" (as defined in subparagraph 9(b)), Station shall
identify itself as a WB affiliate only after WB gives Affiliate
permission to do so and only in a manner reasonably directed by WB.
Prior to the Launch Date, Affiliate shall not, without the express
written permission of WB, make any disclosures to the press or
business community or issue any press announcements about Station's
affiliation with WB.
5. Commercial Announcements:
(a) With respect to WB programming, the parties to this Agreement shall
be entitled to insert the following number of commercial
announcements (Station's allotment includes station breaks but
excludes 5-second prime time station identification breaks at the
beginning of each hour):
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(1) Prime Time (as defined in subparagraph 2(c)) hour (pro-rated
for half-hour programs):
You shall have the right to insert six 30-second
commercial announcements. WB shall have the right to
insert eighteen 30-second commercial announcements.
(2) Children's:
Weekday half-hour:
You shall have the right to insert six 30-second
commercial announcements (or other material constituting
"commercial matter" under the FCC's regulations). WB
shall have the right to insert six 30-second commercial
announcements.
Weekend half-hour:
You shall have the right to insert five 30-second
commercial announcements (or other material constituting
"commercial matter" under the FCC's regulations). WB
shall have the right to insert five 30-second commercial
announcements and one 15-second commercial.
(3) Latenight (as defined in subparagraph 2(c)):
You will receive half the total number of commercial
announcements as specified by WB or less as mutually
agreed to.
(b) If the amount of commercial advertising, commercial matter or
other non-program time included in WB programming is reduced for
any reason (including but not limited to the adoption or
modification of statutes or regulations or any other governmental
action), then we shall be entitled to reduce the number of
commercial announcements available to you to the extent necessary
to provide WB and Affiliate with the same proportionate amount of
commercial time (inclusive of station breaks with respect to
Affiliate) that each party is entitled to under this Agreement.
(c) Your broadcast over Station of the commercial announcements
included by us in WB programming is of the essence to this
Agreement, and nothing contained in this Agreement (other than in
subparagraph 2(f)) shall limit our rights or remedies relating to
your failure to so broadcast said commercial announcements. You
shall
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maintain complete and accurate records of all commercial
announcements broadcast as provided herein. Within two weeks
following each request by us therefor, you will submit copies of
all such records to WB.
6. Force Majeure: WB shall not be liable for failure to make available
any programming or any portion(s) thereof, and Station shall not be
liable for failure to broadcast any such programming or any portion(s)
thereof, by reason of any act of God, equipment failure, action or
claims by any third person, labor dispute, law, governmental regulation
or order, or other cause beyond either party's reasonable control
("force majeure event"). If due to any force majeure event, we
substantially fail to make available all of the programming to be
delivered to Affiliate under the terms of this Agreement, or you
substantially fail to broadcast such programming as scheduled by WB for
four consecutive weeks, or for six weeks in the aggregate during any
12-month period, then the "non-failing" party may terminate this
Agreement upon thirty 30 days prior written notice to the "failing"
party so long as such notice is given at any time prior to the
"non-failing" party's receipt of actual notice that the force majeure
event(s) has ended; provided further, however, that notwithstanding the
above provisions, you shall not have any right to so terminate this
Agreement, upon a force majeure event or otherwise, if we: (i) fail to
make available a minimum or specific number of WB programs; (ii) fail
to commence making available WB programming on any particular date;
(iii) fail to expand the amount of WB programming pursuant to a
specified timetable; (iv) substitute one or more WB programs for
previously scheduled WB programs; (v) cancel one or more WB programs;
or (vi) postpone the roll-out of any WB programming.
7. Assignment or Transfer of Affiliate Agreement and/or Station License:
(a) Assignment or Transfer of Affiliation Agreement: This Agreement
shall not be assigned by Licensee without the prior written consent
of WB. Any purported assignment by Licensee without such consent
shall be null and void, shall not be enforceable against WB, and
shall not relieve Licensee of all its obligations hereunder.
(b) Assignment or Transfer of Station License: If any application is
made to the Federal Communications Commission (FCC) concerning a
purported, attempted or actual transfer of control or assignment
of the Station license, you shall notify us immediately in
writing of the filing of such application. Unless the transfer of
control or assignment is one provided for by Section 73.3540 (f)
of the FCC's current rules and regulations
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(a "short form" assignment or transfer of control that does not
involve a material assignment or transfer of control), we shall
have the right to terminate this Agreement upon twenty (20) days'
advance notice to you, at any time after the filing of such
application. If WB does not terminate this Agreement on or before
twenty days before the effective date of such transfer,
this Agreement shall be deemed to have been fully assigned to the
transferee or assignee of Station's license and such transferee
or assignee will assume and perform all of the obligations and
duties contained in this Agreement without limitation of any kind,
as of the effective date of transfer. In addition, if Licensee
fails, prior to the effective date of the transfer, to procure
in a written form satisfactory to WB the agreement of the assignee
or transferee to assume and perform this Agreement in its entirety
without limitation of any kind, or fails to immediately notify WB
of the application to transfer control or assign the Station
license, then Licensee shall remain fully responsible for the
full performance of all provisions of the Agreement during the
full term of the Agreement as set forth in Paragraph 9, and in
the event of non-performance, Licensee shall be considered in
material breach of this Agreement and WB shall have all rights
and remedies available for such breach, including but not limited
to specific performance and damages.
8. Unauthorized Copying: You shall not, and shall not cause or authorize
others to record, copy or duplicate any programming or other material
we furnish pursuant to this Agreement, in whole or in part, and you
shall take all reasonable precautions to prevent any such recording,
copying or duplication. Notwithstanding the foregoing, if Station is
located in the Mountain Time Zone you may pre-record WB programming for
later broadcast at the times scheduled by us. You shall erase all
such pre-recorded programming promptly after its scheduled broadcast.
Notwithstanding the above provisions, Station may make a non-broadcast
quality recording of its entire broadcast day for archival, file and
reference purposes and uses only, which copy shall be kept in Station's
possession at all times.
9. Term:
(a) The term of this Agreement shall commence on September 24, 1997 and
shall continue for ten (10) years thereafter. The term of this
Agreement may be extended for additional successive periods of two
years each, by us, in our sole discretion, giving written notice of
such extension to you at least 120 days prior to the expiration of
the then-current period; provided,
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however, that if, within 30 days of your receipt of the notice of
extension, you, in your sole discretion, give us written notice that
you reject such extension, then the extension notice shall not be
effective and this Agreement shall terminate upon expiration of the
then-current period.
(b) The "Launch Date" shall be the date on which WB first makes WB
programming available to Affiliate for broadcast by Station on a
regularly scheduled basis.
(c) Each "Contract Year" hereunder shall be an annual period during the
term of this Agreement. The First Contract Year is the annual period
beginning on the Launch Date; the Second Contract Year is the annual
period commencing one year after the Launch Date, etc.
(d) WB shall, within its sole discretion and without liability, have the
right to terminate this Agreement so long as we (i) provide sixty
days prior written notice to you and (ii) are either: (A) ceasing
operation as a television network; or (B) substantially
restructuring the ownership of the television network.
(e) Notwithstanding anything to the contrary contained in this
Agreement, upon the termination or expiration of the term of this
Agreement, all of your rights to broadcast or otherwise use any WB
program or any trademark, logo or other material or item hereunder
shall immediately cease and neither you nor Station shall have any
further rights whatsoever with respect to any such program,
trademark, logo, material or item.
(f) In the event of any conflict between the terms of this Agreement and
the terms of that Agreement between WB and KCI dated June 28, 1994
(the "KCI SAA") then the terms of this Agreement shall supersede the
terms of the KCI SAA, which runs until January 11, 2005. However, if
for any reason this Agreement shall be deemed invalid then the terms
of the currently existing KCI SAA shall continue to be of full force
and effect until January 11, 2005.
10. Applicable Law: The obligations of you and WB under this Agreement are
subject to all applicable federal, state, and local laws, rules and
regulations (including, but not limited to, the Communications Act of
1934, as amended, and the rules, regulations and policies of the FCC)
and this Agreement and all matters or issues collateral thereto shall
be governed by the laws of the State of California without regard to
California's conflict of law rules. The California State Courts and
the U.S. District Courts located in California shall have jurisdiction
over the interpretation of this Agreement or with regard to any dispute
arising under
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this Agreement. The venue for any such action concerning this Agreement
shall be in the County of Los Angeles, California.
11. Station Acquisition by WB: During the term of this Agreement, WB agrees
that neither we nor Time Warner Inc. nor any of its subsidiary companies
will acquire, as defined by the attribution rules of the FCC, a television
broadcast station licensed in the Community of License.
12. Change in Operations: In the event that Station's transmitter
location, power, frequency, programming format or hours of operation
are materially changed at any time during the term of this Agreement so
that Station is of materially less value to us as a broadcaster of WB
programming than at the date of this Agreement, then we shall have the
right to terminate this Agreement upon 30 days prior written notice.
You shall notify WB immediately in writing if application is made to
the FCC to modify in a material manner the transmitter location, power
or frequency of Station or if Affiliate plans to modify in a material
manner the hours of operation of Station. If you fail to notify us as
required herein, then we shall have the right to terminate this
Agreement by giving you 30 days prior written notice. At any time during
the term if Station is off the air, or operating at less than fifty
percent (50%) of its licensed power, for a period of 12 hours or longer,
Station must immediately notify WB. WB may terminate this agreement
upon thirty (30) days prior written notice in the event that Station
is off the air for a period exceeding seve (7) days or if is operating
at less than fifty percent (50%) of its full licensed power for
a period exceeding seven (7) days. Affiliate will install a satellite
antenna and receiver of sufficient quality, in the exclusive judgment of
WB, to receive a network quality signal from WB. Affiliate shall also use
switches, microwaves and all other transmission equipment necessary to
telecast a network quality picture. If, in the exclusive judgment of WB,
the picture or sound quality of Station's transmission is insufficient, WB
will provide Station with notice of the deficiency, and Station shall have
thirty (30) days to cure. In the event that Station should fail to cure
then WB may cancel this agreement upon thirty (30) days written notice.
13. WB Affiliates Council: You, with the other affiliates of WB, shall form a
WB Affiliates Council (the "Council"), which shall be comprised of
representatives from five different affiliates of WB.
14. Non-Liability of Council Members: To the extent the Council and its
members are acting in their capacity as such, then the Council and each
member so acting shall not have any obligation or legal or other
liability whatsoever to you in connection with this Agreement,
including without limitation, with respect to the Council's or such
member's approval or
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non-approval of any matter, exercise or non-exercise of any right
or taking of or failing to take any other action in connection therewith.
15. Warranties and Indemnities:
(a) WB agrees to indemnify, defend and hold Affiliate harmless
against and from all claims, damages, liabilities, costs and
expenses arising out of the use by Station under this Agreement
of any WB program or other material furnished by WB under this
Agreement, provided that Affiliate promptly notifies WB of any
claim or litigation to which this indemnity shall apply, and
provided further that Affiliate cooperates fully with WB in the
defense or settlement of such claim or litigation. Affiliate
agrees to indemnify, defend and hold WB harmless against and
from all claims, damages, liabilities, costs and expenses with
respect to Affiliate's operation of the Station or any material
furnished, added or deleted to or from WB programming by
Affiliate. This indemnity shall not apply to litigation expenses,
including attorneys' fees, that the indemnified party elects to
incur on its own behalf. Except as otherwise provided in this
Agreement, neither Affiliate nor WB shall have any rights against
the other for claims by third persons, or for the failure to
operate facilities or to furnish WB programs if such failure
is the result of a force majeure event as defined in Paragraph 6.
Furthermore, notwithstanding any other provisions of this
Agreement, Affiliate shall not have any rights against WB for
claims by third parties or Affiliate arising out of any actions or
omissions of WB permitted under subparagraph 2(g).
(b) You agree to maintain for Station such licenses, including
performing rights licenses as now are or hereafter may be in
general use by television broadcasting stations and are necessary
for you to broadcast the television programs which we furnish to
you hereunder. We will clear all music in the repertory of
SESAC, ASCAP and BMI used in our programs, thereby licensing the
broadcasting of such music in such programs over Station. You
will be responsible for all music license requirements (and all
other permissions) for any commercial or other material inserted
by you within or adjacent to WB programs in accordance with this
Agreement.
(c) You warrant that the License is in good standing and you agree to
comply with all relevant statutes and FCC rules and requirements
so as to maintain the License in good standing. In the event you
are found to have materially violated any laws or FCC rules or
requirements (after
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<PAGE>
the exhaustion of all appeals so long as Station retains the License
during the pendency of such appeal), the effect of which is that
Station is of materially less value to us as a broadcaster of WB
programming than as of the date of this Agreement, then we shall
have the right to terminate this Agreement upon 30 days prior
written notice. You shall notify us immediately of any action by the
FCC imposing any forfeitures or other sanction(s) on Station or you
including but not limited to short-term renewals, revocation or
denial of renewal.
(d) You warrant that all information delivered by you to us in
connection with this Agreement shall be true and correct in all
material respects.
(e) You warrant that execution of this Agreement and performance of
its obligations will not violate or result in a default under (i)
any material agreement or instrument to which you are party or
(ii) any statute, ordinance, governmental rule or regulation in
any material respect, or order, judgment, injunction, decree or
ruling of any court or administrative agency applicable to you,
which default would materially interfere with the performance of
your obligations hereunder.
(f) You warrant that you are not a party to any legal action or other
proceeding before any court or administrative agency which could
prohibit the performance of your obligations under this Agreement.
16. Retransmission Consent: If any law, governmental regulation or other
action permits you to elect to require any cable television system or
other multichannel video program distributor to obtain your consent to
such system's or distributor's retransmission of Station's broadcast of
either Station's signal as a whole or any WB programming included
therein, then Affiliate and WB agree to negotiate in good faith
regarding whether such consent is to be given (including without
limitation, whether you shall or shall not, in lieu of requiring
consent, elect to require any cable system to comply with any "must
carry" rules, regulations or laws) and, if so, the terms under which
such consent is to be given (including without limitation, the amount
and type of compensation, if any, to be paid by the system or
distributor for such consent and whether any of that compensation shall
be shared between you and us).
17. Network Non-Duplication Protection: During the term of this Agreement,
Affiliate shall be entitled to network non-duplication protection, as
provided by Sections 76.92 through 76.97 of the FCC's rules, against
the presentation of any WB
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program by a cable system during the period commencing one day before and
ending fourteen (14) days after receipt of such WB program by Station.
The geographic zone of network non-duplication protection shall be the
Designated Market Area ("DMA") (as defined by Nielsen) in which your
Station is located or any lesser zone mandated by Sections 76.92 and
73.658(m) of the FCC's rules as those rules exist as of the date of this
Agreement. Network non-duplication protection shall extend only to WB
programs that Station is carrying in accordance with the terms of this
Agreement and such protection shall be subject to the terms and
provisions of subparagraph 2(f). You are under no obligation to exercise
in whole or in part the network non-duplication rights granted herein.
Notwithstanding anything to the contrary in this paragraph, no non-
duplication protection is provided against the signal of WGN until
such time that WB offers exclusivity against the signal of WGN to its
affiliates.
18. Affiliation Ratings Payments. Affiliate agrees to pay to WB an annual
payment, based on the Station's television market ratings, for WB prime
time programming, commencing with the initial broadcast by Station of such
programming, all as defined and set forth in the "Annual Ratings Payment"
Exhibit attached hereto. These payments are intended to compensate WB for
the WB programming and are in no way intended to, nor do they, confer on
WB any ownership or other equity interest in Station.
19. Notices and Reports:
(a) In addition to any other reports or forms requested herein, you will
provide to us in writing, in the manner reasonably requested by WB,
such reports covering WB programs broadcast by Station as we may
request from time to time. To the extent we provide you forms for
such purpose, you shall provide such reports on these forms.
(b) All notices, reports or forms required or permitted hereunder to
be in writing shall be deemed given when personally delivered
(including, without limitation, by overnight courier or other
messenger or upon confirmed receipt of facsimile copy) or on the
date of mailing postage prepaid, addressed as specified below, or
addressed to such other address as such party may hereafter
specify in a written notice. Notice to Affiliate shall be to the
address set forth for Affiliate on page 1 of this Agreement.
Notice to WB shall be to: The WB Television Network, 4000 Warner
Boulevard, Burbank, California, 91522, Attention: General
Counsel.
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20. Miscellaneous:
(a) Nothing contained in this Agreement shall create any partnership,
association, joint venture, fiduciary or agency relationship between
the parties hereto.
(b) Nothing contained in this Agreement nor the conduct of any officer,
director, agent or employee of either WB or Affiliate shall be
deemed to create or to constitute ownership by WB, in whole or in
part, of Affiliate, Station or the License or in any way constitute
a derogation of the rights, duties and responsibilities imposed upon
Affiliate. Nothing in this Agreement shall be deemed to delegate to
WB, directly or indirectly, any right to control the perations of
Station.
(c) You shall at all times permit us, in connection with WB programming,
without charge, to place on, maintain and use at Station's premises,
at our expense, such equipment as WB shall reasonably require.
Station shall operate such equipment for us, to the extent we
reasonably request, and no fee shall be charged by Station therefor.
(d) No waiver of any failure of any condition or of the breach of any
obligation hereunder shall be deemed to be a waiver of any preceding
or succeeding failure of the same or any other condition, or a
waiver of any preceding or succeeding breach of the same or any
other obligation.
(e) Each and all of the rights and remedies of WB and Affiliate under
this Agreement shall be cumulative, and the exercise of one or
more of said rights or remedies shall not preclude the exercise
of any other right or remedy under this Agreement, at law or in
equity. Notwithstanding anything to the contrary contained in
this Agreement, in no event shall either party hereto be entitled
to recover any lost profits or consequential damages because of a
breach or failure by the other party, and except as expressly
provided in this Agreement to the contrary, neither WB nor
Affiliate shall have any right against the other with respect to
claims by any third person or other third entity.
(f) Paragraph headings are included in this Agreement for convenience
only and shall not be used to interpret this Agreement or any of the
provisions hereof, nor shall they be given any legal or other
effect.
(g) This Agreement, including all Exhibits attached hereto,
constitutes the entire understanding between WB and
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Affiliate concerning the subject matter hereof and shall not be
amended, modified, changed, renewed, extended or discharged except
by an instrument in writing signed by the parties or as otherwise
expressly provided herein. No inducement, representations or
warranties except as specifically set forth herein have been made
by either party to this Agreement to the other.This Agreement
replaces any and all prior and contemporaneous agreements, whether
oral or written, pertaining to the subject matter hereof.
(h) This Agreement may be executed in counterparts, with the Agreement
being effective when each party hereto has executed a copy and
delivered that copy to the other party hereto.
(i) The parties hereto agree that Station will be treated in a manner
which is the same as, or similar to, other WB affiliates with
respect to the following terms and conditions of this Agreement:
Station's allotment of commercial announcements, promotion
announcement procedures, WB program carriage (except as to items
identified in each Station's Schedule 1), delivery requirements,
assignment restrictions and retransmission consent. The parties
hereto acknowledge that the "most favored" protection that is
granted to Station in this subparagraph (i) relates only to the
Affiliation Agreement and not to any agreements of any other
nature that may exist between WB and any third party.
Notwithstanding the provisions of this subparagraph (i) Station
acknowledges that the Affiliation Agreement for "Superstation"
WGN may contain terms in addition to and different from the terms
contained in this Affiliation Agreement. The premises and
rationale for preparation of the "Annual Ratings Payment" Exhibit
will be the same for all WB affiliates, however it is
acknowledged that each affiliate will have a different schedule
of payment amounts under these Plans based on each station's base
year calculation. Additionally, guarantee payments will only be
required of stations in the top 15 markets.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first written above.
THE WB TELEVISION NETWORK PARTNERS ACME HOLDINGS OF ST. LOUIS, LLC.
L.P. dba THE WB TELEVISION NETWORK
("WB") ("Affiliate")
/s/ John Maatta /s/ Douglas E. Gealy
By:________________________________ By:________________________________
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Authorized Agent President & COO
Title:_____________________________ Title:_____________________________
September 26, 1997 9/26/97
Date:______________________________ Date:______________________________
KOPLAR COMMUNICATIONS, INC.
By:________________________________
Title:_____________________________
Date:______________________________
18
<PAGE>
ANNUAL RATINGS PAYMENT EXHIBIT
As part of the consideration to WB for the WB programming, Licensee agrees to
make annual payments to WB based on Station's television market ratings (the
"TMR Payments") for adults 18-49 for the prime time broadcast periods of WB
programming commencing with the initial broadcast by Station of WB programming.
Such payments shall partially compensate WB for the WB programming by
calculating the value and/or profitability added to Station as a result of its
affiliation with WB and pay to WB 25% of such added value and/or profitability.
Such payments are not intended to, nor do they, confer in WB any ownership
interest in Station. All defined terms used herein shall have the same meaning
as set forth in the Agreement unless otherwise defined herein. The TMR Payments
shall be calculated and paid as follows:
A. Calculation of TMR Payment Amount: At the end of each successive
Contract Year commencing on the Launch Date, the "Average Rating"
for each such Contract Year shall be determined by taking the
average of Station's television ratings (adults 18-49) for the
prior November, February, and May sweeps periods of such Contract
Year as reported on the Nielsen Station Index ("NSI"), as
processed, refined, re-formatted or re-configured by that
application commonly known as the "SNAP System," but only with
respect to those prime time hours programmed by WB under the
Agreement. Based on the Station's Average Rating for each
Contract Year and the number of hours programmed by WB in that
Year, Station shall owe WB the amount (the "TMR Amount") set
forth in the table attached hereto as the Annual Ratings Payment
Exhibit-Table. For example, in the particular case of Station,
if the adults 18-49 rating for WB programmed hours is 3.0 for a
particular Contract Year, and WB is programming 11 hours per week
during such Year, then the TMR payment that will be due and owing
for such Year is $186,007.00. In the event that the TMR Payment
for any particular Contract Year has increased or decreased from
the prior year's TMR Payment disproportionately in comparison to
the increase or decrease over such period in the profitability of
Station's WB furnished prime time programming (after giving
effect to any increase in the number of WB prime time programming
hours between the two periods), then either WB or Station may
request that the Station's financial results and operational
information be audited and reviewed by WB. Promptly after such
audit and review, WB and Station shall meet to discuss such
financial results and operational information of Station and in
good faith seek to adjust the then currently due TMR Payment to
reflect the intent of these Payments as set forth in the
introductory paragraph to this Exhibit.
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<PAGE>
B. TMR Payment: The TMR Amount for each Contract Year shall be payable
by Licensee to WB within 15 days following WB's delivery to Licensee
of an invoice for the TMR Amount, which invoice shall be delivered
by WB not earlier than the release by NSI or any successor ratings
index of the ratings for the fourth and final sweeps period of such
Contract Year.
C. No NSI Ratings: In the event there are no NSI ratings available,
then Licensee and WB shall use those standard television market
ratings which are generally available and used by national and/or
regional advertisers for purposes of calculating advertising
payments to television stations.
D. Continuing Obligation. Licensee's obligation to make the above TMR
Payments on the basis set forth herein shall survive any termination
of this Agreement by WB, any sale or transfer of any Station assets
and/or any ownership interest in the Station and shall remain
binding on any successor Station owner, which successor remains an
affiliate and is approved by WB in its discretion as otherwise set
forth in the Agreement.
20
LEASE
THIS LEASE, made as of this 1st day of February, 1997, between ROBERTS
BROADCASTING HOLDINGS OF UTAH, L.L.C., a Missouri limited liability company,
hereinafter referred to as "Lessor", and ROBERTS BROADCASTING COMPANY OF SALT
LAKE CITY, L.L.C., a Delaware limited liability company, hereinafter referred to
as "Lessee",
WITNESSETH THAT:
Leased Premises. Lessor, in consideration of the rentals reserved and of
the covenants and promises herein contained to be kept and performed by Lessee,
does hereby demise and lease unto Lessee, and Lessee does hereby take and hire
from Lessor, space in a building located in the County of Salt Lake, Utah at
6135 South Stratler Street, Murray, Utah, described as follows and hereinafter
referred to as the "Premises":
"Lot 19, Interlake Industrial Park, according to the official plat
thereof recorded in the office of the recorder of Salt Lake
County, Utah.
Said leased premises are outlined on Exhibit A attached hereto and hereinafter
for purposes of convenience referred to as the "Leased Premises" and consist of
8,000 square feet. The Leased Premises include the non-exclusive right to use
the parking lot, rest rooms and other common areas located on the Premises.
Lessor represents and warrants to Lessee that Lessor has valid and
marketable fee simple title to the Premises and full power and authority to
enter into and carry out the terms of this Lease without any consents from third
parties.
1. Term. TO HAVE AND TO HOLD THE SAME, with all the privileges and
appurtenances pertaining thereto, for a term of 15 years commencing February 1,
1997, and expiring January 31, 2012.
Providing Lessee shall not be in default in any respect under the terms of
this Lease, subject to any applicable notice and cure periods, at the end of the
initial term, Lessee shall have the option to extend this Lease for two
successive renewal terms of five years each by giving written notice of the
exercise of the option to Lessor no later than the August 1 immediately
preceding expiration of the initial or renewal term in the manner provided in
Section 20 of this Lease.
2. Rental. Lessee covenants and agrees to pay, without demand, a yearly rental
of $54,000 which shall be payable in monthly installments of $4,500 on the first
day of each and every month for the period from February 1, 1997 through January
31, 2002.
The annual rent shall be $63,540 payable in monthly installments of $5,295
on the first day of each and every month in advance for the period from February
1, 2002 through January 31, 2007.
<PAGE>
The annual rent shall be $79,428 payable in monthly installments of $6,619
on the first day of each and every month in advance for the period from February
1, 2007 through January 31, 2012.
As a security deposit for rental payments and any other amounts due Lessor,
Lessee shall deposit with Lessee the sum of $4,500.
3. Lessor's Obligations. (a) As an inducement to enter into this Lease, it is
agreed that the sole obligation of the Lessor, except as clearly and
unequivocally otherwise provided herein, shall be limited to assuring Lessee
quiet enjoyment of the Leased Premises and maintaining the common elements on
the Premises.
(b) Lessor at its cost shall make such improvements as are necessary to
make the exterior of the building (including landscaping) comparable in
appearance to the exterior of other comparable buildings in the immediate
vicinity. Lessor shall also undertake such replacement or cleaning of floor
coverings, painting and repairs as are reasonably necessary to place the
premises in tenantable condition or provide Lessee with a reasonable allowance
for such purpose for that portion of the building currently suitable for use as
offices.
4. Taxes, Charges and Assessments.
(a) Lessee covenants to pay or cause to be paid, in addition to all other
sums required to be paid by Lessee under the provisions of this Lease, all taxes
and charges (on or before the date the same become due and payable) on account
of Lessee's use, occupancy or operation of the Leased Premises, including but
not limited to all sales, use, occupation and personal property taxes, all
permit and inspection fees, occupation and license fees, and all water, sewer,
storm water, gas, telephone, electric lights and power charges assessed or
charged on or against the Leased Premises and Lessee's pro rata share of all
such charges assessed or charged against the Premises as a whole.
(b) Lessee covenants to pay, in addition to all other sums required to be
paid by Lessee under this Lease Lessee's pro rata share of all taxes,
assessments and impositions, general and special, ordinary and extra-ordinary,
of every name and kind, which shall be taxed or levied, imposed or assessed
during the ten-n of this Lease or any renewal thereof upon all or any part of
the Premises. In addition, Lessee shall pay its pro rata share of all
non-structural repairs to the Premises, all common area maintenance charges, and
Lessor's cost of insuring the Premises.
At the termination of this Lease, or any renewal thereof, by lapse of time,
all general taxes payable by Lessee under the provisions of this section shall
be apportioned between Lessor and Lessee for the year in which such termination
shall occur according to that part of such year during which the respective
parties shall have been entitled to the possession of the Leased Premises, and
in addition Lessee shall upon such termination be released and discharged from
any obligation to pay installments of special assessments of every name and kind
failing due after such termination of the term of this lease or any renewal
thereof.
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<PAGE>
(c) All pro rata amounts payable by Lessee under this Lease shall be
payable in the proportion that 8,000 square feet bears to 9,800 square feet and
shall be payable within 15 days after Lessor submits an invoice therefor. Lessor
shall upon request of Lessee provide reasonable documentation for such charges
provided that such charges shall become incontestable 45 days after invoicing.
(d) If at any time during the term of this lease or any renewal thereof an
income tax is assessed, levied or imposed by the State of Utah or by any
political or taxing subdivision thereof in which the premises are located, upon
the income arising from the rents and other sums payable hereunder which, is in
lieu of or acts as a substitute for a tax, assessment or imposition which Lessee
is required to pay under the provisions of (b), Lessee and not Lessor shall be
required, and Lessee hereby agrees, to pay the same; provided always that Lessee
shall not in any year be obligated to pay any greater amount pursuant to this
section (e) than would have been payable by Lessor by way of such substituted
income tax had the fixed rental payable by Lessee under (c) hereof been the sole
taxable income of Lessor for the year in question against which Lessor had been
allowed the deductions, credits or exemptions applicable solely to such limited
income.
5. Liability and Casualty Insurance
(a) Lessee shall at all times during the term of this Lease at its sole
cost and expense and for the mutual benefit of the Lessor and Lessee maintain
general public liability insurance against claims for bodily injury, death or
property damage occurring in, upon or about the Leased Premises or in, upon or
about adjoining streets, sidewalks or premises adjacent to the Leased Premises,
such insurance to afford protection to the limit of not less than $2,000,000 in
respect of injury or death to any one person, to the limit of not less than
$5,000,000 in respect of any one accident and to the limit of not less than
$500,000 in respect of property damage.
(b) Lessee shall at all times during the term of this Lease and at its sole
cost and expense keep Lessee's property on the Leased Premises insured against
loss or damage by fire, lightning, windstorm, water, flood, earthquake, hail,
explosion, riot, riot attending a strike, civil commotion, war loss if
available, damage from aircraft and vehicles and smoke damage in an amount not
less than 100% of the full insurable value of the actual replacement cost of
such property and Lessor shall have no responsibility therefor. All policies
shall name Lessor as a coinsured with Lessee.
(c) All insurance provided for in Sections 5(a) and 5(b) shall be effected
with insurance companies approved by the parties, which approval shall not be
unreasonably withheld, authorized to do business in Utah under valid and
enforceable policies, and such policies shall name Lessor and Lessee as
insureds, as their respective interests may appear. All such policies of
insurance shall provide that such policy shall not be cancelled without at least
ten (10) days prior written notice to each insured named therein.
6. Lessor's Right to Perform Lessee's Covenants. Lessee covenants and agrees
that if it shall at any time fail to pay any tax, charge assessment or
imposition in accordance with the provisions of Section 4, or shall fail to make
any other payment or perform any other act on the
3
<PAGE>
part of Lessee to be made or performed, then Lessor may (but shall not be
obligated so to do), without further demand upon Lessee and without waiving or
releasing Lessee from any obligations of Lessee in this lease contained: (i) pay
any tax, charge, assessment or imposition payable by Lessee pursuant to the
provisions of Section 4, or (ii) make any other payment or perform any other act
on Lessee's part to be made or performed as in this lease provided. All sums so
paid by Lessor, and all necessary incidental costs and expenses in connection
with the performance of any such act by Lessor, together with interest thereon
at the rate of four percent plus the prime rate of interest being charged at the
time by Nations Bank in St. Louis, Missouri from the date of the making of such
expenditure by Lessor, shall be deemed additional rent hereunder and shall be
payable to Lessor on demand, or at the option of Lessor may be added to basic
rent due or thereafter becoming due under this Lease, and Lessee covenants to
pay any such sum or sums with interest as aforesaid and Lessor shall have (in
addition to any other right or remedy of Lessor) the same rights and remedies in
the event of the non-payment thereof by Lessee as in the case of default by
Lessee in the payment of the fixed rental.
7. Repairs and Maintenance of Premises.
(a) Lessee covenants throughout the term of this lease at its sole cost and
expense, to maintain, and at the expiration of the term hereof, to yield up, in
good and tenantable repair, normal wear and tear excepted, order and condition,
the Leased Premises and any improvements or alterations at any time erected
thereon at Lessee's own cost and expense, to make all nonstructural repairs,
interior and exterior. When used in this section, the term "repairs" shall
include replacements, alternations or renewals when necessary to keep the Leased
Premises in good condition and in compliance with any legal requirement
affecting the Leased Premises.
(b) All property of any kind which may be on the Premises or Leased
Premises (whether belonging to the Lessee or to third persons, shall be at the
sole risk of Lessee or those claiming by, through or under Lessee, and Lessor
shall not be liable to Lessee for any injury, loss or damage to any person or
property on the Premises or Leased Premises in any event, provided, however,
Lessor and its successors in title shall not hereby be relieved of the
responsibility to any person whose property may be damaged as a result of their
negligent or willful acts.
8. Compliance with Orders, Ordinances, Etc.
(a) Lessee covenants throughout the term of this Lease, at Lessee's sole
cost and expense, promptly to comply with all statutes, codes, laws, acts,
ordinances, orders, judgments, decrees, injunctions, rules, regulations,
permits, licenses, authorizations, directions, and requirements of all federal,
state, county, municipal and other governments, departments, commissions,
boards, companies or associations insuring the premises, courts, authorities,
officials and officers, foreseen or unforeseen, ordinary or extraordinary, which
now or at any time hereafter may be applicable to the Leased Premises or any
part thereof, or any use, manner of use or condition of the Leased Premises or
any part thereof, even though the foregoing may, by their terms, be directed to
Lessor. Lessee shall likewise observe and comply with the requirements of all
policies of public liability, fire and all other policies of insurance at any
time in force with respect to the Premises and the improvements and equipment
thereon.
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<PAGE>
(b) Lessee shall have the right to contest by appropriate legal
proceedings, in the name of Lessee or Lessor or both but without cost or expense
to Lessor, the validity of any statute, code, law, act, ordinance, order,
judgment, decree, injunction, rule, regulation, direction or requirement of the
nature herein referred to, and if by the terms thereof compliance therewith may
legally be held in abeyance without the incurrence of any lien against the
premises or Lessee's leasehold interest hereunder for failure so to comply
therewith, Lessee may postpone compliance therewith until the final
determination of the proceedings including any appeals, provided that all such
proceedings shall be prosecuted with all due diligence and dispatch and if any
lien against the premises is incurred by reason ' of non-compliance, Lessee may
nevertheless make the contest aforesaid and delay compliance as aforesaid,
provided that Lessee, if so requested by Lessor, furnishes to Lessor security
reasonably satisfactory to Lessor against any loss by reason of such lien and
prosecutes the contest aforesaid with due diligence and dispatch, and satisfies
the same before any foreclosure thereof.
9. Work Performed by Lessee. With respect to any repairs, construction,
restoration, replacement or alterations performed upon the premises by Lessee
during the term hereof, in accordance with or as required by any provisions
hereof, Lessee agrees that:
(a) No work in connection therewith shall be undertaken until Lessee shall
have procured and paid for, so far as the same may be required, from time to
time, all municipal and other governmental permits and authorizations of the
various municipal departments and governmental subdivisions having jurisdiction,
and Lessor agrees to join in the application for such permits or authorizations
whenever such action is necessary; and
(b) All work in connection therewith shall be done promptly and in good and
workmanlike manner and in compliance with the building and zoning laws of the
municipality or other governmental subdivision wherein the premises are situated
and with all laws, ordinances, orders, rules, regulations and requirements of
all federal, state and municipal governments and appropriate departments,
commissions, boards and officers thereof, and in accordance with the orders,
rules and regulations of any company or association insuring the premises; and
the work shall be prosecuted with reasonable dispatch, unavoidable delays
excepted.
10. Mechanics' Liens. Lessee shall not suffer or permit any mechanics' liens to
be filed against the fee of the Premises nor against the Leased Premises by
reason of work, labor, services or materials supplied or claimed to have been
supplied to Lessee or anyone holding the Premises or Leased Premises or any part
thereof through or under Lessee; provided, however, that Lessee shall have the
right to contest the validity or the amount of any such lien or claimed lien,
provided that Lessee shall not permit any sale, foreclosure or forfeiture of the
premises by reason of nonpayment of the lien. On final determination of the lien
or claim for lien, Lessee shall immediately pay any judgment rendered with all
proper costs and charges and shall have the lien released or judgment satisfied
at Lessee's own expense. If any such lien shall ripen into a judgment which has
become final, Lessor at its option may pay any such final judgment and any
amount so paid by Lessor on account of any such judgment with interest thereon
at the rate of four percent plus the prime rate of interest being charged at the
time by Nations Bank in St.
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<PAGE>
Louis, Missouri per annum from the date of payment, shall be repaid by Lessee to
Lessor on demand and if unpaid may be treated as additional rent as provided in
Section 6 hereof.
11. Alterations. Lessee shall have the right from time to time at its sole cost
and expense to make additions, alterations and changes (hereinafter collectively
referred to as "alterations") in or to the Leased Premises, subject, however, in
all cases to the following:
(a) The conditions under which the alterations are to be performed and the
method of proceeding with and performing the same shall be governed by all the
provisions of Section 9 hereof.
(b) No alterations of any kind which would impair the market value or
usefulness of the Premises or Leased Premises for the purposes for which the
same arepresently being used shall be made without in each case the prior
written consent of Lessor (which consent shall not be unreasonably withheld).
(c) No building or buildings now or hereafter located on the Premises or
Leased Premises shall be demolished or removed and no substantial change in the
structural character thereof shall be made without in each case the prior
written consent of Lessor (which consent shall not be unreasonably withheld).
(d) No alterations involving an estimated cost of more than $5,000 shall be
undertaken unless the plans and specifications therefor are submitted to and
approved in writing by Lessor (which approval shall not be unreasonably
withheld).
12. Use of the Leased Premises. The Leased Premises shall be used only and
exclusively for the operation of a television studio and administrative office
purposes without the written consent of Lessor. The Leased Premises shall be
occupied a minimum of eight hours per day, five days per week. The Lessee shall
not use or suffer nor permit any person to use the premises or any part thereof
for any purpose or use in violation of the laws of the United States or the
State of Utah or any political subdivision thereof, including without limit the
County of Salt Lake and the town of Murray, nor for any immoral or unlawful
purposes whatsoever. Lessee's use of the Leased Premises shall at all times
comply with all federal, state and local laws relating to the environment and
any regulations or policies adopted pursuant to such laws, and Lessee shall not
generate, use or store, or permit the generation, use or storage, on the
Premises of any hazardous or toxic substance or material, provided that Lessee
may store and use customary and ordinary cleaning materials in reasonable
amounts in accordance with normal and customary cleaning procedures.
Lessee hereby agrees to indemnify Lessor and save him harmless from and
against any and all liability, penalties, damages, expense, and judgments,
whatsoever, on account of Lessee's use and occupancy of the Leased Premises.
Lessee shall not commit any waste, damage or any injury of or to the Leased
Premises or any part thereof and shall take all reasonable precautions and
actions to prevent others from committing any of the foregoing.
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13. Rent Absolute. Lessee shall bear all risk of damage to the extent of the
full insurable replacement value, fixed as provided in paragraph 5(b), or
destruction of the whole or any part of the Leased Premises, including without
limitation, any loss, complete or partial, or interruption in the use, occupancy
or operation of the Leased Premises, or any matter of thing which for any reason
interferes with, prevents, or renders burdensome the use of occupancy of the
Leased Premises or the compliance by Lessee with any of the terms of this lease.
The assumption of such risks by Lessee and the obligation and covenant of Lessee
nevertheless to pay all the rentals herein provided for, (subject only to the
exceptions hereinafter set forth) and to perform each and all of the other terms
and conditions of this lease, constitutes a valuable consideration to Lessor for
this lease.
Lessee acknowledges that it has examined the Premises and the Leased
Premises herein described and any and all improvements or structures thereon
prior to making of this Lease and knows the conditions thereof, and accepts the
same in said condition, and that no representations as to the condition thereof
have been made by Lessor or representatives of Lessor, and that Lessee in
entering into this lease, is relying solely upon its own examination thereof.
14. Eminent Domain. In the event that the Leased Premises are wholly taken or
condemned for public purposes by public authorities then this Lease shall
terminate on the date title passes and both Lessor and Lessee are released of
all of their obligations hereunder including the obligation to pay any rent from
and after the date when the condemning authority takes possession.
In the event of a partial taking or condemnation of the Premises for the
widening or relocation of public roads or highways adjacent to the Premises that
does not affect any parking spaces or the building, this Lease shall continue
without any rent adjustment.
In the event of a partial taking or condemnation for public purposes of
parking spaces or a portion of the building and in the event that the portion of
the Premises remaining after such taking is adequate for the reasonable conduct
of Lessee's business as the same was conducted immediately before such taking,
then Lessee shall continue occupancy of the remainder of the Leased Premises but
the rent due and payable by the Lessee shall be adjusted for the remainder of
the term. In the event Lessor and Lessee cannot agree on an adjustment
satisfactory to each, the parties agree that each shall employ a commercial real
estate appraiser licensed as may be required by the State of Utah and
experienced in office rental rates in Salt Lake County, Utah to determine the
annual fair market rental value of the remaining Leased Premises on the same
terms as contained herein. If the highest appraisal shall be no greater than
twenty percent more than the lowest, the two shall be averaged and the average
of the two shall be the fair market value. If the highest appraisal is more than
twenty percent higher than the lower, then the two appraisers will select a
third appraiser at the joint cost of the parties, who shall determine the annual
fair market rental value, and send a written appraisal report to all parties
within twenty-one days after notification of his selection. The annual fair
market rental value shall then be the average of the three separate appraisals.
In the event of either a partial or total taking or condemnation
as described above, the entire proceeds of condemnation shall be paid to Lessor,
and Lessee shall have no claim against
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Lessor for the value of any unexpired leasehold estate or for any property of
Lessee taken, except personal property of Lessee which Lessee is prevented from
removing from the Premises.
15. Indemnification of Lessor. Lessee agrees to indemnify and save harmless
Lessor and the premises against any and all losses, injuries, claims, demands
and expenses, including legal expenses, of whatsoever kind and nature and by
whomsoever made arising from or in any manner directly or indirectly growing out
of (a) the use and occupancy or non-use of the Premises or Leased Premises or
any equipment or facilities thereon or used in connection therewith by anyone
whomsoever, (b) any repairs, construction, restoration, replacements,
alterations, remodeling on or to the Leased Premises or any part thereof, or any
equipment or facilities therein or thereon, (c) the condition of the Leased
Premises and any equipment or facilities at any time located thereon or used in
connection therewith, and (d) any acts or omissions of Lessor other than willful
acts or omissions.
16. Damage or Destruction. If the Leased Premises shall, with or without fault
of Lessor, be totally or partially destroyed or damaged so as to substantially
disrupt Lessee's business, this Lease shall remain in force and effect, except
that Lessee's obligation to pay rent shall cease at the time of such disruption
and not resume again until such time as Lessee can resume business without
substantial disruption. Within 30 days after any damage or destruction to the
Leased Premises that substantially disrupts Lessee's business, Lessor shall
notify Lessee whether it intends to reconstruct, repair or replace the Leased
Premises. If Lessor elects not to reconstruct, repair or replace the I-eased
Premises, this Lease shall terminate upon the giving of such notice without
further liability to either party. If Lessor elects to reconstruct, repair or
replace the Leased Premises, Lessor shall reconstruct, repair or replace the
Leased Premises within 90 days after notice to Lessee of such election putting
the Leased Premises in such condition as will comply with all terms of this
Lease, provided that in no event shall Lessor be responsible or any delay which
may result from governmental regulations, inability to obtain labor or materials
or any other cause beyond Lessor's reasonable control.
17. Default.
(a) If one or more of the following events (herein sometimes called "events
of default") shall happen and be continuing:
(1) If Lessee defaults in the payment of any of the rentals or other
charges provided to be paid hereunder and such default shall
continue for five days after notice of such non-payment by Lessor
to Lessee;
(2) If Lessee defaults in the observance or performance of any other
covenant, condition, agreement or provision hereof unless (i)
such default is remedied within thirty days after notice thereof
from Lessor to Lessee or (ii) all reasonable and necessary steps
to remedy the default are taken within such thirty day period and
the default in fact remedied within six months after such notice;
or
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(3) If Lessee admits insolvency or bankruptcy or its inability to pay
its debts as they may mature, or makes an assignment for the
benefit of credits or applies for or consents to the appointment
of a trustee or receiver for Lessee, or for the major part of its
property;
(4) If a trustee or receiver is appointed for Lessee or for the major
part of its property and is not discharged within sixty days
after such appointment;
(5) If bankruptcy, reorganization, arrangements, insolvency or
liquidation proceedings, or other proceedings for relief under
any bankruptcy law or similar law for the relief of debtors, are
instituted by or against Lessee, and if instituted against Lessee
are allowed against Lessee or are consented to or are not
dismissed, stayed or otherwise nullified within sixty days after
such institution:
then in any such case, Lessor may at its option exercise any one or more of the
following remedies:
(i) Lessor may terminate this lease by giving to Lessee
notice of Lessor's intention to do so, in which event the term of
this lease or any renewal thereof shall end, and all right, title
and interest of Lessee hereunder shall expire on the date stated
in such notice, which shall not be less than ten days after the
date of the notice by Lessor of its intention so to terminate;
(ii) Lessor may terminate the right of Lessee to possession
of the premises by giving notice to Lessee that Lessee's right of
possession shall end on the date stated in such notice, which
shall not be less than ten days from the date of such notice,
whereupon the right of Lessee to the possession of the premises
or any part thereof shall cease on the date stated in such
notice;
(iii) Lessor may enforce the provisions of this Lease and
may enforce and protect the right of Lessor hereunder by a suit
or suits in equity or at law for the specific performance of any
covenant or agreement contained herein or for the enforcement of
any other appropriate legal or equitable remedy.
(b) If Lessor exercises either of the remedies provided for in
sub-paragraph (i) or (ii) of Section 17(a), Lessor may then or at any time
thereafter re-enter and take complete and peaceful possession of the Leased
Premises, with or without process of law, and may remove all persons therefrom,
and Lessee covenants in any such event peacefully and quietly to yield up and
surrender the Leased Premises to Lessor.
(c) If Lessor terminates the right of possession as provided in
sub-paragraph (ii) of Section 17(a), Lessor may re-enter the Leased Premises and
take possession of all thereof
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(including any and all equipment and apparatus thereon), may remove any portion
of the equipment, machinery or apparatus thereon which Lessor elects so to do,
and may sublet or relet the premises or any part thereof from time to time for
all or any part of the unexpired part of the then term hereof, or for a longer
period, and Lessor may collect the rents from such reletting or subletting, and
apply the same, first to the payment of the expense of re-entry and reletting,
and secondly to the fixed rentals here in provided to be paid by Lessee, and in
the event that the proceeds of such re-letting or sub-letting are not sufficient
to pay in full the foregoing, Lessee shall remain and be liable therefor, and
Lessee promises and agrees to pay the amount of any such deficiency from time to
time and Lessor may at any time and from time to time sue and recover judgment
for any such deficiency or deficiencies.
(d) Lessee hereby grants to Lessor, and Lessor shall have, a landlord's
lien on Lessee's furniture, fixtures and equipment (or in the case of such items
leased by Lessee, on Lessee's interest in the same) to secure payment of all
amounts due hereunder. Unless Lessor waives its lien in writing, Lessor shall be
entitled to possession, foreclosure, sale and all other remedies provided by law
in connection with such lien. However, in furtherance of such rights or
following waiver of those rights, Lessee may require Lessee to remove its
furniture, fixtures and equipment within thirty days after termination of this
Lease. Furniture, fixtures and equipment not so removed shall be deemed
abandoned and shall become the property of Lessor.
18. Termination. In the event of the termination of this Lease by Lessor as
provided for by sub-paragraph (i) of Section 17(a), Lessor shall be entitled to
recover from Lessee all the fixed rentals accrued and unpaid for the period up
to and including such termination date, as well as all other additional rentals
and other sums payable by Lessee, or for which Lessee is liable or in respect of
which Lessee under any of the provisions hereof has agreed to indemnify Lessor,
which may be then owing and unpaid, and all costs and expenses, including court
costs and actual attorneys' fees incurred by Lessor in the enforcement of his
rights and remedies hereunder and in addition Lessor shall be entitled to
recover as damages actual reasonable attorneys' fees and court costs, which
Lessor shall have sustained by reason of the breach of any of the covenants of
this lease other than for the payment of rent.
19. Inspection of Premises by Lessor. Lessee agrees to permit Lessor and the
authorized representatives of Lessor to enter the premises at all reasonable
times during the usual business hours (or at any time in the case of an
emergency) for the purpose of (i) inspecting the same (such right of entry and
inspection to extend to the holder of any mortgage on the promises and the
authorized representatives of such holder), or (ii) making any necessary repairs
to the Premises and performing any work therein that may be necessary by reason
of Lessee's default under the terms of this Lease.
20. Notices. All notices provided for herein shall be in writing and shall be
determined to have been given (unless otherwise required by the specific
provisions hereof in respect of any matter) when delivered personally or when
deposited in the United States mail, certified mail with return receipt, postage
prepaid, addressed as follows:
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If to Lessor: 1408 N. Kingshighway, Suite 300
St. Louis, Missouri 63113
Attn: Michael V. Roberts
If to Lessee: 1408 N. Kingshighway, Suite 300
St. Louis, Missouri 63113
Attn: Steven C. Roberts
or to Lessor and Lessee at such other address as such of them may designate by
notice duly given in accordance with this section to the other party.
21. Cumulative Remedies - No Waiver. The specific remedies to which Lessor or
Lessee may resort under the terms of this Lease are cumulative and are not
intended to be exclusive, of any other remedies or means of redress to which
they may be lawfully entitled in case of any breach or threatened breach by
either of them of any provision of this Lease. The failure of Lessor to insist
in any one or more cases upon the strict performance of any of the covenants of
this Lease, or to exercise any option herein contained, shall not be construed
as a waiver of relinquishment for the future of such covenant or option. One or
more waivers of any covenant or agreement or condition by the Lessor or Lessee
shall not be construed as a waiver of a future breach of the same covenant,
agreement or condition. A receipt by Lessor of rent with knowledge of the breach
of any covenant hereof shall not be deemed a waiver of any such future or
continuing breach, and no waiver, change, modification or discharge by either
party hereto of any provision in this Lease shall be deemed to have been made or
shall be effective unless expressed in writing and signed by both Lessor and
Lessee.
22. Fixtures. All improvements, replacements, alterations, and additions which
may be erected or made at any time upon the Leased Premises during the initial
term or any renewal term shall become a part of the premises and upon
termination of this lease shall remain the property of Lessor except to the
extent otherwise provided for in any consent or consents delivered to Lessee by
Lessor, which consent or consents shall not be unreasonably withheld; provided,
however, that upon termination of this Lease (except for termination by reason
of default of Lessee as hereinbefore provided), Lessee at its sole cost may
remove from the Leased Premises all personal property, trade fixtures,
equipment, furniture, furnishings and consumable supplies not paid for by
Lessor, which have been or may hereafter be placed upon the Leased Premises,
whether or not affixed or annexed, unless the removal thereof would result in
substantial damage to the premises. Any damage caused to the Premises or Leased
Premises by the removal of such property shall be restored at the sole expense
of Lessee.
Lessor acknowledges that Lessee may finance the purchase of Lessee's
equipment installed on the Leased Premises and Lessor agrees to subordinate any
liens it may have to Lessee's equipment lenders, provided that such lenders
agree to indemnify and hold Lessor harmless from and against any loss,
liability, cost or expense resulting from removal of Lessee's equipment from the
Premises or Leased Premises or other exercise of such lenders' rights and
further agree that any removal of Lessee's equipment from the Premises or Leased
Premises shall be performed by qualified personnel in accordance with sound
engineering practices.
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23. Holding Over. If Lessee shall hold over or remain in possession of the
Leased Premises after the expiration of the initial term or any extension or
renewal thereof without the execution and delivery by Lessor and Lessee of a new
written lease, shall create a tenancy from month to month only and Lessee shall
pay double the then rental amount plus damages sustained by Lessor as a result
of the holdover until Lessee surrenders possession or is removed from the Leased
Premises.
24. Assignment, Subletting by Lessee. This Lease may be assigned by Lessor.
Lessee shall not allow or permit any transfer of this Lease or any interest
hereunder by operation of law, or assign, convey, mortgage, pledge or encumber
this Lease or any interest hereunder, or permit the use or occupancy of the
Leased Premises, or any part thereof, by anyone other than Lessee, or sublet the
Leased Premises without, in each case, Lessor's written consent first had and
obtained, which consent shall not be unreasonably withheld or delayed.
25. Miscellaneous.
(a) The captions of this Lease are for convenience only and are not to be
construed as part of this Lease and shall not be construed as defining or
limiting in any way the scope or intent of the provisions hereof.
(b) If any term or provision of this Lease shall to any extent be held
invalid or unenforceable, the remaining terms and provisions of this Lease shall
not be affected thereby, but each term and provision of this Lease shall be
valid and be enforced to the fullest extent permitted by law.
(c) All covenants, agreements and conditions herein contained shall be
binding upon and inure to the benefit of Lessor and Lessee and their respective
successors and permitted assigns and the same shall be construed as covenants
running with the land.
(d) Wherever in this Lease the term "mortgage" or words of similar import
appear, they shall be construed as meaning any mortgage on the premises or any
part thereof.
(e) This Lease may be executed in several counterparts, each of which shall
constitute an original but all together only one lease.
26. Subordination to Mortgage. On condition that any mortgagee of the Premises
shall recognize and accept Lessee as a tenant under this Lease so long as the
Lessee is not in default, this Lease, at the election of the mortgagee, shall be
subject and subordinate in all respects to any mortgage which may be hereafter
placed on the real property of which the Leased Premises form a part and to each
advance made or hereafter to be made, or both, under any such mortgage, and to
any renewals, modifications, consolidations, replacements of extensions thereof
and also substitutions therefor. This paragraph shall be self operative and no
further instrument of subordination shall be required.
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IN WITNESS WHEREOF, Lessor and Lessee have caused this instrument to be
executed on the day and year first above written.
LESSOR:
ROBERTS BROADCASTING HOLDINGS OF UTAH, L.L.C.
By: /s/Steven C. Roberts
------------------------------------
LESSEE:
ROBERTS BROADCASTING COMPANY OF SALT LAKE, L.L.C.
By: /s/Michael V. Roberts
--------------------------------------
<PAGE>
Exhibit A - Production Office Facility has been omitted intentionally by
the Registrants.
A copy of this omitted Exhibit will be provided to the Securities and
Exchange Commission upon request
TOWER LEASE AGREEMENT
This Lease Agreement is made and entered into as of the 22nd day
of August, 1997 by and between ROBERTS BROADCASTING COMPANY OF UTAH, INC., a
Delaware corporation ("Landlord"), and ROBERTS BROADCASTING COMPANY OF SALT LAKE
CITY, L.L.C., a Delaware limited liability company ("Tenant").
WITNESSETH:
WHEREAS, landlord is the lessee of certain real property (the
"Premises") located on land located in Utah County, Utah, more particularly
described as:
TOWNSHIP 6 SOUTH, RANGE 1 WEST, SLB&M
Section 22: Within NE 'A SW 'A SE 1/4 specifically described as
follows:
Beginning at a point which is North 997.53 feet and West 1394.48
feet from the SE comer of Section 22, Township 6 South, Range I
West, SLB&M, thence North 30'00' West 250.00 feet; thence North
60'00' East 261.36 feet; thence South 30'00' East 250.00 feet;
thence South 60'00' West 261.36 feet to the point of beginning.
pursuant to the lease dated September 12, 1996 (the "Ground Lease") wherein the
State of Utah, acting by and through the School and Institutional Trust Lands
Administrator, (the "State') was the lessor; and
WHEREAS, Landlord, at its sole cost and expense (except for
payments provided for in this Lease), is constructing on the Premises a
communications transmission tower (the "Tower") substantially as described in
Exhibit 1 hereto and a transmitter building (the building with any and all
future additions thereto, hereinafter the "Transmitter Building"); and
WHEREAS, the State is the owner of the Premises and has leased the
Premises to Landlord and has the contractual right to prior approval of leases
and subleases of space on the Premises; and
WHEREAS, Tenant is the Federal Communications Commission (the
"FCC") permittee of Television Station KZAR-TV, Channel 16, Provo, Utah (the
"Station") and desires to place and operate the antenna for the Station at a
location on the Tower, said location being described in Exhibit 2 hereto (the
"Antenna Space"), to install and to maintain at Tenant's expense certain
transmission lines from the Station's transmitter equipment across or under
portions of the Premises and through or upon the Tower to the Antenna Space, and
to occupy the Transmitter Building (the "Tenant's Space") in which to locate the
Station transmitter and related equipment; and
WHEREAS, Tenant requires other space on the Premises for the
installation of Tenant's generator and related fuel storage tank, an ancillary
broadcast microwave antenna, a two-way
<PAGE>
radio facility, power supply and ancillary equipment and a down link earth
station, with the further right to interconnect such equipment with equipment in
the Tenant's Space in the manner provided herein; and
WHEREAS, Tenant is applying for a construction permit issued by
the FCC (the "Construction Permit") to locate its antenna on the Tower and to
install its transmitter in the Transmitter Building;
NOW, THEREFORE, in consideration of Tenant's obligation to pay
rent and in consideration of the mutual rights, obligations, terms, covenants,
and provisions hereof, the parties mutually agree as follows:
ARTICLE I
LEASED PREMISES
Landlord, for and in consideration of the covenants and conditions
herein mentioned, reserved and contained, to be kept and performed by Tenant,
and the rents to be paid by Tenant hereunder, does hereby grant to Tenant, for
the rental periods described herein, and Tenant does hereby take from Landlord
for said periods, upon and subject to the covenants and conditions herein
contained, the following:
(a) Antenna Space. The Antenna Space for the installation and
operation of Tenant's Station KZAR television Channel 16 antenna all as more
particularly described in Exhibit 2 hereto; and
(b) Tenant's Space. Occupancy of the Tenant's Space within the
Transmitter Building, as reasonably designated by Lessor, for installation and
operation of Tenant's transmitter and related equipment; and
(c) Additional Areas. Occupancy of additional areas of space
outside the Transmitter Building at locations mutually acceptable to Landlord
and Tenant for (i) placement and use of Tenant's generator and generator fuel
tank (which shall comply with all applicable laws, rules and ordinances); (ii)
the installation (not on the Tower) and use of an auxiliary broadcast microwave
antenna; (iii) the installation and use of a down link earth station; (iv) the
installation and use of a two-way radio facility and (v) power supply and
ancillary equipment, with the further right to install, maintain, repair,
replace and remove wires, transmission line or conduit for all of the foregoing
over courses mutually acceptable to Landlord and Tenant; and
(d) Access. The right, in common with others, to use the roadways
constructed by Landlord to and on the Premises for ingress and egress to and
from the Transmitter Building and Tower as reasonably necessary for purposes of
Tenant's installation, removal, servicing, maintenance and repair of Tenant's
equipment therein; and
(e) Transmission Lines. The limited and non-exclusive right to
install and to maintain a waveguide transmission line having a diameter of no
more than 18 inches from the Tenant's
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Space to the Antenna Space, generally on the Tower, all for the sole purpose of
enabling Tenant to conduct its broadcasting activities; and
(f) Utility Lines. The right, in common with others, at Tenant's
expenses, to connect to power, telephone and utility lines in the Transmitter
Building; provided, however, Tenant shall also bear the costs of any increase in
the capacity of the power, telephone and utility lines necessary to accommodate
Tenant's use thereof.
(g) Sanitation Facilities. The right to have and maintain at a
location of Landlord's selection a combustible toilet and such other sanitation
facilities as may be desired by tenant or required by government authority. It
is understood by Tenant that landlord does not provide, and has no obligation to
provide, potable or other water at the Leased Premises.
All of the space, premises and rights granted under this Article I
are demised and leased on a limited and non-exclusive basis and are hereinafter
sometimes referred to as the "Leased Premises". Tenant's use of the Leased
Premises shall be limited to broadcasting activities associated with the
broadcast operations of the Station.
Landlord covenants, represents and warrants to Tenant as follows:
(i) Landlord has a valid leasehold estate with respect to the Premises pursuant
to the Ground Lease; (ii) subject to satisfaction of the conditions set forth in
Section II(c), Landlord has full power and authority to enter into and carry out
the terms of this Lease without any consents from third parties; (iii) at such
time as the Tower is made available to Tenant pursuant to Section III(A) the
Tower will be registered and in compliance with all applicable regulations of
the Federal Communications Commission and the Federal Aviation Administration;
(iv) subject to the provisions of Article XXI below, Landlord will complete
construction of the Tower as contemplated herein and make it ready for
installation of Tenant's antenna by December 31, 1997; and (v) the uses of the
Premises as provided herein are permitted by the Ground Lease.
ARTICLE II
TERM
(a) TO HAVE AND TO HOLD the Leased Premises for a term commencing
, _________, 1997 (the "Commencement Date") and expiring at midnight on December
31, 2013, unless this Lease is sooner terminated as hereinafter provided.
(b) Holding Over. If Tenant or anyone claiming under Tenant shall
remain in possession of the Leased Premises or any part thereof after the
expiration of the term of this Lease or any renewal thereof without any
agreement in writing between the landlord and Tenant with respect thereto, prior
to acceptance of rent by Landlord, the person remaining in possession shall be
deemed a tenant at sufferance, and, after acceptance of rent by Landlord, the
party remaining in possession shall be deemed a tenant from month to month,
subject to the provisions of this Lease insofar as the same may be made
applicable to a tenancy from month to month. The rental during any such period
shall equal one hundred fifty percent (150%) of the rental in effect immediately
preceding such expiration.
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(c) Condition to Lease. This Lease Agreement is conditioned upon
Landlord's timely compliance with the provisions of Section l(g)(iv) above.
ARTICLE III
RENT
(a) Rent. Upon satisfaction of the conditions set forth in
Section II(c) and completion of construction of the Tower and Transmitter
Building and. when the Tower is ready for the installation of Tenant's antenna,
Lessor shall give Tenant 30 days' notice and Tenant shall upon the expiration of
said 30 day period or upon commencement of broadcasting, whichever first occurs,
begin to pay Landlord for the Leased Premises rent in the amount of $9,500.00
per month for the period ending December 31, 2000, and $11,000.00 per month
thereafter (the "Rent") on or before the first day of each month, commencing
with a prorated payment for any portion of the month in which the Rent payments
commence. Any other payments which are payable when invoiced hereunder shall be
due within twenty (20) days after Tenant's receipt of such invoice. Effective
January 1, 2003, and on January 1, of each year thereafter, the Rent shall be
increased (but in no event decreased) by a percentage equal to the percentage
increase in the Consumer Price Index, All Urban Consumers, Salt Lake City
Metropolitan Statistical Area (or any successor or substitute index), from the
Commencement Date.
(b) Additional Rent. Tenant shall pay Landlord during the term of
this Lease, as additional rent, all utility, diesel fuel, tax, and maintenance
expenses, including maintenance of the access road, associated with the
Premises, Tower and Transmitter Building and reasonably attributable, either
directly or as a Proportional Share, to Tenant (the "Additional Rent"). As used
in this Lease, "Proportional Share" means that share of the total common
expenses incurred by all users of the Leased Premises calculated by dividing the
space within the Transmitter Building occupied by each tenant by the total space
occupied by all tenants. Tenant's interest in the Transmitter Building at any
given time shall be that fraction determined by dividing the total number of
square feet in Tenant's Space by the total number of square feet in the
Transmitter Building. Landlord shall have the right to grant additional tenants
use of the Transmitter Building, provided that such use shall not, in Landlord's
sole reasonable discretion, result in a material disturbance to Tenant's
occupancy of Tenant's Space or involve any use or shared use of Tenant's Space
by such additional tenant.
Landlord shall maintain the Transmitter Building (but not the
interior portions of the Tenant's Space or any personal property of Tenant
including, but not limited to, Tenant's air conditioning and ventilation system
and auxiliary power generator) so as to comply with existing rules and
regulations imposed by any governmental authority having jurisdiction over the
ownership or operations of the same.
Tenant may install and maintain, at its own cost, an air
conditioning and ventilation system adequate for Tenant's intended use and
serving only Tenant's Space and an auxiliary power generator.
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Tenant may install in Tenant's Space in the Transmitter Building
and maintain, at its own cost, a monitored fire alarm system and security
system. The selection of the fire alarm system and security system shall be
subject to the prior approval of Landlord, which approval shall not unreasonably
be withheld or delayed.
(c) Aperture Fee. On or before April 1, 1998, Tenant shall pay
Landlord the sum of $125,000.00 as a one time aperture fee.
(d) Security Deposit. At such time as rental payments first
become due to Landlord, Tenant shall pay Lessor the sum of $9,500.00 as a
security deposit for rental payments and any other amounts due Landlord.
ARTICLE IV
CONSTRUCTION, INSTALLATION AND USE OF LEASED PREMISES
(a) Tenant's Construction Permit. Tenant represents that it has
obtained from the FCC its Construction Permit and that such approval has become
final.
(b) Landlord's Regulatory Applications. Landlord represents that
it has approvals from the FCC, the Federal Aviation Administration ("FAA") and
is seeking approval from all other appropriate governmental authorities for
permits necessary for the construction of the Tower and the Transmitter
Building, both of which shall be the sole and exclusive property of Landlord.
(c) Installation of Tenant's Equipment. The antenna and related
equipment to be installed on the Tower are as described in Exhibit 2. Tenant, at
Tenant's expense, shall install Tenant's equipment in the Antenna Space,
including the necessary antennas and transmission lines from the Tenant's Space
to the Antenna Space, all according to the description of such installations
contained in the Exhibits hereto. Tenant, at Tenant's expense, also shall
install its generator, broadcast microwave antenna, two-way radio facility,
power supply and ancillary equipment and earth station, all in accordance with
the descriptions of such installment contained in the Exhibits hereto. In
addition to the requirements of Article IV, all work on the Tower by or on
behalf of Tenant shall be performed in accordance with plans and specifications
and by contractors and riggers all approved by Landlord, which approval shall
not be unreasonably withheld or delayed, and shall be subject to Landlord's
requirements as to the circumstances, timing and sequence of such work. Without
limitation of the foregoing, all equipment installed by Tenant on the Tower,
including the mounting hardware used to attach such equipment to the Tower,
shall be designed to withstand a steady state wind load of 50 PSF (equivalent to
the force produced by a steady state wind speed of 112 MPH on flat surfaces)
with such loading calculated under the assumptions of wind direction leading to
the greatest imposed wind loading and, further, of equipment and its associated
hardware being coated with ice having a radial thickness of two inches. Prior to
the commencement of any such work, Tenant shall cause its contractor to obtain
insurance otherwise meeting the requirements of this Article but affording
minimum protection of not less than $2,500,000 in respect to personal injury or
death to any one person, of not less than $10,000,000 in respect to personal
injury or death to any two
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or more persons, and of not less than $5,000,000 for property damage.
Certificates of such insurance shall be provided to Landlord prior to the
commencement of any such work. The installation of Tenant's equipment shall be
the responsibility of and at the expense of Tenant under the supervision and
direction of Landlord, provided that, without limitation, Landlord may require
changes in the installation method and process to (1) ensure the structural
integrity of the Tower, and (2) avoid interruption, to the extent possible, of
the broadcast activities of other users of the Tower. All installation shall be
consistent with good engineering practices in compliance with all federal, state
and other governmental requirements, and with the use of the Leased Premises by
Landlord and other existing tenants. Upon completion of such installations,
Tenant shall provide Landlord with a written certificate of Tenant's engineer
certifying compliance with the foregoing requirements. All installation costs
incurred by Landlord hereunder shall be chargeable to Tenant, at reasonably
competitive rates in the area, including any additional costs resulting from
interruption of transmissions by other tenants.
In the event Landlord notifies Tenant that Tenant's construction
or installation is not in material compliance with any requirement of this
Lease, Tenant shall immediately cease such construction or installation until
such time as the issue is resolved and Landlord agrees that construction or
installation may continue.
EXCEPT FOR SPECIFIC WARRANTIES SET FORTH HEREIN, NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, IS MADE BY LANDLORD WITH RESPECT TO THE
SUITABILITY OF THE TOWER AND RELATED FACILITIES FOR TENANT'S INTENDED USE
THEREOF.
(d) Prior Approval of Landlord. All construction and/or
installation done by or on behalf of Tenant and all maintenance, repair, removal
or relocation (which maintenance repair, removal or relocation shall be in
conformity with the equipment specifications set forth herein) of any of
Tenant's equipment on the Tower shall require the prior written approval of
Landlord, which approval shall not be withheld unreasonably. Request for such
approval shall be in writing and shall be furnished to Landlord at least 10 days
prior to the proposed work, provided that repairs of an emergency nature may be
requested and approved orally. Such requests shall state with reasonable
precision the type of equipment to be worked on, the manner and time of the work
to be performed and the precautions to be taken to avoid interference with
equipment or transmissions of others. Any such work must also be consistent with
the obligations of Tenant hereunder. All work on the Tower shall be performed by
qualified engineers, contractors, or riggers satisfactory to Landlord in its
sole discretion.
All construction and/or installation done by or on behalf of
Tenant and all maintenance, repair, removal or relocation involving an
expenditure of Tenant of more than $2,500 (which maintenance, repair, removal or
relocation shall be in conformity with the equipment specifications set forth
herein) of any of Tenant's equipment on the Leased Premises other than the
Tower, of the type which requires notice to or the approval of the FCC, shall
require the prior written approval of Landlord, which approval shall not be
withheld unreasonably. Request for such approval shall be in writing and shall
be furnished to Landlord at least 10 days prior to the proposed work, provided
that repairs of an emergency nature may be requested and approved orally. Such
requests shall state with reasonable precision the type of equipment to
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be worked on, the manner and time of the work to be performed and the
precautions to be taken to avoid interference with equipment or transmissions of
others. Any such work must also be consistent with the obligations of Tenant
hereunder. All work shall be performed by qualified engineers or contractors
satisfactory to Landlord in its sole discretion.
(e) Access. Subject to paragraph (d) above, Tenant shall have a
right of access to the Tower at all reasonable times for inspection, repair,
maintenance and replacement of its equipment; provided, however, that (except as
may be provided elsewhere in this Lease) such access and activities shall not
interfere with the use of the Tower by Landlord or any tenant or user, or
interrupt or otherwise adversely affect the continued transmitting operations of
Landlord or any other tenant or user. Landlord shall have a right of access, at
all reasonable times, for examination, inspection, emergency repair or
replacement of any of Tenant's equipment located in the Transmitter Building;
provided, however, that (except as may be provided elsewhere in this Lease) such
access and activity by Landlord shall not interfere with the use of the Tower by
Tenant or interrupt or otherwise adversely affect the continued broadcast
operation of Tenant. At the outset of the term of the Lease, Tenant shall
provide to Landlord duplicates of any keys necessary to permit access to
Tenant's equipment at said location; provided that (i) Landlord will advise
Tenant as to who receives any such duplicate keys, and (ii) Tenant shall not be
responsible for, any damages suffered by Landlord, its employees or agents or
other tenants entering or using Tenant's Space when Tenant is not present,
except Tenant shall be responsible if it fails to respond and appear at the
Leased Premises upon 24 hours advance notice or if it authorizes any such entry
by Landlord, its employees or agents or other tenants.
(f) Condition of Tenant's Equipment. The equipment installed by
Tenant hereunder shall be and remain the property of Tenant, subject to the
rights of Landlord described in Articles III, IX, and XIII hereof. Except as
otherwise provided in this Agreement, Tenant shall be fully responsible for the
replacement, maintenance, modification, rearrangement and removal of its
equipment installed in or upon the Leased Premises, and Landlord shall have no
responsibility therefor. Tenant shall keep all of its equipment in safe
condition at all times and in compliance with all applicable statutes, rules,
regulations, orders, directives of any governmental body and other standards
pertaining thereto and pertaining to the Leased Premises. The manner of use and
the equipment and devices to be used for any installation, relocation and
removal of Tenant's equipment must be consistent with good engineering practices
and with the quiet and uninterrupted use and occupancy of the Leased Premises by
Landlord and other tenants. Tenant shall at all times keep Landlord's property
free and clear of any and all mechanic's liens or similar claims that might
arise by virtue of Tenant's maintenance, modification, removal or rearrangement
of its equipment installed on the Leased Premises and Tenant shall defend,
indemnify and save harmless the Landlord of, from and against any such claims,
or any costs or expenses, including reasonable attorneys' fees, Landlord may
incur in the defense or removal of any such claims. Landlord reserves the right,
consistent with good engineering practices, to approve or disapprove the manner
of use and the equipment and devices to be used for any installation,
replacement, relocation or removal of any equipment on the Tower and/or on the
Premises. Upon completion of any installation, relocation or removal of
equipment by Tenant which is subject to paragraph (e) above, Tenant shall
promptly notify Landlord in writing. Thereupon, Landlord, at its option, may
inspect the installation, removal or relocation of equipment to assure that it
has been performed as required by this paragraph (f)
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and if Landlord shall determine that the work has not been so performed, Tenant
shall remove and correct such work to the extent and in the manner required by
Landlord. Upon its failure to do so within five days of written notification
from Landlord, Landlord may remove and correct such work, and Tenant shall, when
invoiced, reimburse Landlord for all reasonable costs and expenses thereof.
(g) Replacement Equipment. Tenant, subject to the other
provisions of this Lease, may replace its Channel 16 antenna and/or transmission
line within the Antenna Space as long as the replacement Channel 16 antenna and
the replacement transmission line, cumulatively, do not have a greater wind and
weight load than do the original antenna and transmission line, unless prior
approval has been received from Landlord.
(h) Permitted Uses, Nuisances. Tenant shall use the Leased
Premises exclusively for its Station KZAR television Channel 16 broadcast
activities and shall not engage in the transmission of any other services
therefrom. Tenant shall not maintain, commit or permit any nuisance or unsafe
condition. If Tenant, upon five days' notice from Landlord, shall fail to remedy
any such nuisance or unsafe condition, Landlord may do the same, and Tenant
shall, when invoiced, reimburse Landlord for the costs and expenses thereof.
(i) Necessary Permits. Tenant, at its own cost and expense, shall
obtain and maintain in effect any and all permits, licenses and approvals that
may be required with respect to Tenant's equipment or activities by each
governmental authority having jurisdiction.
(j) Purchase Money Equipment Liens. Landlord acknowledges that
Tenant may finance the purchase of Tenant's equipment installed on the Tower and
Landlord agrees to subordinate any liens it may have to Tenant's equipment
lenders, provided that such lenders agree to indemnify and hold Landlord
harmless from and against any loss, liability, cost or expense resulting from
removal of Tenant's equipment from the Tower or other exercise of such lenders'
rights and further agree that any removal of Tenant's equipment from the Tower
shall be performed by qualified personnel in accordance with sound engineering
practices.
ARTICLE V
TOWER MAINTENANCE AND REPAIR
During the term of this Lease and in accordance with and subject
to the provisions of Article XIV as applicable, Landlord will (1) maintain the
Tower so as to comply with existing rules and regulations imposed by any
governmental authority having jurisdiction over its operation, and make any
repairs and modifications reasonably necessary to maintain the same in good
condition and in compliance with good broadcast engineering practices, and (2)
maintain the Transmitter Building (but not the interior portions of Tenant's
Space) so as to comply with existing rules and regulations imposed by any
governmental authority having jurisdiction over the ownership or operation of
the same and make any repairs and modifications reasonably necessary to maintain
the same in good condition and in compliance with good broadcast engineering
practice. Tenant shall reimburse Landlord, when invoiced by Landlord, for
Tenant's Proportional Share of maintaining the Premises (including the access
road thereto),
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Tower and Transmitter Building. Further, Tenant shall reimburse Landlord, when
invoiced by Landlord, for the cost of any repairs or modifications occasioned by
(i) the negligence of Tenant, its agents, servants, employees, contractors or
invitees; (ii) a defect or malfunction in, or problem with, Tenant's system,
equipment or any attachments thereto; (iii) any safety hazard or violation of
any applicable statute, rule, regulation, order, directive or standard relating
to, in or caused by Tenant's system, equipment or any attachment thereto; (iv)
changes or improvements to the Tower or the Leased Premises requested in writing
by Tenant, to the extent not paid directly by Tenant; or (v) any violation or
breach of any provision of this Lease by Tenant or anyone acting under Tenant.
In the performance of its obligation to maintain and repair the
Tower, and to allow other tenants to install, remove, relocate, maintain and
repair their equipment, it may be necessary from time to time for Landlord to
request that Tenant temporarily cease transmission and broadcasting activities,
to turn off electrical power and/or to make other adjustments to its equipment
and operations. Landlord agrees, except in the case of emergencies, to give
Tenant 24 hours' notice of such disruptions and to schedule and complete such
work so far as reasonably possible between 1:00 a.m. to 5:00 a.m., and Landlord
will not cause any interruption of Tenant's transmission and broadcasting
activities under this provision unless such interruption to Tenant's operations
is required by and consistent with good engineering practices. Tenant agrees to
cooperate with Landlord and to comply with and honor Landlord's reasonable
requests for temporary cessation of transmission and broadcasting activities, to
turn off electrical power and/or to make other adjustments to its equipment or
operation, as necessary, to allow for orderly performance and carrying out of
such work. Tenant acknowledges that it is aware that the safety of workers is of
paramount concern in deciding the time when Tenant must temporarily cease
operations. Tenant agrees to abide by any work rules or procedures for personnel
access to the Tower which may be required by Landlord for compliance with the
policies and rules of the FCC. Landlord agrees to abide by any work rules or
procedures for personnel access to the Tower which may be required by Tenant for
compliance with the policies and rules of the FCC. In the event Tenant fails to
cooperate with Landlord and refuses to temporarily cease operation, Landlord
shall have the right to turn off the electric power to Tenant's equipment as
required to perform and carry out such work.
Landlord shall use its best efforts to secure the cooperation of
all tenants on the Tower to comply with and honor Landlord's reasonable requests
for temporary cessation of transmission and broadcasting activities, to turn off
electrical power and/or to make other adjustments to their equipment or
operations, as necessary, to allow for orderly performance and carrying out of
the installation, removal, maintenance and repair of Tenant's equipment and to
abide by any work rules or procedures for personnel access to the Tower which
may be required for compliance with the policies and rules of the FCC.
ARTICLE VI
INDEMNITY AND INSURANCE
(a) Indemnification by Tenant. Tenant hereby assumes all risk of
and responsibility for, and agrees to defend, indemnify and hold harmless
Landlord, its officers, directors,
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members, servants, employees and agents from and against any and all claims,
demands, suits and proceedings made or commenced by any party against any of the
foregoing, for loss of life, personal injury, loss or damage to property or any
and all other damages or loss caused by (i) the use of the Tower, the
Transmitter Building or the Premises by Tenant, its officers, directors,
members, agents, servants, employees or invitees, or (ii) the performance by or
carrying out by Tenant or any subtenant of any of the terms and conditions
hereof, or (iii) the failure of Tenant to perform any term, covenant or
condition required to be performed by Tenant hereunder, or (iv) any damage or
injury that may occur as a result of any unsafe condition, or of any negligent
installation or maintenance of Tenant's equipment to the extent such condition
or installation or maintenance is the responsibility of Tenant hereunder, or (v)
failure by Tenant or any subtenant to comply with any applicable statute, rule,
regulation, order or other standard pertaining to the use or installation of
Tenant's equipment or (vi) the overlap, if any, of aperture of Tenant's
equipment with that of any other tenant on the tower, and any radiation levels
which are violative, or in the future may be violative, of the applicable rules,
regulations or policies of the FCC or other regulatory agency caused by Tenant's
equipment or the location thereof on the Tower; and in all events from and
against any and all judgments, recoveries, settlements, costs, expenses and
losses that may be incurred by any indemnified party as a result of any such
claim, demand, suit or proceeding, including, but not limited to, attorneys'
fees, court costs and expenses incurred in responding to defending any such
claim, demand, suit or proceeding. Tenant hereby waives, to the furthest extent
provided by law, any immunity or limited liability to which it may be entitled
under applicable workers' compensation laws with respect to loss or injury to
its own employees.
If any suit or proceeding shall be instituted against Landlord for
which indemnification would be required under the provisions of this Article,
Landlord shall, with reasonable promptness, give written notice of same to
Tenant. Subject always to Tenant's demonstration to Landlord's reasonable
satisfaction of Tenant's continuing financial capacity to respond to any
resulting indemnity obligations hereunder, Tenant shall have the right (but not
the obligation) to assume the defense of the case at Tenant's sole and separate
expense; provided, however, that, at Landlord's expense, Landlord shall be
entitled to designate counsel of its choosing to associate with Tenant's counsel
in the defense of said proceeding. Landlord shall cooperate fully in all
respects with the Tenant in any defense, compromise or settlement, including,
without limitation, providing Tenant with all pertinent information under the
control of Landlord. If after such notice Tenant does not assume control of such
defense, Landlord shall conduct such defense and Tenant shall be kept informed
and be consulted by Landlord with respect to the litigation but shall be bound
by the results obtained by Landlord insofar as the claim against Landlord is
concerned. Landlord shall provide Tenant with timely notice of Landlord's
intention to settle any claim, and Tenant shall have the right to approve or
withhold approval of any such settlement. If Landlord fails to obtain Tenant's
prior written consent to any such settlement, Landlord shall be deemed to have
released Tenant from its obligation to indemnify Landlord with respect to such
claim.
(b) Indemnification by Landlord. Except as provided in Articles
VII and XXII of this Lease, Landlord hereby assumes all risk of and
responsibility for and agrees to indemnify and hold harmless Tenant, its
officers, directors, members, employees and agents from and against any and all
losses, and all claims, demands, suits and proceedings made or commenced by any
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third party against any of the foregoing, for loss of life, personal injury,
loss or damage to property or other damage caused by (i) the negligent or
intentional act(s) or omission(s) of Landlord or its agents, servants or
employees arising in the course of the performance by this Lease; (ii) the
failure of Landlord to perform any material term, covenant or condition required
to be performed by Landlord hereunder or (ii) the breach of any warranty by
Landlord herein, and in such events from and against any and all judgment,
recoveries, settlements, reasonable costs and expenses and losses that may be
incurred by any indemnified party as a result of any such claim, demand, suit or
proceeding, including but not limited to reasonable attorneys' fees, court costs
and expenses incurred in responding to or defending any such claim, demand, suit
or proceeding. Notwithstanding the foregoing, Landlord shall not be liable for
consequential damages, including without limit lost revenues from Tenant's
inability to transmit or broadcast.
If any suit or proceeding shall be instituted against Tenant for
which indemnification would be required under the provisions of this Section
VI(b), Tenant shall, with reasonable promptness, give written notice of same to
Landlord. Landlord shall have the right (but not the obligation) to assume the
defense of the case at Landlord's sole and separate expense; provided, however,
that, at Tenant's expense, Tenant shall be entitled to designate counsel of its
choosing to associate with Landlord's counsel in the defense of said proceeding.
Tenant shall cooperate fully in all respects with the Landlord in any defense,
compromise or settlement, including, without limitation, providing Landlord with
all pertinent information under the control of Tenant. If after such notice
Landlord does not assume control of such defense, Tenant shall conduct such
defense and Landlord shall be kept informed and be consulted by Tenant with
respect to the litigation but shall be bound by the results obtained by Tenant
insofar as the claim against Landlord is concerned. Tenant shall provide
Landlord with timely notice of Tenant's intention to settle any claim, and
Landlord shall have the right to approve or withhold approval of any such
proposed settlement. If Tenant fails to obtain landlord's prior written consent
to any such settlement, Tenant shall be deemed to have released Landlord from
its obligation to indemnify Tenant with respect to such claim.
(c) Workers' Compensation Insurance. Before commencing any
installation, maintenance work or removal on the Premises, Tenant shall procure
and thereafter maintain at Tenant's expense, worker compensation insurance
coverage with a responsible insurance company, qualified to do business in Utah,
reasonably satisfactory to Landlord. Said insurance shall provide for the
payment of compensation in accordance with the laws of the State of Utah for all
workers hired or employees employed by Tenant or its contractors or
subcontractors, and shall further insure Landlord against any and all liability
for personal injury or death for such workers and employees. Prior to the
commencement of any such installation, maintenance, work or removal, Tenant
shall provide Landlord with a certificate of insurance, which certificate shall
contain a provision for 30 days prior written notice to Landlord of any
cancellation or change.
(d) Tenant's Liability Insurance. Tenant shall procure and
maintain, at Tenant's expense, throughout the term, a policy or policies of
comprehensive general liability insurance, with contract liability coverage,
with respect to all of Tenant's operations and activities on the Premises,
including but not limited to operations of contractors and the operation of
vehicles and equipment and negligence of Tenant, and naming Landlord and Tenant
as co-insured, with
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premium thereon being fully paid in advance, issued by and binding upon a
responsible insurance company qualified to do business in the State of Utah and
reasonably satisfactory to Landlord. Such insurance shall afford minimum
protection of not less than $2,500,000 with respect to personal injury or death
to any one person, of not less than $10,000,000 for injury or death for two or
more persons, and not less than $5,000,000 for property damage. Each of the
foregoing limitations shall be for each occurrence and shall not be an aggregate
limit under the policy. Tenant shall obtain such additional insurance and/or
increase the foregoing limits as Landlord may, from time to time, reasonably
require by written notice. Tenant shall also cause any contractors or
subcontractors performing any work on the Tenant's equipment and/or making
repairs or changes thereto, or otherwise performing work on behalf of the
Tenant, to procure comprehensive public liability insurance complying with this
paragraph and Article IV(e), if applicable. Prior to any use or occupancy of the
Leased Premises including but not limited to performance of any work on the
Leased Premises and thereafter prior to the expiration of any applicable policy
or the performance of any work, Tenant shall give Landlord a certificate of
insurance for each insurance policy required in this subsection and said
insurance certificate shall contain a provision for 30 days prior written notice
to Landlord of any cancellation or change.
(e) Landlord's Rights to Procure Liability Insurance. If Tenant
shall fail to procure or maintain the insurance policies required in this
Article or shall fail to cause its contractors or subcontractors to procure and
maintain such insurance policies, Landlord may, but it shall not be obligated
to, procure and maintain such insurance policies, and Landlord may, but it shall
not be obligated to, procure and maintain such policies at Tenant's expense. Any
amounts paid by Landlord for such insurance shall be paid by Tenant to Landlord
when invoiced.
(f) Limitation. Nothing in this Article shall be deemed to
impair, decrease, modify or otherwise affect the obligations of any party under
any other provision of this Lease Agreement.
ARTICLE VII
RISK OF LOSS, LOSS OF USE
Except as otherwise provided in this Agreement, Tenant shall have
the full risk of loss from any and all causes for all of its equipment located
or installed in, on or around the Leased Premises. Except as otherwise provided
in this Agreement or in the case of Landlord's gross negligence or intentional
misconduct, Landlord shall have no responsibility and shall not be liable for
damage or destruction thereto, or for losses resulting from any such damage or
destruction.
Except as otherwise provided in this Agreement or in the case of
Landlord's gross negligence or intentional misconduct, Landlord shall not be
liable to Tenant or anyone claiming under or through Tenant for any loss or
damage caused by the acts or omissions of any other tenants of the Premises or
the malfunctioning or interruption of any service, utility, facility or
installation supplied by Landlord or any other party.
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IN NO EVENT SHALL LANDLORD BE LIABLE FOR CONSEQUENTIAL DAMAGES,
INCLUDING BUT NOT LIMITED TO LOST REVENUES RESULTING FROM TENANT'S INABILITY TO
TRANSMIT OR BROADCAST, UNDER ANY CIRCUMSTANCES, AND TENANT FOR ITSELF, ITS
SUCCESSORS AND ASSIGNS HEREBY EXPRESSLY WAIVES ALL SUCH CLAIMS OF CONSEQUENTIAL
DAMAGES WITH RESPECT TO THIS LEASE, THE LEASED PREMISES OR ANY PART THEREOF, OR
TENANTS OPERATIONS HEREUNDER, AND HEREBY EXPRESSLY RELEASES, RELIEVES AND
DISCHARGES LANDLORD OF AND FROM ANY SUCH CLAIMS.
Landlord shall procure replacement cost fire and extended coverage
insurance with respect to the Transmitter Building. Such policy shall provide
for such deductibles, endorsements or other features as a qualified insurance
advisor (which may be Landlord's regular insurance advisor) selected by Landlord
shall recommend. Landlord shall invoice each tenant, including Tenant hereunder,
its proportionate share of such insurance in accordance with the proportions
established in Article III. Landlord shall be designated as sole loss payee and
insurance trustee in connection with any such insurance policy, and Landlord
shall have the right to expend all or any portion of such proceeds in the
repair, reconstruction or replacement of the Transmitter Building in accordance
with Article VIII(B) hereof.
ARTICLE VIII
DESTRUCTION OR DAMAGE TO LEASED PREMISES
(a) Damage to Premises. If the Tower or the Transmitter Building
shall, with or without fault of the Landlord, by any cause be totally or
partially destroyed or damaged so as to cause total termination of broadcasting,
this Lease shall remain in force and effect, except that Tenant's obligation to
pay rent shall cease at the time of such termination of broadcasting and shall
not resume again until such time as Tenant is notified by Landlord that Tenant
may resume Tenant's broadcasting activities. Landlord shall repair, reconstruct
or replace the destruction or damage to the extent necessary to allow
broadcasting as soon as reasonably possible. Subject to Landlord's prior
approval, such approval not to be unreasonably withheld or delayed, Tenant shall
have the right to install temporary transmission facilities prior to such time.
Within 30 days after any damage to or destruction of the Tower
and/or Transmitter Building, Landlord shall notify Tenant whether it intends to
reconstruct, repair or replace the Tower and/or Transmitter Building. If
Landlord elects not to reconstruct, repair or replace the Tower and/or
Transmitter Building, this Lease shall terminate upon the giving of such notice
without further liability to either party. If landlord elects to reconstruct,
repair or replace the Tower and/or Transmitter Building, Landlord shall
reconstruct, repair or replace the Tower within 90 days after notice to Tenant
of such election putting the Tower and Transmitter Building in such condition as
will comply with all of the terms and conditions of this Lease, provided that in
no event shall Landlord be responsible for any delay which may result from
governmental regulations, inability to obtain labor or materials or any other
cause beyond Landlord's reasonable control.
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(b) Insurance Proceeds. The proceeds of any insurance which may
be collected by Landlord on account of any such damage or destruction shall be
the sole property of the Landlord, except for recovery for property of Tenant,
in which case, the proceeds shall be the sole property of Tenant.
ARTICLE IX
DEFAULT
(a) Lien or Encumbrance. It shall be the responsibility and
obligation of Tenant to pay all taxes imposed upon, or assessed with respect to,
Tenant's equipment including its antenna and transmission lines on the Tower and
its interest in the Transmitter Building. Tenant shall not allow any lien or
encumbrance to be placed against Landlord property or the Transmitter Building
for failure to pay such tax or for failure to pay any other debt finally
resolved in judicial proceedings to be due, whether or not such person be a
taxing authority or other creditor. Tenant, at its expense, promptly shall take
all action necessary to obtain the release of any lien or encumbrance in such
circumstances. Any such claim or taxes may be contested in good faith if and so
long as Tenant shall post a bond against such tax lien or claim in form and from
a surety acceptable to Landlord and enforcement of such claim or taxes or loss
or forfeiture of Tenant to comply with this Article IX(a) may be declared a
default under this Lease by Landlord. Upon the occurrence and continuation of a
violation by Tenant under the provision of this Article IX(a), Landlord, in its
sole and absolute discretion, after giving not less than seven days written
notice to Tenant, shall have the right to pay any such tax, lien or encumbrance
on Landlord's property or upon the Transmitter Building, and any amounts so paid
by Landlord together with any reasonable expenses, including attorneys' fees,
incurred by Landlord in connection therewith shall be reimbursed by Tenant on
demand.
(b) Default Reentry. If Tenants fails to pay any rental or other
payment due hereunder when due within seven days after the date that notice of
such payment default is sent to Tenant, or Tenant fails to perform any of the
other terms, conditions or covenants of this Lease to be observed or performed
by Tenant for more than 30 days after notice of such other default shall be
received or delivery refused by Tenant, or if Tenant suffers this Lease to be
taken under any writ of execution or otherwise, then Landlord, besides other
rights or remedies it may have, shall have the immediate right (i) to terminate
this Lease or reenter and attempt to relet without terminating this I-ease and
(ii) in either such event, to remove all persons and property from the Leased
Premises and such property may be removed and stored in a public warehouse or
elsewhere at the cost of the Tenant, all without service of notice or resort to
legal process and without being deemed guilty of trespass, or becoming liable
for any loss or damage which may be occasioned thereby.
(c) Application of Rent Deficiency. If Landlord, without
terminating this Lease, either (i) elects to reenter and attempts to relet, or
(ii) takes possession pursuant to legal proceedings, or (iii) takes possession
pursuant to any notice provided by law, then it may, from time to time make such
alterations and repairs as may be necessary in order to relet the Leased
Premises or any part thereof for such term or terms (which may be for a lesser
or greater term than the term of this Lease) and at such rental or rentals and
upon such other terms and
14
<PAGE>
conditions as Landlord in its sole discretion may deem advisable. Upon each such
reletting, all rentals received by Landlord for such reletting shall be applied,
first, to the payment of any indebtedness other than rent due hereunder from
Tenant to Landlord; second, to the payment of any costs and expenses of
recovering the Leased Premises and reletting the same, including brokerage fees
and attorneys' fees; third, to the payment of rent due and unpaid hereunder, and
the residue, if any, shall be held by Landlord and applied to payment of future
rent as the same may become due and payable hereunder. If such rentals received
from such reletting during any month are less than that to be paid during that
month by Tenant hereunder, Tenant shall pay any such deficiency to Landlord.
Such deficiency shall be calculated and paid monthly when invoiced. No such
reentry or taking possession of the Leased Premises by Landlord shall be
construed as an election on its part to terminate this Lease unless a notice of
such intention be given to Tenant or unless the termination thereof be decreed
by a court of competent jurisdiction. Notwithstanding any such reletting without
termination, Landlord may at any time thereafter elect to terminate this Lease
for such previous breach. Should Landlord at any time terminate this Lease for
any breach, in addition to any other remedies it may have, it may recover from
Tenant all damages it may incur by reason of such breach, including the cost of
recovering the Leased Premises, reasonable attorneys' fees and the excess, if
any, at the time of such termination of the amount of rent and charges
equivalent to rent reserved in this Lease for the remainder of the stated term
over the then reasonable rental value of the Leased Premises for the remainder
of the stated term, all of which amounts shall be immediately due and payable
from Tenant to Landlord.
(d) Expense Reimbursement. In addition to any other remedies
Landlord may have at law or in equity and/or under this I-ease, in the event an
action for damages, specific performance or other relief shall be instituted by
either party, in or out of bankruptcy, and Landlord is the prevailing party in
such action, in whole or in part, Landlord shall be entitled to and Tenant shall
pay upon demand all Landlord's reasonable costs, charges and expenses, including
but not limited to fees of counsel, agents and others retained by Landlord,
incurred by Landlord in connection with any such actions.
In addition to any other remedies Tenant may have at law or in
equity and/or under this Lease, in the event of an action for damages, specific
performance or other relief shall be instituted by either party, in or out of
bankruptcy, and Tenant is the prevailing party in such action, in whole or in
part, Tenant shall be entitled to and Landlord shall pay upon demand all
Tenant's reasonable costs, charges and expenses, including but not limited to
fees of counsel, agents and others retained by Tenant in connection with any
such actions.
(e) Bankruptcy, Insolvency. Subject to the provisions of all
applicable law, if Tenant shall become bankrupt, file any debtor proceedings or
take or have taken against Tenant in any court pursuant to any statute either of
the United States or of any state, a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or trustee of all or a
portion of Tenant's property, or if Tenant makes an assignment for the benefit
of creditors, or petitions for or enters into an arrangement, then and in that
event, this Lease shall at the option of Landlord be cancelled and terminated
and any party claiming on behalf of Tenant shall not have any rights whatsoever
under this Lease. In the event this Lease has been assigned to a
15
<PAGE>
successor Tenant in accordance with Article XV hereof, the term "Tenant" in this
section (e) shall include only the Tenant under the most recent of such
assignments.
(f) No Waiver. No waiver of any covenant or condition or the
breach of any covenant or condition of this Lease shall be taken to constitute a
waiver of any subsequent breach of such covenant, nor shall the acceptance of
rent by Landlord at any time when Tenant is in default under any covenant or
condition hereof, be construed as a waiver of such default or of Landlord's
right to terminate this Lease on account of such default.
(g) Cumulative Remedies. The rights and remedies given to
Landlord by this Lease shall be deemed to be cumulative and no one of such
rights and remedies shall be exclusive at law or in equity of the rights and
remedies which Landlord might otherwise have by virtue of a default under this
Lease, and the exercise of one such right or remedy by Landlord shall not impair
Landlord's standing to exercise any other right or remedy.
(h) Landlord's Lien. Tenant hereby grants to Landlord, and
Landlord shall have, a landlord's lien on Tenant's equipment (or in the case of
equipment leased by Tenant, on Tenant's interest in the equipment) to secure
payment of all amounts due hereunder. Unless Landlord waives its lien in
writing, Landlord shall be entitled to possession, foreclosure, sale and all
other remedies provided by law in connection with such lien. However, in
furtherance of such rights or following waiver of those rights, Landlord may
require Tenant to remove its equipment within 30 days after termination of this
Lease. Equipment not so removed shall be deemed abandoned and shall become the
property of Landlord.
ARTICLE X
RIGHT OF QUIET ENJOYMENT
Except as Tenant encounters interference as described at Article
XIII hereof, over which Landlord has no immediate control, Landlord covenants
Tenant shall be placed in possession of the Leased Premises at the commencement
of the term of this Lease, and that during such term, and any renewal thereof,
Tenant paying the herein stipulated rental and performing all of the terms and
provisions of this Lease Agreement shall peaceably hold and enjoy the Premises
without hindrance or interruption by Landlord, except that Landlord shall have
the right to enter upon the Leased Premises at all reasonable times for the
purpose of inspecting same or showing for sale or reletting or effecting new
construction or installations, repairs and replacements.
ARTICLE XI
CONDEMNATION AND DISMANTLING
(a) Condemnation. If the Leased Premises, or any part or portion
thereof, are condemned, or taken, or ordered dismantled, by any governmental
authority, agency or entity having the power of eminent domain or condemnation,
or other power to order dismantling, so as to make unusable the transmission
facilities used by Tenant, and if, in the case of a taking of less than all of
the Landlord's Premises, within 30 days after possession is taken by such
16
<PAGE>
condemning authority, Landlord does not elect to restore the remaining portions
of the Leased Premises so as to permit Tenant's transmission facilities to be
returned to usefulness within one year, then this Lease shall terminate from the
time possession is taken by the condemning authority, or dismantling is begun,
as the case may be, and Tenant shall have no obligation for the payment of rent
hereunder for any period after Tenant's transmission facilities become unusable,
except that any rent which has accrued during any period prior thereto which is
not yet fully paid shall become immediately due and payable in full.
(b) Condemnation Award. With respect to the condemnation of all
or any portion of the Leased Premises, Tenant shall not be entitled, and hereby
waives any right, to share or participate in any condemnation award received by
Landlord or any holder or holders of mortgages, deeds of trust, fee simple
interests or other property interests in the Leased Premises. Unless Landlord
shall elect to restore the Leased Premises as provided in paragraph (a) hereof,
any condemnation award received by Tenant with respect to its interest in the
Transmitter Building shall belong to Tenant. If Landlord shall elect to so
restore, then such award shall be made available to Landlord to pay for the
costs of such restoration. If Landlord concludes, in Landlord's sole judgment
and discretion, that the sum of all condemnation awards turned over to Landlord
as provided above will be insufficient to complete such restoration, Landlord
shall assess each tenant its Proportionate Share (determined in accordance with
Article III) of the shortfall. Tenant shall pay such amounts to Landlord when
and as invoiced. Landlord shall have the right, but not the obligation, to defer
performance of any restoration work pending receipt of payment of such
assessment by tenants.
(c) Modification of Lease Premises. Should any governmental
authority to order or direct Landlord to make any alteration of the Leased
Premises, any delay, disruption or hindrance caused to Tenant, its broadcasting,
transmission or business, occasioned thereby, shall not affect or impair
Tenant's obligation to pay Rent hereunder. Such required alterations shall be
made by Landlord as promptly as reasonably possible, provided that the costs of
any such alterations to the Transmitter Building shall be reimbursed by Tenant
for its Proportionate Share (determined in accordance with Article III), when
and as invoiced.
ARTICLE XII
REMOVAL OF EQUIPMENT
At any time during the term of this Lease, and upon expiration or
termination without default thereof, Tenant, if not in default hereunder, shall
have and is hereby granted the right to dismantle, disconnect and remove, at
Tenant's sole expense and in accordance with Article IV(e), any and all
equipment owned by Tenant which may be installed in or connected to the Tower,
the Transmitter Building, or the Premises; but such right shall not apply to
Tenant's proportionate interest in the Transmitter Building (the Tenant's Space)
which shall revert to Landlord on the expiration or earlier termination of this
Lease. If Tenant shall not have made written request of Landlord for the removal
of Tenant's equipment within 30 days from and after said expiration or
termination, such equipment and property shall be considered to be abandoned by
Tenant and become the property of Landlord. All expenses incurred by Landlord in
effecting such removal shall be paid by Tenant when invoiced.
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ARTICLE XIII
INTERFERENCE
(a) Interference by Tenant. Tenant understands that Landlord
intends to grant to other tenants facilities and/or rights which are the same
as, or similar to, those granted herein to Tenant. Tenant will endeavor in good
faith to conduct its activities in accordance with sound electronic and
engineering practice and will cooperate with other tenants and potential tenants
so as to anticipate and prevent Interference. If any engineering statement is
presented to or by Landlord confirming that Tenant's broadcasting, transmitting
or other activities in or on any portion of the Leased Premises are causing
Interference to another tenant or Landlord, Tenant shall promptly and at its
sole expense correct the condition causing such Interference.
(b) Interference to Tenant. Similarly, upon determination that
any other tenant is causing Interference with Tenant's broadcasting,
transmitting or activities in or on any portion of the Leased Premises, Landlord
will use its best efforts to cause such other tenant to promptly correct the
condition causing such Interference.
(c) Interference Defined. Except with regard to "Signal
Degradation" to Interference Protected Third Parties, as used herein and
throughout the Lease, "Interference" with a transmitting activity shall mean a
condition existing which constitutes interference within the meaning of the
provisions of the applicable rules and regulations of the FCC as determined
and/or measured by the standards of ANSI/EPA/TEA. Tenant acknowledges that the
determination of what constitutes Interference and the appropriate actions to be
taken to correct such Interference shall be at the sole discretion of Landlord.
ARTICLE XIV
REPAIRS
(a) Action by Landlord. If circumstances occur, or threaten to
occur, from which Landlord may reasonably conclude that damage is likely to
occur to the property of Tenant, of Landlord, of any other tenant or of any
other person, or that substantial threat to life or the safety of individuals
will exist, before agents of Tenant can be advised and respond, Landlord,
without notice to Tenant, may repair, maintain, deenergize, disconnect or
dismantle any or all equipment and/or lines of Tenant and take any other
reasonable action which in Landlord's discretion, may appear necessary, with
respect to the property of Tenant, or of Landlord, without any liability
whatever on the part of Landlord for any damage whatsoever which such action may
cause.
(b) Non-Emergency Repairs. In the event of need for repair or
maintenance of the Tower or Transmitter Building, and if such repairs or
maintenance are not, in the discretion of Landlord of an emergency nature, then
Landlord shall have the right, upon 10 days notification to Tenant, to undertake
such repair or maintenance at its convenience. In such cases, Landlord and
Tenant agree to try to coordinate such activities in such manner as will
minimize any
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<PAGE>
interruption that may be caused to Landlord's and Tenant's broadcast activities
or to the transmission activities of any other tenants.
ARTICLE XV
ASSIGNMENT
(a) By Landlord. This Lease may be assigned by Landlord.
(b) By Tenant. Without the prior written consent of Landlord,
such consent not to be unreasonably withheld or delayed, Tenant shall not assign
or sublease this Lease or any interest therein, and shall not encumber,
hypothecate or otherwise give as security, this Lease or any interest therein.
Notwithstanding the foregoing, Tenant may assign its rights and obligations
under this Lease to any party acquiring the license for the Station pursuant to
prior FCC approval, provided that such acquiring party agrees in writing to
assume, be bound by and comply with all of the terms and conditions of this
Lease. No assignment shall be effective as against Landlord for any purpose,
unless all sums due from Tenant, together with any costs to Landlord to cover
reasonable legal and other expenses of Landlord in connection with such
assignment, shall have been paid to Landlord.
In all such assignments, Tenant shall remain primarily liable to
Landlord for fulfillment of the terms, covenants and conditions hereof, except
that such Tenant shall be released and discharged of all liability accruing
hereunder after the effective date of such release if (i) assignee as Tenant
fully and punctually performs each and all of its obligations hereunder during
the first 12 calendar months next following the effective date of such
assignment; and (ii) the financial ability and credit standing of the assignee
(together with the financial ability and credit standing of any guarantors of
such assignee's obligations hereunder), in the reasonable judgment and
discretion of Landlord, is satisfactory to Landlord.
Landlord's consent to one assignment by Tenant or acceptance of
performance from an assignee shall not be deemed a waiver of Landlord of the
restrictions of this Article XV as to subsequent attempts to assign by Tenant or
by Tenant's heirs, successors, assigns or subtenants. As used herein the terms
Landlord and Tenant shall be deemed to include their respective heirs,
successors and permitted assigns.
ARTICLE XVI
ALTERATIONS
Tenant shall not demolish, remove or modify any installations,
additions, fixtures, structures or other improvements now or hereafter attached
to the Leased Premises or any structure thereon, without the prior written
consent of Landlord, which consent as to nonstructural modifications,
installations, additions or fixtures in the Tenant's Space shall not be
unreasonably withheld.
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ARTICLE XVII
UTILITIES
Tenant shall be responsible for furnishing and paying for all
water, fuel, air conditioning, telephone, electricity and all other utility
services directly and only utilized by it. Tenant shall install its own meter
for electrical service at the Premises.
ARTICLE XVIII
SUBORDINATION
This Lease is subject and subordinate at all times to the lien of
existing and future mortgages on the Premises and any improvements thereon.
Although no instrument or act on the part of the Tenant shall be necessary to
effectuate such subordination, the Tenant will, nevertheless, execute and
deliver such instruments subordinating this Lease to the lien of all such
mortgages as may be desired by the mortgagee, provided that in the instrument of
subordination, the mortgagee (or trustee), for itself and its successors and
assigns, agrees that, so long as Tenant shall not be in material default under
this Lease, the mortgagee (or trustee) and its successors and assigns recognize
the right of Tenant to possession under the Lease and will not disturb the
peaceful, quiet enjoyment of the demised premises by Tenant. Tenant hereby
appoints Landlord its attorney-in-fact, irrevocably, to execute and deliver any
such instrument for and in the name of Tenant. If this Lease is so subordinated,
no entry under any such mortgage or sale for the purpose of foreclosing the same
or repossessing or other action pursuant to such mortgage or other security
indenture shall be regarded as an eviction of Tenant, constructive or otherwise,
or give Tenant any rights to terminate this Lease. In any event, Tenant shall
attorn to such mortgagee or mortgagees and any assignee or purchaser therefrom.
ARTICLE XIX
SUCCESSORS
The terms, conditions and covenants contained in the Lease shall
apply to, inure to the benefit of and be binding upon, the parties hereto and
their respective successors and permitted assigns.
ARTICLE XX
NOTICES
Whenever any notice is required or permitted hereunder (other than
telephonic notices permitted hereunder), such notice shall be in writing and
shall be deemed duly given if delivered to the address of the party to be
notified or if deposited in the United States mail, postage prepaid, certified
or registered mail, return receipt requested, addressed to the party to be
notified as follows:
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TENANT: Roberts Broadcasting Company of Salt Lake, L.L.C.
1408 North Kingshighway, Suite 300
St. Louis, MO 63113
Attn: Michael V. Roberts
Telephone: (314) 367-4600
Telecopier: (314) 367-0174
LANDLORD: Roberts Broadcasting Company of Utah, Inc.
1408 North Kingshighway, Suite 300
St. Louis, MO 63113
Attn: Steven C. Roberts
Telephone: (314) 367-4600
Telecopier: (314) 367-0174
and shall be deemed received on the date of delivery to such address or, if
mailed, on the date delivery was accepted or refused by Tenant as evidence on
the return receipt.
Either party may change its address for delivery of notice by
giving notice of a change of address in compliance with the terms of this
Article XX.
ARTICLE XXI
DELAYS
In any case in which either party hereto is required to do any act
(other dm make a payment of money), delays caused by or resulting from an act of
God, war, civil commotion, fire or other casualty, labor difficulties, general
shortage of labor, materials or equipment, governmental regulations or other
causes beyond such party's reasonable control, shall not be counted in
determining the time when the performance of such act must be completed, whether
such time be designated by fixed time, a fixed period of time or a "reasonable
time". In any case where work is to be paid for out of insurance proceeds or
condemnation awards, due allowance shall be made, both to the party required to
perform such work and to the party required to make such payment, for delays and
collection of such proceeds and rewards.
ARTICLE XXII
WAIVER OF SUBROGATION
The parties hereby release each other from any and all liability
for any loss or damage caused by fire or any of the extended coverage
casualties, even if such fire or any other casualty shall be brought about by
the fault or negligence of such other party its agents, servant, employees or
invitees. Each party shall cause its fire and extended coverage policies, if
any, to include a waiver of subrogation rights.
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ARTICLE XXII
CONSTRUCTION OF AGREEMENT
This Lease and the rights and obligations of the parties hereto
shall be governed by, and construed in accordance with, the laws of the State of
Utah applicable to agreements made and to be performed in that state. In the
event any provision of this Lease shall be held invalid or unenforceable by any
court of competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision hereof.
ARTICLE XXIV
MODIFICATIONS
Any agreement between the parties hereto shall be ineffective in
changing, modifying or discharging this Lease in whole or in part unless such
agreement is in writing and signed by the party against who such change,
modification or discharge is sought to be enforced. This Lease supersedes any
and all prior agreements between the parties, whether written or oral, with
respect to the subject matter hereof.
ARTICLE XXV
PARAGRAPH HEADINGS
Paragraph headings used in this Lease are for convenience of the
parties only and shall in no way be used to interpret or construe the agreement
of the parties.
IN WITNESS WHEREOF, the Landlord and Tenant have executed this
agreement as of the day and year first above written.
LANDLORD:
Roberts Broadcasting Company
of Utah, Inc.
By:/s/Steven C. Roberts
-------------------------------
TENANT:
Roberts Broadcasting Company
of Salt Lake, L.L.C.
By:/s/Michael V. Roberts
-------------------------------
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Exhibits 1 and 2 and Exhibit A - Transmitter Facility have been intentionally
omitted by the Registrants.
A copy of these omitted Exibits will be provided to the Securities and Exchange
Commission upon request.
[EXECUTION COPY)
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
among
ACME TELEVISION, LLC
THE SEVERAL LENDERS FROM
TIME TO TIME PARTIES HERETO
-and-
CANADIAN IMPERIAL BANK OF COMMERCE
as Agent
Dated as of December 2, 1997
<PAGE>
TABLE OF CONTENTS
RECITALS................................................................ 1
I GENERAL TERMS....................................................... 2
Section 1.01. Revolving Lines of Credit................... 2
Section 1.02. Scheduled Reductions of the Commitments..... 3
Section 1.03. Interest on the Notes............... 3
Section 1.04. Requests for Advances; Type of Loan......... 6
Section 1.05. Loan Disbursements.......................... 7
Section 1.06. Payments, Prepayments and Termination or
Reduction of the Revolver Commitments..... 7
Section 1.07. Fees........................................ 11
Section 1.08. Requirements of Law......................... 12
Section 1.09. Limitations on LIBOR Loans; Illegality...... 13
Section 1.10. Taxes....................................... 14
Section 1.11. Indemnification............................. 15
Section 1.12. Payments Under the Notes.................... 16
Section 1.13. Set-Off, Etc................................ 17
Section 1.14. Pro Rata Treatment; Sharing................. 17
Section 1.15. Non-Receipt of Funds by the Agent........... 18
Section 1.16. Replacement of Notes........................ 19
II. SECURITY; SUBORDINATION; USE OF PROCEEDS........................... 19
Section 2.01. Security for the Obligations; Subordination;
Etc...................................... 19
Section 2.02. Use of Proceeds............................. 21
III. CONDITIONS OF MAKING THE LOANS................................... 21
Section 3.01. Conditions to Amendment and Restatement..... 21
Section 3.02. Acquisition Loans........................... 25
Section 3.03. All Loans................................... 28
Section 3.04. Lender Approvals............................ 28
IV. REPRESENTATIONS AND WARRANTIES................................... 29
Section 4.01. Financial Statements........................ 29
Section 4.02. Organization, Qualifications, Etc........... 29
Section 4.03. Authorization; Compliance; Etc.............. 29
Section 4.04. Governmental and Other Consents, Etc........ 30
Section 4.05 Litigation.................................. 30
Section 4.06. Compliance with Laws and Agreements......... 31
Section 4.07. Licenses.................................... 31
Section 4.08. The Stations................................ 32
Section 4.09. Title to Properties; Condition of
Properties............................... 33
Section 4.10. Interests in Other Businesses............... 33
Section 4.11. Solvency.................................... 33
Section 4.12. Full Disclosure............................. 34
<PAGE>
Section 4.13. Margin Stock............................... 34
Section 4.14. Tax Returns................................ 34
Section 4.15. Pension Plans, Etc......................... 34
Section 4.16. Material Agreements........................ 35
Section 4.17. Projections................................ 35
Section 4.18. Brokers, Etc............................... 35
Section 4.19. Capitalization............................. 35
Section 4.20. Environmental Compliance................... 35
Section 4.21. Investment Company Act..................... 37
Section 4.22. Labor Matters.............................. 37
Section 4.23. Delaware Code Provisions................... 37
V. FINANCIAL COVENANTS.............................................. 37
Section 5.01. Minimum EBITDA............................. 37
Section 5.02. Maximum Total Debt Leverage................ 38
Section 5.03. Maximum Secured Debt Leverage.............. 38
Section 5.04. Cash Interest Coverage..................... 39
Section 5.05. Restricted Payments........................ 39
VI. AFFIRMATIVE COVENANTS............................................. 40
Section 6.01. Preservation of Assets; Compliance
with Laws, Etc........................... 40
Section 6.02. Insurance.................................. 41
Section 6.03. Taxes, Etc................................. 43
Section 6.04. Notice of Proceedings,
Defaults, Adverse Change, Etc............. 43
Section 6.05. Financial Statements and Reports........... 44
Section 6.06. Inspection................................. 46
Section 6.07. Accounting System.......................... 46
Section 6.08. Appraisals................................. 46
Section 6.09. Additional Assurances...................... 46
Section 6.10. Compliance with Environmental Laws......... 47
Section 6.11 Permitted Restructurings;
Acquisition Restructurings............... 48
VII. NEGATIVE COVENANTS............................................... 49
Section 7.01. Indebtedness............................... 49
Section 7.02. Liens...................................... 50
Section 7.03. Disposition of Assets; etc................. 51
Section 7.04. Fundamental Changes; Acquisitions.......... 52
Section 7.05. Local Marketing Agreements, Etc............ 52
Section 7.06. Management................................. 52
Section 7.07. Sale and Leaseback......................... 52
Section 7.08. Investments................................ 53
Section 7.09. Change in Business and Activities.......... 53
Section 7.10. Accounts Receivable............. 53
Section 7.11. Transactions with Affiliates............... 53
Section 7.12. Amendment of Certain Agreements, Etc....... 53
Section 7.13. ERISA...................................... 54
Section 7.14. Margin Stock............................... 54
Section 7.15. Negative Pledges, etc...................... 54
ii
<PAGE>
VIII. DEFAULTS.......................................................... 54
IX. REMEDIES ON DEFAULT, ETC.......................................... 57
X. THE AGENT......................................................... 58
Section 10.01 Appointment, Powers and Immunities.............. 58
Section 10.02 Reliance by Agent............................... 59
Section 10.03. Events of Default............................... 59
Section 10.04. Rights as a Lender.............................. 59
Section 10.05. Indemnification................................. 59
Section 10.06. Non-Reliance on Agent and other Lenders......... 60
Section 10.07. Failure to Act.................................. 60
Section 10.08. Resignation or Removal of Agent................. 60
Section 10.09. Cooperation of Lenders.......................... 61
XI. DEFINITIONS....................................................... 61
XII. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS; SEPARATE
ACTIONS BY THE LENDERS............................................ 84
XIII. BENEFIT OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS.............. 85
XIV. MISCELLANEOUS...................................................... 87
Section 14.01. Survival......................................... 87
Section 14.02. Fees and Expenses; Indemnity; Etc................ 87
Section 14.03. Notice........................................... 88
Section 14.04. Governing Law.................................... 90
Section 14.05. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.... 90
Section 14.06. Severability..................................... 91
Section 14.07. Section Headings, Etc............................ 91
Section 14.08. Several Nature of Lenders' Obligations........... 91
Section 14.09. Counterparts..................................... 91
Section 14.10. Knowledge and Discovery.......................... 92
Section 14.11. Amendment of Other Agreements.................... 92
Section 14.12. FCC Approvals.................................... 92
Section 14.13. Disclaimer of Reliance........................... 92
Section 14.14. Environmental Indemnification.................... 93
iii
<PAGE>
INDEX OF SCHEDULE
Schedule 1.01(a) Allocation of Loans and Commitments
Schedule 1.01(c) Form of Revolving Credit Note
Schedule 1.04(a) Request for Advances
Schedule 1.04(d) Interest Rate Option Notice
Schedule 1.06 Commitment Reduction Notice
Schedule 2.01 Exceptions to Security Requirements
Schedule 3.01(k) Officer's Closing Certificates
Schedule 3.02(c) Officer's Compliance Certificate; Acquisitions
Schedule 3.02(f)(i) Form General Counsel Opinion; Acquisitions
Schedule 3.02(f)(ii) Form FCC Counsel Opinion; Acquisitions
Schedule 3.02(f)(iii) Form Local Counsel Opinion; Acquisitions
Schedule 4.01(a) Financial Statements
Schedule 4.01(b) Opening Balance Sheet
Schedule 4.02 Opening Balance Sheet
Schedule 4.04 Organization, Etc.
Schedule 4.05 Governmental and Other Consents
Schedule 4.07 Litigation
Schedule 4.09 Licenses
Schedule 4.10 Real Properties; Tower Site Leases, Etc.
Schedule 4.15 Interests in Other Businesses
Schedule 4.16 Pension Plans
Schedule 4.17 Material Agreements
Schedule 4.19 Projections
Schedule 4.20 Capitalization
Schedule 6.05 Envirornmental Compliance; Site Assessments
Schedule 7.01 Compliance Certificate
Schedule 7.02 Indebtedness
Schedule 11.01 Liens
Schedule 11.02 Excluded Programming Payments
Schedule 11.02(a) Officer's Compliance Certificate; Acquisitions
Schedule 11.02(b) Form General Counsel Opinion; Acquisitions
Schedule 11.02(c) Form FCC Counsel Opinion; Acquisitions
Schedule 11.02(d) Form Local Counsel Opinion; Acquisitions
Schedule 11.03 Employment/Consulting Agreements
Schedule 13(b)(iv) Form of Assignment and Acceptance
Schedule 13(b)(v) Form of Notice of Assignment and Acceptance
<PAGE>
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
AGREEMENT dated as December 2,1997, by and among CIBC INC. ("CIBC") and the
various other financial institutions which are now, or in accordance with
Article XIII hereafter become, parties hereto by execution of the signature
pages to this Agreement (collectively, the "Lenders" and each individually, a
"Lendee'); CANADIAN IMPERIAL BANK OF COMMERCE [formerly referred to as Canadian
Imperial Bank of Commerce, New York Agency], as agent for the Lenders (in such
capacity, together with its successors and assigns in such capacity, the
"Agent"); and ACME TELEVISION, LLC, a limited liability company organized and
existing under the laws of the State of Delaware (the "Borrower Certain
capitalized terms used herein without definition are defined in Article XI of
this Agreement.
RECITALS
A. The Borrower's direct and indirect Subsidiaries (i) own and operate
broadcast television Station KWBP, Channel 32, broadcasting in the Portland,
Oregon DMA; (ii) own and operate broadcast television station WINT, Channel 20,
broadcasting in the Knoxville, Tennessee DMA; (iii) operate pursuant to a time
brokerage agreement dated as of September 8, 1997, Station KPLR, Channel I 1,
broadcasting in the St. Louis, Missouri DMA, pending the FCC's grant of approval
to the transfer of the Missouri Station, and (iv) hold the rights to acquire or
construct other broadcast television stations in the Salt Lake city, Utah, and
Albuquerque, New Mexico DMA'S. Certain special purpose subsidiaries of the
Borrower, referred to herein as the License Companies, hold or will hold the
licenses for each broadcast television station.
B. The Borrower, the Agent and the Lenders are parties to that certain
Credit Agreement dated as of August 15, 1997 (the "Original A2reement"),
pursuant to which the Borrower issued its Secured Revolving Credit Note in the
principal amount of $22,500,000, payable to CIBC (the "Original Note").
C. On September 24, 1997, the Borrower and Acme Finance Corporation, a
Delaware corporation wholly-owned by the Borrower ("Acme Finance" and, together
with the Borrower the "Issuers"), offered (the "Offering") as their joint and
several obligation $175,000,000 in 10.875% Senior Discount Notes due 2004 (the
"Senior Notes"), which are issued pursuant to an Indenture dated as of September
30, 1997 between the Issuers, the Borrower's Subsidiaries (as guarantors) and
Wilmington Trust Company, as trustee (the "Indenture"). In connection with the
sale of the Senior Notes, the issuers prepared and circulated an Offering
Memorandum dated September 24, 1997, setting forth information regarding the
Issuers and the Senior Notes, a true and complete copy of which was provided to
the Agent (the "Offering Memorandum").
D. As conditions to the Offering, inter alia, (i) Acme Television Holdings,
LLC, the Borrower's ultimate parent ("Acme Holdings") issued its Convertible
Debentures and membership units (together, the "ACME Holdings Eguity
Financing,") for aggregate gross proceeds of approximately $45,042,000, from
which approximately $42,900,000 were contributed to the Borrower through Acme
Intermediate (the "Acme Holdings Equity Contribution"); and (ii) Acme
Intermediate Holdings, LLC, which owns 99.5% of the
<PAGE>
Borrower's membership interests ("Acme Intermediate"), and Acme Intermediate
Finance, Inc. offered (the "Acme Intermediate Offering') $71,634,000 in 12%
Senior Secured Discount Notes due 2005 (the "Acme Intermediate Notes"), which
were issued pursuant to an Indenture dated as of September 30, 1997 between Acme
Intermediate, Acme Intermediate Finance, Inc. and Wilmington Trust Company, as
Trustee (the "Acme Intermediate Indenture") for aggregate gross proceeds of
approximately $40,000,000, from which $38,000,000 were contributed to the
Borrower (the "Acme Intermediate Eguity Contribution").
E. The proceeds to the Borrower from the Offering, together with the
proceeds of the Acme Holdings Equity Contribution and the Acme Intermediate
Equity Contribution, will be used to (i) pay the cash portion of the purchase
price of the Permitted Acquisitions; (ii) fund the required capital expenditures
to construct or upgrade the Stations; (iii) deliver the KPLR Escrow Funds; and
(iv) pay fees and expenses in connection with the Offering and the consummation
of the foregoing.
F. The Borrower desires to obtain additional funds for working capital and
capital expenditures and to finance Permitted Acquisitions and-, therefore,
desires to amend and restate the Original Agreement to (i) increase the
Revolving Credit Commitment from $22,500,000 to $40,000,000 and (ii) make
certain other amendments, modifications and revisions to the terms thereof.
G. The Lenders are willing to agree to such amendment and restatement, all
subject to the terms and conditions of this Agreement.
NOW THEREFORE the parties hereto, intending to be legally bound, and in
consideration of the foregoing and the mutual covenants contained herein, hereby
agree that the Original Agreement be, and it hereby is, amended and restated to
read in its entirety (but retaining references to the foregoing Recitals) as
follows:
I. GENERAL TERMS
Section 1.01. Revolving Lines of Credit.
(a) On the date hereof, subject to the terms and conditions contained in
this Agreement, the Lenders agree to establish in favor of the Borrower
revolving lines of credit (the "Revolving! Lines of Credit") in the aggregate
principal amount of up to $40,000,000, allocated among the Lenders as set forth
in Schedule 1.01(a) (collectively, as reduced pursuant to Section 1.06, the
"Commitments" and, with respect to each Lendees allocation of the Revolving
Lines of Credit, its "Commitment') which shall expire on the Expiration Date.
(b) Loans made under the Revolving Lines of Credit are hereinafter
sometimes referred to collectively as the "Advances". The aggregate principal
amount of Advances made by the Lenders as requested in any Request for Advances
shall be (i) at least $1,000,000 and, if more, a multiple of $100,000, in the
case of LIBOR Loans, and $500,000 and, if more, a multiple of $1 00,000, in the
case of Prime Rate Loans, or (ii) such lesser amount as equals the then
unadvanced portion of the aggregate Commitments. From the date hereof to and
including the
- 2 -
<PAGE>
Expiration Date and within the limits of the aggregate Commitments, the
Borrower may borrow, repay and reborrow under this Section 1.01.
(c) The borrowing under Section 1.01 shall be evidenced by the Borrower's
Amended and Restated Secured Revolving Credit Notes, each in the form attached
hereto as Schedule 1.0 I (c) (together with any additional Revolving Credit
Notes issued to any assignee(s) of the Commitments under Article XIII or
otherwise issued in substitution therefor, the "Notes"). The Notes are hereby
incorporated by reference herein and made a part hereof.
Section 1.02. Scheduled Reductions of the Commitments. The Commitments (i)
shall be automatically permanently reduced on September 30, 2000 and each
Quarterly Date thereafter, on each of which dates the Borrower shall repay such
amount of the aggregate Notes as shall cause the aggregate outstanding principal
balance thereunder to be less than or equal to the Commitments, as so reduced,
and (ii) shall expire on the Expiration Date, when all outstanding principal and
accrued interest on the Notes shall be due and payable in full. Such quarterly
reductions of the Commitments shall be in the amounts set forth below, without
giving effect to any other mandatory or optional Commitment reductions and,
after giving effect to such quarterly automatic reductions, the maximum
aggregate amount of the Commitments shall not exceed the levels set forth below:
Aggregate Amount of
Ouarterly Date Automatic Permanent Reduction Maximum Commitments
Closing Date $-0- $40,000,000
September 30, 2000 $ 2,000,000 $38,000,000
December 31, 2000 $ 2,000,000 $36,000,000
March 31, 2001 $ 2,000,000 $34,000,000
June 30, 2001 $ 2,000,000 $32,000,000
September 20, 2001 $ 3,000,000 $29,000,000
December 31, 2001 $ 3,000,000 $26,000,000
March 31, 2002 $ 3,000,000 $23,000,000
June 3 0, 2002 $ 3,000,000 $20,000,000
September 3 0, 2002 $20,000,000 $-0-
Section 1.03. Interest on the Notes.
(a) Interest Rate. Subject to the terms and conditions set forth in this
Section 1.03, including without limitation paragraph (b)(iii) below, the
Borrower may elect an interest rate for the outstanding principal balances from
time to time of the Notes, or any portion thereof, based on either the Prime
Rate or the applicable LIBOR Rate and determined as follows:
(i) the rate for any Prime Rate Loan shall be the Prime Rate plus the
Applicable Margin for Prime Rate Loans then in effect; and
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<PAGE>
(ii) the rate for any LIBOR Loan shall be the applicable LIBOR Rate
plus the Applicable Margin for LIBOR Loans in effect on the first day of
the applicable Interest Period.
(b) Determination of Applicable Margin for Loans.
(i) The Applicable Margin for Loans during the period commencing on
the date hereof and ending on February 14, 1998 shall be 2.00%, with
respect to Prime Rate Loans, and 3.00%, with respect to LIBOR Loans.
(ii) Subject to the provisions of Section 1.03(b)(iii) below, the
Applicable Margin for Loans during the Pricing Period commencing on
February 15, 1998 and ending on May 14, 1999 and during each Pricing Period
thereafter shall be determined based upon the ratio of (A) Total Debt as of
the last day of the fiscal quarter ended immediately preceding the first
day of such Pricing Period to (B) Adjusted EBITDA for the period of four
(4) consecutive fiscal quarters ending on such Quarterly Date (the
"Pricing Ratio"). as indicated in the following Table:
<TABLE>
<CAPTION>
Applicable Margin for Loans
<S> <C> <C>
Pricing Ratio Prime Rate Loans LIBOR Loans
Greater than or equal to
6.00:1.00 2.00% 3.00%
Less than 6.00: 1.00 but greater
than or equal to 5.5 0: 1.00 1.75% 2.75%
Less than 5.50:1.00 but greater
than or equal to 5.00: 1.00 1.50% 2.50%
Less than 5.00: 1.00 but greater
than or equal to 4.50:1.00 1.00% 2.00%
Less than 4.50: 1.00 .75% 1.75%
</TABLE>
(iii) Notwithstanding the foregoing, so long as Adjusted EBITDA for
any period of four (4) consecutive fiscal quarters shall be negative, the
Applicable Margin for Loans during the Pricing Period commencing on the day
after the last day of such fiscal quarter shall be 2.00%, with respect to
Prime Rate Loans, and 3.00%, with respect to LIBOR Loans.
(c) Computations, Pricing Period, Etc.
(i) Nothing in Section 1.03(b) shall be deemed to constitute a waiver
of the requirements of Section 5.02, default under which will result in an
Event of Default and the application of the default rate of interest
specified in Section 1.03(f).
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<PAGE>
(ii) As used in Section 1.03, the first "Pricing Period" shall
commence on November 15, 1998 and end on February 14, 1999 and, thereafter,
the term "Pricing Period" shall mean each period commencing on (A) the last
date as of which the Borrower is required, under Section 6.05(b) and
Section 6.05(d), to deliver financial statements and a Compliance Report
indicating the applicable Pricing Ratio, being February 15, May 15, August
15 and November I in each year (in each case, a "Compliance Report Delivery
Rate"), and ending on (B) the next following Compliance Report Delivery
Date.
(iii) The determination of the Applicable Margin for any Pricing
Period shall be based on the quarterly financial statements and Compliance
Report required to be delivered on the first date of such Pricing Period,
as provided above. Notwithstanding the preceding sentence, in the event of
any discrepancy between the computation based on such financial statements
and Compliance Report and the related audited financial statements
furnished pursuant to Section 6.05(a) (the "Audited Financial Statements"),
or any information disclosed in connection therewith, the computation based
upon the Audited Financial Statements shall govern, retroactive to the
first day of the applicable Pricing Period. In the event of a retroactive
correction in the determination of the Applicable Margin in favor of the
Borrower, the amount of interest thereby refundable to the Borrower shall
be applied on the date of such retroactive correction, to prepay interest
payable on the Notes. If the retroactive correction is in favor of the
Lenders, the amount of interest due to the Lenders shall be paid in full to
the Agent within five (5) days after written notice of such correction is
provided to the Borrower.
(iv) Notwithstanding the foregoing, no downward adjustment of the
Applicable Margin hereunder shall be permitted (A) unless the Compliance
Report for the relevant fiscal period delivered to the Agent includes a
request by the Borrower for such adjustment or (B) during the existence of
any Default.
(d) Interest Payment Dates. Interest on the Loans shall be payable in
arrears, without setoff, deduction or counterclaim, as follows:
(i) Interest on each Prime Rate Loan shall be due and payable on the
last Business Day of March, June, September and December of each year (the
"Ouarterly Dates"), commencing December 31, 1997, and at maturity, whether
by reason of acceleration, prepayment, payment or otherwise, provided that
interest accrued on any Prime Rate Loan which is converted to a LIBOR Loan
shall be paid on the Quarterly Date following the date of such conversion
(or, if accrued on a Prime Rate Loan which is so converted on a Quarterly
Date, on such Quarterly Date). The interest rate on Prime Rate Loans shall
change on the date of any change in the applicable Prime Rate.
(ii) Interest on each LIBOR Loan shall be due and payable on the last
day of the Interest Period applicable to such Loan and, if such Interest
Period exceeds three (3) months, every three (3) months after the beginning
thereof, until and at maturity, whether by reason of acceleration,
prepayment, payment or otherwise.
5
<PAGE>
(e) Computations. Interest on Prime Rate Loans (except to the extent based
on the Federal Funds Rate) shall be computed on the basis of the actual number
of days elapsed over a 365 or 366-day year, as applicable. Interest on Prime
Rate Loans, if based on the Federal Funds Rate, and on LIBOR Loans shall be
computed on the basis of the actual number of days elapsed over a 360-day year.
(f) Effect of Defaults, Etc.
(i) During the existence and continuance of any Event of Default, the
outstanding principal under the Notes and, to the extent permitted by
applicable law, overdue interest, fees or other amounts payable hereunder
or under the other Loan Documents shall bear interest, from and including
the date such Event of Default occurred until such Event of Default is
waived in writing as provided herein or cured, at a rate per annum equal to
two percent (2.00%) above (a) the interest rate or rates then applicable to
Prime Rate Loans and overdue interest, fees and other expenses (computed on
the basis of the actual number of days elapsed over a 365-day period), or
(b) with respect to any LIBOR Loans then in effect (and only until the end
of the Interest Period applicable to such LIBOR Loans) the interest rate or
rates then applicable to such LIBOR Loans (computed on the basis of the
actual number of days elapsed over a 360-day period).
(ii) Nothing in this Section 1.03(f) shall affect the rights of the
Agent or the Lenders to exercise any rights or remedies under the Loan
Documents or applicable law arising upon the occurrence of an Event of
Default.
Section 1.04. Requests for Advances; Type of Loan.
(a) Requests for Advances. Each request by the Borrower for Advances under
the Revolving Lines of Credit (other than the initial Advances, if made
concurrently herewith) shall be made not later than (i) I 1:00 A.M. (New York
time) on the Business Day of the proposed Borrowing Date, if such Advances are
Prime Rate Loans, or (ii) I 1:00 A.M. (New York time) on the third Business Day
prior to the proposed Borrowing Date, if any of such Advances are LIBOR Loans,
by a written Request for Advances, in the form of schedule 1.0 a (each, a
"Request for Advances"), signed by a duly authorized representative of the
Borrower and indicating (i) the date of such Advances, (ii) whether such
Advances shall be Prime Rate Loans or LIBOR Loans and, if so, the Interest
Period for such LIBOR Loans, and (iii) the use of proceeds thereof, to the
extent any such proceeds are not being used for working capital purposes. The
Agent shall promptly notify the Lenders of such Request for Advances and the
information contained therein. Such Request for Advances shall be irrevocable
and binding on the Borrower.
(b) Conversion to a Different Type of Loan. The Borrower may elect from
time to time to convert any outstanding Advances to Prime Rate Loans or LIBOR
Loans, as the case may be, provided that (i) with respect to any such conversion
of LIBOR Loans to Prime Rate Loans, the Borrower shall provide the appropriate
Interest Rate Option Notice by 12:00 Noon (New York time) on the date of such
proposed conversion; (ii) with respect to any such conversion of
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<PAGE>
Prime Rate Loans to LIBOR Loans, the Borrower shall provide the appropriate
Interest Rate Option Notice by 12:00 Noon. (New York time ) at least three
Business Days' prior to the date of such proposed conversion; (iii) with respect
to any such conversion of LIBOR Loans into Prime Rate Loans, such conversion
shall only be made on the last day of the related Interest Period; (iv) no Loans
may be converted into LIBOR Loans when any Default has occurred and is
continuing; (v) the Borrower may have no more than eight (8) LIBOR Loans
outstanding at any time; (vi) any conversion of less than all of the outstanding
Prime Rate Loans into LIBOR Loans shall be in a minimum aggregate principal
amount of $1,000,000 and, if greater, an integral multiple of $1 00,000; and
(vii) any conversion of less than all of the outstanding LIBOR Loans into Prime
Rate Loans shall be in a minimum aggregate principal amount of $500,000 and, if
greater, an integral multiple of $1 00,000. The Agent shall promptly notify the
Lenders of such Interest Rate Option Notice and the information contained
therein.
(c) Continuance of an Interest Rate Option. The Borrower may continue any
LIBOR Loans as such upon the expiration of the related Interest Period by
providing to the Agent (i) an Interest Rate Option Notice in compliance with the
notice provisions set forth in Section 1.04(b) or (ii) standing written
instructions authorizing the automatic continuation of such Loans, which
instructions shall be effective until notice to the Agent by the Borrower
revoking the same (such notice to take effect no sooner than three (3) Business
Days after receipt by the Agent); provided that no LIBOR Loans may be continued
when any Default has occurred and is continuing, but shall be automatically
converted to Prime Rate Loans on the last day of the first applicable Interest
Period which ends during the continuance of such Default. Prime Rate Loans shall
be deemed to continue as such until receipt of an Interest Rate Option Notice
requesting conversion thereof to LIBOR Loans.
(d) Form of Notice. Each Interest Rate Option Notice shall be substantially
in the form of Schedule 1.04(d) and shall specify: (i) the aggregate principal
amount of Loans to be continued or converted; (ii) the proposed date thereof;
(iii) the Interest Period for such LIBOR Loans; and (iv) whether such Loans
shall be LIBOR Loans or Prime Rate Loans.
Section 1.05. Loan Disbursements. The Advances shall be made by the Lenders
pro rata as provided in Section 1.14. Not later than 12:00 noon (New York time),
in the case of LIBOR Loans, or 2:00 P.M. (New York time), in the case of Prime
Rate Loans, on the date specified for any Advances, each Lender shall make
available to the Agent the portion of the Advances to be made by it on such
date, in immediately available funds, for the account of the Borrower. The
amount so received by the Agent shall, subject to the terms and conditions of
this Agreement, be made available to the Borrower by depositing the same in
immediately available funds in the appropriate account or accounts of the
Borrower and by disbursing such funds as indicated in writing in the related
Request for Advances prior to the date such Advances are proposed to be made.
Section 1.06. Payments, Prepayments and Termination or Reduction of the
Revolver Commitments.
(a) Voluntary Reductions of Commitments and Related Prepayments. At any
time prior to the Expiration Date, upon at least three (3) Business Days'
written notice to the
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<PAGE>
Agent in the form of Schedule 1.06 (each, a "Commitment Reduction Notice")
signed by a duly authorized representative of the Borrower, the Borrower may
permanently terminate or permanently reduce the Commitments, without premium or
penalty (other than any indemnification payments owned under Section 1. II),
provided as follows:
(i) any such reduction shall be in an aggregate amount of not less
than $500,000 or, if greater, an integral multiple of $ 1 00,000;
(ii) any such reduction shall apply to each Lender's Commitment pro
rata as provided in Section 1.14; and
(iii) simultaneously with each such reduction, the Borrower (A) shall
pay to the Agent, for the ratable account of each Lender, any then accrued
unpaid Commitment Fee on the terminated or reduced portion of the
respective Commitments, (B) shall pay any indemnification payments due in
accordance with Section 1. 1 1 in respect of LIBOR Loans so prepaid and (C)
shall repay such amount of the aggregate principal amount of the Notes as
shall cause the outstanding principal balance thereunder to be less than or
equal to the aggregate Commitments, after giving effect to such reduction,
provided that any such prepayment shall be an aggregate amount of not less
than $1,000,000 or, if greater, an integral multiple of $ 1 00,000, in case
of LIBOR Loans so prepaid, or $500,000 or, if greater, an integral multiple
of $1 00,000, with respect to Base Rate Loans so prepaid.
Each Commitment Reduction Notice shall specify that date fixed for such
termination or reduction, the aggregate principal amount thereof and the
aggregate principal amount of the Notes required to be repaid hereunder on such
date.
(b) Mandatory Reductions of the Commitments; Casually Events. Subject to
the provisions of Section 6.02, if (i) the Borrower or any of the Subsidiaries
shall receive Insurance Proceeds in respect of any Casualty Event and shall not
have restored, repaired or replaced the Damaged Property within the applicable
Restoration Period and (ii) such Insurance Proceeds, together with all other
Insurance Proceeds theretofore received in respect of Casualty Events and not
applied to restore, repair or replace an asset or property, exceed $500,000 in
the aggregate, then, on the last day of such Restoration Period (or, if earlier,
the date as of which the Borrower or any Subsidiary shall have determined not to
restore, repair or replace the Damaged Property), (A) the Commitments shall be
automatically reduced, in an aggregate amount, if any, equal to the aggregate
amount of such Insurance Proceeds not theretofore applied to the repair,
restoration or replacement of the Damaged Property under Section 6.02(b) and (B)
the Borrower shall prepay the Notes accordingly, without premium or penalty
(other than any indemnification payments due under Section 1.11), all as
provided in Sections 1.06(e) and (i), respectively. Nothing in this Section
1.06(b) shall be deemed (x) to limit any obligation of the Companies pursuant to
Section 6.02 to remit Insurance Proceeds to the Collateral Account, (y) to
obligate the Agent to release Insurance Proceeds from the Collateral Account to
the Borrower or any Subsidiary during the existence and continuance of any Event
of Default or (z) to apply to temporary prepayments of the Notes from Insurance
Proceeds pending completion of repairs, replacements and restoration within the
applicable Restoration Period and subject to the provisions of Section 6.02(b).
8
<PAGE>
(c) Mandatory Reductions of the Commitments; Dispositions of Assets.
Without limiting the obligation of the Borrower under Section 7.03 to obtain the
consent of the Required Lenders to any disposition of assets or LMA not
otherwise permitted hereunder, the Borrower agrees (i) two (2) Business Days
prior to the occurrence of any disposition of assets or properties other than
pursuant to Section 7.03(a) or any LMA (as defined in clause (b) of the
definition of such term in Article XI), to deliver to the Agent (in sufficient
copies for each Lender) a statement, certified by the chief executive officer or
chief financial officer of the Borrower and in reasonable detail, of the
respective estimated amounts of the Net Cash Proceeds and Adjusted Net Cash
Proceeds of such disposition or the estimated amounts payable under such LMA and
(ii) that, in the event such disposition is completed or such LMA is commenced
(but subject to the Borrower's right, under certain circumstances, to redeploy
certain of the proceeds thereof, as provided below), the Commitments shall be
automatically reduced as follows:
(A) on the date of such disposition or the commencement of such LMA,
in an aggregate amount equal to 100% of the Adjusted Net Cash Proceeds of
such disposition or the amounts paid under such LMA, as the case may be,
received by the Borrower or any of the Subsidiaries on such date; and
(B) thereafter, quarterly, on the date of the delivery to the Agent
pursuant to Section 6.05 hereof of the financial statements for each fiscal
quarter or (if earlier) the date which is forty-five (45) days after the
end of such fiscal quarter, to the extent the Borrower or any Subsidiary
shall receive Adjusted Net Cash Proceeds during such fiscal quarter under
deferred payment arrangements or investments entered into or received in
connection with any such disposition and/or further payments under such
LMA, an amount equal to I 00% of the aggregate amount of related Adjusted
Net Cash Proceeds and/or such LMA payments, provided that if, prior to the
date upon which the Borrower would otherwise be required to make a
prepayment under this paragraph (B) with respect to any fiscal quarter, all
such Adjusted Net Cash Proceeds and/or LMA payments received in cash shall
aggregate an amount that will require a prepayment of $250,000 or more
under this paragraph (B) with respect to such fiscal quarter, then the
Borrower shall immediately make a prepayment under this paragraph (B) in an
amount equal to such required prepayment.
In connection with each such reduction of the Commitments, the Borrower shall
prepay the Notes accordingly, as provided in Section 1.06(f), without premium or
penalty (other than any indemnification payments due under Section 1.11).
Notwithstanding the foregoing, provided that no Specified Default exists or is
continuing as of the date of any such disposition or the commencement of any
such LMA, no reduction of the Commitments or prepayment of the Notes shall be
required under this Section 1.06(c) with respect to the Adjusted Net Cash
Proceeds from any such disposition or LMA (or all dispositions of assets in the
aggregate) after the date hereof in the event that the Borrower advises the
Agent at the time the Net Cash Proceeds from such disposition or LMA (or the
last in any such series of dispositions) are received that it intends to
reinvest the Adjusted Net Cash Proceeds in replacement assets pursuant to a
Permitted Acquisition, so long as:
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<PAGE>
(1) such Adjusted Net Cash Proceeds are at the written election of the
Borrower (x) deposited in the Collateral Account and held therein by the
Agent pending such reinvestment, in which event the Agent need not release
such Adjusted Net Cash Proceeds except upon presentation of evidence
satisfactory to it that such Adjusted Net Cash Proceeds are to be so
reinvested in compliance with the provisions of this Agreement, (y) applied
by the Borrower to the prepayment of the Notes without permanent reduction
of the Commitments in such amount (each, a "Temporary Prepayment") (in
which event the Borrower agrees to advise the Agent in writing at the time
of such Temporary Prepayment that such prepayment is being made from the
proceeds of a disposition) or (z) held and applied in any combination of
clauses (x) and (y) above; and
(2) the Adjusted Net Cash Proceeds from any such disposition are. in
fact so reinvested (by withdrawal from the Collateral Account or under the
Revolvers and application to the purchase price of one or more Permitted
Acquisitions) prior to the earlier to occur of (x) 180 days following the
date of such disposition, unless a definitive agreement with respect to a
Permitted Acquisition utilizing Adjusted Net Cash Proceeds shall have been
entered into prior to or within such period, or (y) in such event, 360 days
following such disposition, it being understood that, in the event Adjusted
Net Cash Proceeds from more than one disposition of assets are paid into
the Collateral Account or applied to the prepayment of the Notes as
provided in subparagraph (1) above, such Adjusted Net Cash Proceeds shall
be deemed to be released in the same order in which such dispositions
occurred.
Accordingly, (aa) any such Adjusted Net Cash Proceeds held in the Collateral
Account without reinvestment for more than the 180 or 360 day period, as
applicable, referred to in subparagraph (2) above (as applicable, the
"Reinvestment Period") shall be forthwith applied to the prepayment of the Notes
and the reduction of the Commitments (by an amount equal to the portion of such
prepayments applied to the Notes) as provided above without premium or penalty
(other than any indemnification payments due under Section 1.11), and (bb) to
the extent that any such Adjusted Net Cash Proceeds so applied to a Temporary
Prepayment are not reborrowed for reinvestment within the Reinvestment Period,
the Commitments shall be permanently reduced as provided above. Nothing in this
Section 1.06 shall be deemed to obligate the Agent or the Lender, as the case
may be, to release any of Adjusted Net Cash Proceeds from the Collateral Account
to the Borrower or any Subsidiary, or to make Loans in the amount of any
Temporary Prepayment, in each case for purposes of reinvestment as aforesaid,
during the existence of any Specified Default. Upon the occurrence and during
the existence of any Specified Default, all Adjusted Net Cash Proceeds held in
the Collateral Account shall be subject to the provisions of the Security
Agreements.
(d) Mandatory Reductions of the Commitments; Debt Issuances. Without
limiting the obligation of the Borrower to obtain the consent thereto of the
Required Lenders under Section 7.01, upon any issuance of additional debt
securities of the Borrower, other than the Senior Notes, (i) the Commitments
shall be automatically reduced in an aggregate amount equal to the net proceeds
thereof and (ii) the Borrower shall prepay the Notes accordingly, without
premium or penalty (other than any indemnification payments due under Section
1.1 1) as provided in Sections 1.06(e) and (f).
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(e) Application of Reductions of the Commitments. Upon the occurrence of
any of the events described in the above paragraphs of this Section 1.06, the
amount of the proposed or required reduction of the Commitments, if any, shall
be applied to the reduction of the Lenders' respective Commitments on a pro rata
basis, as provided in Section 1.14. Each such reduction of the aggregate
Commitments shall apply proportionately to reduce each dollar level of the
aggregate Commitments shown in the Table of scheduled automatic reductions in
Section 1.02, for reduction dates occurring after the date of such reduction.
(f) Mandatory Prepayments; Applications of Prepayments.
(i) Simultaneously with any mandatory automatic reduction of the
Commitments under Section 1.02 or Section 1.06(b), (e) or (d), the
Borrower (A) shall pay to the Agent, for the ratable account of each
Lender, any then accrued unpaid Commitment Fee on the reduced portion of
the respective Commitments, (B) shall repay such amount of the aggregate
principal amount of the Notes as shall cause the outstanding principal
balance thereunder to be less than or equal to the aggregate Commitments,
after giving effect to such reduction, and (C) shall pay any
indemnification payments due in accordance with Section 1.11 in respect of
LIBOR Loans so prepaid.
(ii) All voluntary and mandatory prepayments of the Notes under this
Section 1.06 (A) shall be made without set-off (other than for final
judgments for the payment of money against either Agent or any Lender),
deduction or counterclaim, and (B) unless otherwise specified in this
Section 1.06, shall be applied first, to overdue interest, fees,
indemnification payments and expenses hereunder and second, to pay
principal of the Notes, provided, in each case, that (A) payments of
principal of the Notes shall be applied to the Lenders' respective Notes
pro rata as provided in Section 1.14, unless otherwise agreed to by the
Lenders (in which case the Agent will provide notice to the Borrower of
such alternate application within a reasonable period of time thereafter),
and (B) applications of prepayments to principal shall be made first to
Base Rate Loans and then to LIBOR Loans.
Section 1.07. Fees.
(a) Commitment Fee. The Borrower shall pay to the Agent, for the ratable
account of each Lender, a non-refundable fee (the "Commitment Fee') on the
aggregate daily unused portion of the Commitments from the date hereof to and
including the earlier of the termination of the Commitments or the Expiration
Date, at the rate of one-half of one percent (1/20/o) (computed on the basis of
the actual number of days elapsed over a 365-366 day year), payable quarterly in
arrears on each Quarterly Date, without setoff, deduction or counterclaim, with
a final payment at the maturity of the Notes, whether by payment, prepayment,
acceleration or otherwise.
(b) Funding Fee. The Borrower shall pay CIBC a non-refundable funding fee
on the date hereof in the amount specified in the Fee Letter (the "Funding!
Fee").
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(c) Agency Fee. The Borrower shall pay the Agent semi-annually a
non-refundable agency fee in the amount specified in the Fee Letter (the "Agency
Fee").
Section 1.08. Requirements of Law.
(a) In the event that any Regulatory Change shall:
(i) change the basis of taxation of any amounts payable to any Lender
under this Agreement or the Notes in respect of any Loans, including
without limitation LIBOR Loans (other than taxes imposed on the overall net
income of such Lender);
(ii) impose or modify any reserve, compulsory loan assessment, special
deposit or similar requirement relating to any extensions of credit or
other assets of, or any deposits with or other liabilities of, any office
of such Lender (including any of such Loans or any deposits referred to in
the definition of "LIBOR Base Rate" in Article XI); or
(iii) impose any other conditions affecting this Agreement in respect
of Loans, including without limitation LIBOR Loans (or any of such
extensions of credit, assets, deposits or liabilities);
and the result of any of the foregoing shall be to increase such Lender's costs
of making or maintaining any Loans, including without limitation LIBOR Loans or
any Commitment, or to reduce any amount receivable by such Lender hereunder in
respect of any of its LIBOR Loans or any Commitment, in each case only to the
extent that such additional amounts are not included in the LIBOR Base Rate or
Prime Rate applicable to such Loans, then the Borrower shall pay on demand to
such Lender, through the Agent, and from time to time as specified by such
Lender, such additional amounts as such Lender shall reasonably determine are
sufficient to compensate such Lender for such increased cost or reduced amount
receivable.
(b) If at any time after the date of this Agreement any Lender shall have
determined that the applicability of any law, rule, regulation or guideline
adopted pursuant to or arising out of the July 1988 report of the Basle
Committee on Lending Regulations and Supervisory Practices entitled
"International Convergence of Capital Measurement and Capital Standards", or the
adoption or implementation of any Regulatory Change regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof (whether or not having the
force of law), has or will have the effect of reducing the rate of return on
such Lender's capital or on the capital of such Lender's holding company, if
any, as a consequence of the existence of its obligations hereunder to a level
below that which such Lender or its holding company could have achieved but for
such adoption, change or compliance (taking into consideration such Lender's
policies with respect to capital adequacy) by an amount reasonably deemed by
such Lender to be material, then from time to time following written notice by
such Lender to the Borrower as provided in paragraph (c) of this Section, within
fifteen (I 5) days after demand by such Lender, the Borrower shall pay to such
Lender, through the Agent, such additional amount or amounts as such Lender
shall reasonably
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determine will compensate such Lender or such corporation, as the case may be,
for such reduction, provided that to the extent that any or all of the
Borrower's liability under this Section arises following the date of the
adoption of any such Regulatory Change (the "Effective Date"), such compensation
shall be payable only with respect to that portion of such liability arising
after notice of such Regulatory Change is given by such Lender to the Borrower
(unless such notice is given within sixty (60) days after the Effective Date, in
which case such compensation shall be payable in respect of all periods before
and after the Effective Date).
(c) If any Lender becomes entitled to claim any additional amounts pursuant
to this Section, it shall promptly notify the Borrower of the event by reason of
which it has become so entitled. A certificate setting forth in reasonable
detail the computation of any additional amounts payable pursuant to this
Section submitted by such Lender to the Borrower shall be delivered to the
Borrower and the other Lenders promptly after the initial incurrence of such
additional amounts and shall be conclusive in the absence of manifest error. No
failure on the part of any Lender to demand compensation under paragraph (a) or
(b) above on any one occasion shall constitute a waiver of its rights to demand
compensation on any other occasion. The protection of this Section shall be
available to each Lender regardless of any possible contention of the invalidity
or inapplicability of any law, regulation or other condition which shall give
rise to any demand by such Lender for compensation thereunder.
(d) Upon notice to the Borrower from any Lender as contemplated in
subparagraph (c) above, Borrower may seek to locate a replacement Lender
therefor and arrange for an assigmnent of the original Lender's interest in the
Loans and the Loan Documents as provided under Article XIII, provided that (i)
any such replacement Lender shall be reasonably acceptable to the Agent and (ii)
any such replacement of the original Lender shall not relieve the Borrower of
any accrued obligations to the original Lender under subparagraph (b) above or
otherwise under this Agreement and the other Loan Documents.
Section 1.09. Limitations on LIBOR Loans; Illegality.
(a) Anything herein to the contrary notwithstanding, if, on or prior to the
determination of an interest rate for any LIBOR Loans for any applicable
Interest Period, the Agent shall determine (which determination shall be
conclusive absent manifest error) that:
(i) by reason of any event affecting United States money markets or
the London interbank market, quotations of interest rates for the relevant
deposits are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining the rate of interest for such Loans
under this Agreement; or
(ii) the rates of interest referred to in the definition of "LIBOR
Base Rate" in Article XI, on the basis of which the rate of interest on any
LIBOR Loans for such period is determined, do not accurately reflect the
cost to the Lenders of making or maintaining such LIBOR Loans for such
period;
then the Agent shall give the Borrower prompt notice thereof (and shall
thereafter give the Borrower prompt notice of the cessation, if any, of such
condition), and so long as such condition
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remains in effect, the Lenders shall be under no obligation to make LIBOR Loans
or to convert Prime Rate Loans into LIBOR Loans and the Borrower shall, on the
last day(s) of the then current Interest Period(s) for any outstanding LIBOR
Loans, either prepay such LIBOR Loans in accordance with Sections 1.01, 1.02 and
1.06 or convert such Loans into Prime Rate Loans in accordance with Section
1.04.
(b) Notwithstanding any other provision herein, if for any reason a Lender
shall be unable to make or maintain LIBOR Loans as contemplated by this
Agreement, such Lender shall provide prompt written notice to the Borrower and
(i) such Lender's commitment hereunder to make LIBOR Loans, continue LIBOR Loans
as such and convert Prime Rate Loans to LIBOR Loans shall thereupon terminate
and (ii) such Lender's Loans then outstanding as LIBOR Loans, if any, shall be
converted automatically to Prime Rate Loans on the respective last days of the
then current Interest Periods with respect to such Loans or within such earlier
period as required by law. If any such conversion of a LIBOR Loan occurs on a
day which is not the last day of the then current Interest Period with respect
thereto, and if the reason for such Lender's inability to make or maintain LIBOR
Loans as contemplated by this Agreement is a Regulatory Change, then the
Borrower shall pay to such Lender such amounts, if any, as may be required
pursuant to Section 1.11.
(c) Upon notice to the Borrower from any Lender as contemplated in
subparagraph (b) above, Borrower may seek to locate a replacement Lender
therefor and arrange for an assignment of the original Lender's interest in the
Loans and the Loan Documents as provided under Article XIII, provided that (i)
any such replacement Lender shall be reasonably acceptable to the Agent and (ii)
any such replacement of the original Lender shall not relieve the Borrower of
any accrued obligations to the original Lender under subparagraph (b) above or
otherwise under this Agreement and the other Loan Documents.
Section 1.10. Taxes.
(a) All payments made by the Borrower under this Agreement and the Notes
shall be made free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Govenmental Authority (all such
taxes, levies, imposts, duties, charges, fees, deductions and withholdings being
hereinafter called "Taxes"); provided, however, that the term "Taxes" shall not
include net income taxes, franchise taxes (imposed in lieu of net income taxes)
and general intangibles taxes (such as those imposed by the State of Florida)
imposed on the Agent or any Lender, as the case may be, as a result of a present
or former connection or nexus between the jurisdiction of the government or
taxing authority imposing such tax (or any political subdivision or taxing
authority thereof or therein) and the Agent or such Lender other than that
arising solely from the Agent or such Lender having executed, delivered or
performed its obligations or received a payment under, or enforced, this
Agreement, the Notes or any of the Security Documents. If any Taxes are required
to be withheld from any amounts payable to the Agent or any Lender hereunder or
under the Notes, the amounts so payable to the Agent or such Lender shall be
increased to the extent necessary to yield to the Agent or such Lender (after
payment of all Taxes) interest or any such other amounts payable hereunder at
the rates or in the amounts
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specified in this Agreement and the Notes. Whenever any Taxes are payable by the
Borrower in respect of this Agreement or the Notes, as promptly as possible
thereafter the Borrower shall send to the Agent for its own account or for the
account of such Lender, as the case may be, a certified copy of an original
official receipt received by the Borrower showing payment thereof. If the
Borrower fails to pay any Taxes when due to the appropriate taxing authority or
fails to remit to the Agent the required receipts or other required documentary
evidence, the Borrower shall indemnify the Agent and the Lenders for any
incremental taxes, interest or penalties that may become payable by the Agent or
any Lender as a result of any such failure. If, after any payment of Taxes by
the Borrower under this Section, any part of any Tax paid by the Agent or any
Lender is subsequently recovered by the Agent or such Lender, the Agent or such
Lender shall reimburse the Borrower to the extent of the amount so recovered. A
certificate of an officer of the Agent or such Lender setting forth the amount
of such recovery and the basis therefor shall, in the absence of manifest error,
be conclusive. The Agent and the Lenders shall use reasonable efforts to notify
the Borrower of their attempts, if any, to obtain abatements of any such Taxes
and the receipt by the Agent or the Lenders of any funds in connection
therewith. The agreements in this subsection shall survive the termination of
this Agreement and the payment of the Notes and all other amounts payable
hereunder.
(b) Each Lender, if any, that is not incorporated under the laws of the
United States or a state thereof agrees that prior to the date any payment is
required to be made to it hereunder it will deliver to the Borrower and the
Agent (i) two duly completed copies of United States Internal Revenue Service
Form 1 00 1 or 4224 or successor applicable form, as the case may be, and (ii)
an Internal Revenue Service Form W-8 or W-9 or successor applicable form. Each
such Lender also agrees to deliver to the Borrower and the Agent two further
copies of the said Form I 00 I or 4224 and Form W-8 or W-9, or successor
applicable forms or other manner of certification, as the case may be, on or
before the date that any such form expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent form previously
delivered by it to the Borrower, and such extensions or renewals thereof as may
reasonably be requested by the Borrower or the Agent, unless in any such case an
event (including, without limitation, any change in treaty, law or regulation)
has occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form with respect to it and
such Lender so advises the Borrower and the Agent. Such Lender shall certify (x)
in the case of a Form 1001 or 4224, that it is entitled to receive payments
under this Agreement without deduction or withholding of any United States
federal income taxes and (y) in the case of a Form W-8 or W-9, that it is
entitled to an exemption from United States backup withholding tax.
Section 1.11. Indemnification. The Borrower shall pay to the Agent, for the
account of each Lender, upon the request of such Lender delivered to the Agent
and thereafter delivered by the Agent to the Borrower, such amount or amounts as
shall compensate such Lender for any loss (including, in the case of LIBOR
Loans, loss of profit), cost or expense incurred by such Lender (as reasonably
determined by such Lender) as a result of.
(a) any payment or prepayment or conversion of any LIBOR Loan held by such
Lender on a date other than the last day of the Interest Period for such LIBOR
Loan (including
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without limitation any such payment, prepayment or conversion required under
Section 1.04 or 1.06); or
(b) any failure by the Borrower to borrow, convert into or continue a LIBOR
Loan on the date for such borrowing specified in the relevant Request for
Advances or Interest Rate Option Notice under Section 1.04 or otherwise;
such compensation to include, without limitation, an amount equal to: (i) any
loss or expense suffered by such Lender during the period from the date of
receipt of such early payment or prepayment or the date of such conversion or
failure to borrow, convert or continue to the last day of such Interest Period,
if the rate of interest obtainable by such Lender upon the redeployment of an
amount of funds equal to the LIBOR Loans so paid, prepaid or converted or as to
which such failure to borrow, convert or continue applies is less than the rate
of interest applicable to such LIBOR Loans for such Interest Period and (ii) any
loss or expense suffered by such Lender in liquidating LIBOR deposits prior to
maturity which such Lender is unable to redeploy and which correspond to the
LIBOR Loans so paid, prepaid or converted or as to which such failure to borrow,
convert or continue applies. The determination by each such Lender of the amount
of any such loss or expense, when set forth in a written notice delivered to the
Agent (and thereafter delivered by the Agent to the Borrower), containing such
Lender's calculation thereof in reasonable detail, shall be presumed correct in
the absence of manifest error.
Section 1.12. Payments Under the Notes. All payments and prepayments made
by the Borrower of principal of, and interest on, the Notes and other sums and
charges payable under this Agreement, including without limitation the
Commitment Fee and any payments under Sections 1.08, 1.10 and 1.11, shall be
made in immediately available funds to the Agent (as specified in Section 14.03)
for the accounts of the Lenders as provided in Section 1.14 and otherwise herein
or in the Fee Letter, not later than 2:00 P.M. (New York Time), on the date on
which such payment shall become due. The failure by the Borrower to make any
such payment by such hour shall not constitute a Default hereunder so long as
payment is received later that day, provided that any such payment made after
2:00 P.M. (New York Time), on such due date shall be deemed to have been made on
the next Business Day for the purpose of calculating interest on amounts
outstanding on the Notes. The Borrower shall, at the time of making each payment
under this Agreement or the Notes, specify to the Agent the Notes or amounts
payable by the Borrower hereunder to which such payment is to be applied (and in
the event that it fails to so specify, or if an Event of Default has occurred
and is continuing, the Agent may distribute such payments in such manner as the
Required Lenders may direct or, absent such direction, as it determines to be
appropriate, subject to the provisions of Section 1.14). Except as otherwise
provided in the definition of "Interest Period" with respect to LIBOR Loans, if
any payment hereunder or under the Notes shall be due and payable on a day which
is not a Business Day, such payment shall be deemed due on the next following
Business Day and interest shall be payable at the applicable rate specified
herein through such extension period. The Agent, or any Lender for whose account
any such payment is made, may (but shall not be obligated to) debit the amount
of any such payment which is not made by such time to any deposit account of the
Borrower with the Agent or such Lender, as the case may be with prompt advice
thereof. Each payment received by the Agent under this Agreement or any Note for
the account of a Lender
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shall be paid promptly to such Lender, in immediately available funds, for the
account of such Lender for the Note in respect to which such payment is made.
Section 1.13. Set-Off, Etc. The Borrower agrees that, in addition to (and
without limitation of) any right of set-off, bankers' lien or counterclaim a
Lender may otherwise have and in addition to the debit right afforded in Section
1.12, each Lender (and each subsequent holder of any Note) shall be entitled, at
its option, to offset balances held by it, or by any of its respective branches
or agencies, for the account of the Borrower at any of its offices, in Dollars
or in any other currency, against any principal of or interest on the Notes held
by such Lender (or subsequent noteholder) or other fees or charges owed to such
Lender (or subsequent noteholder) hereunder which are not paid when due
(regardless of whether such balances are then due to the Borrower and regardless
of whether the Lenders are otherwise fully secured), in which case it shall
promptly notify the Borrower and the Agent thereof, provided that such Lender's
(or subsequent noteholder's) failure to give such notice shall not affect the
validity thereof and (as security for any Indebtedness hereunder) the Borrower
hereby grants to the Agent and the Lenders a continuing security interest in any
and all balances, credit, deposits, accounts or moneys of the Borrower
maintained with the Agent and any Lender now or hereafter. If a Lender (or
subsequent noteholder) shall obtain payment of any principal, interest or other
amounts payable under this Agreement through the exercise of any right of
set-off, bankees lien or counterclaim or otherwise or pursuant to the debit
right provided in Section 1.12, it shall promptly purchase from the other
Lenders participations in (or, if and to the extent specified by such Lender,
direct interests in) the Note(s) held by the other Lenders in such amounts, and
make such other adjustments from time to time as shall be equitable, to the end
that all the Lenders shall share the benefit of such payment (net of any
expenses which may be incurred by such Lender in obtaining or preserving such
benefit) pro rata based upon the unpaid principal amounts of and interest on the
Note(s) held by each of them. To such end, the Lenders shall make appropriate
adjustments among themselves (by the resale of participations sold or otherwise)
if such payment is rescinded or must otherwise be restored. The Borrower agrees
that any Lender or any other Person which becomes an assignee pursuant to
Article XIII(B) hereof with respect to the Loans (each being hereinafter
referred to as an "Assignee") may exercise all rights of setoff, bankers' lien,
counterclaim or similar rights with respect to such assignment. Nothing
contained herein shall be deemed to require any Assignee to exercise any such
right or shall affect the right of any Assignee to exercise, and retain the
benefits of exercising, any such right with respect to any indebtedness or
obligation of the Borrower, other than the Borrowees indebtedness and
obligations under this Agreement.
Section 1.14. Pro Rata Treatment; Sharing.
(a) Except to the extent otherwise provided herein and in the Fee Letter or
as otherwise agreed by the Lenders: (i) each borrowing from the Lenders under
the Commitments shall be made from the Lenders and each payment of the
Commitment Fee under Section 1.07 shall be made to the Lenders pro rata
according to the amounts of their respective unused Commitments; (ii) the
principal amount of LIBOR Loans made by each Lender shall be determined on a
pro rata basis in accordance with its respective Commitment (when making.
Advances) or the outstanding principal amounts of the Loans owed to such Lender
(in the case of conversions to or continuations of Loans as LIBOR Loans); (iii)
each payment and prepayment
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of principal of the Notes shall be made to the Lenders pro rata in accordance
with the respective unpaid principal amounts of the respective Notes held by the
Lenders; (iv) each payment of interest on the Notes shall be made for the
accounts of the Lenders and each payment of any other sums and charges payable
under this Agreement (except for the Agency Fee and the Funding fee, which are
payable in accordance with the Fee Letter) shall be made to the Lenders pro rata
in accordance with the respective unpaid principal amounts of, and interest on,
the Loans made by each of them; (v) each payment under Section 1.08, 1.10 or
1.11 shall be made to each Lender in the amount required to be paid to such
Lender to adequately indemnify or compensate such Lender for losses suffered or
costs incurred by such Lender as provided in such Section; and (vi) each
distribution of cash, property, securities or other value received by any
Lender, directly or indirectly, in respect of the Borrower's Indebtedness
hereunder, whether pursuant to any attachment, garnishment, execution or other
proceedings for the collection thereof or pursuant to any bankruptcy,
reorganization, liquidation or other similar proceeding, after payment of
collection and other expenses as provided herein and in the Security Documents,
shall be apportioned among the Lenders pro rata in accordance with the
respective unpaid principal amounts of and interest on the Notes held by each of
them.
(b) Notwithstanding the foregoing, if any Lender ("Recovering Party") shall
receive any such distribution (a "Recovery") in respect thereof, such Recovering
Party shall pay to the Agent for distribution to the Lenders as set forth herein
their respective pro rata shares of such Recovery, based on the Lenders' pro
rata shares of all Loans outstanding at such time, unless the Recovering Party
is legally required to return any Recovery, in which case each party receiving a
portion of such Recovery shall return to the Recovering Party its @@o rata share
of the sum required to be returned without interest. For purposes of this
Agreement, calculations of the amount of the pro rata share of each Lender shall
be rounded to the nearest whole dollar.
(c) The Borrower acknowledges and agrees that, if any Recovering Party
shall be obligated to pay to the other Lenders a portion of any Recovery
pursuant to Section 1.14(b) and shall make such recovery payment, the Borrower
shall be deemed to have satisfied its obligations in respect of Indebtedness
held by such Recovering Party only to the extent of the Recovery actually
retained by such Recovering Party after giving effect to the pro rata payments
by such Recovering Party to the other Lenders. The obligations of the Borrower
in respect of Indebtedness held by each other Lender shall be deemed to have
been satisfied to the extent of the amount of the Recovery distributed to each
such other Lender by the Recovering Party.
Section 1.15. Non-Receipt of Funds by the Agent. Unless the Agent shall
have been notified in writing by a Lender or the Borrower prior to the date on
which such Lender or the Borrower is scheduled to make payment to the Agent of
(in the case of a Lender) the proceeds of a Loan to be made by it hereunder or
(in the case of the Borrower) a payment to the Agent for the account of any or
all of the Lenders hereunder (such payment being herein referred to as a
"Required Payment"), which notice shall be effective upon actual receipt, that
it does not intend to make such Required Payment to the Agent, the Agent may
(but shall not be required to) assume that the Required Payment has been made
and may (but shall not be required to), in reliance upon such assumption, make
the amount thereof available to the intended recipient(s) on such date and, if
such Lender or the Borrower (as the case may be) has not in fact made the
Required Payment to the Agent, the recipient(s) of such payment shall, on
demand, or with
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respect to payment received by the Borrower, within three (3) Business Days
after such receipt repay to the Agent for the Agents own account the amount so
made available together with interest thereon in respect of each day during the
period commencing on the date such amount was so made available by the Agent
until the date the Agent recovers such amount at a rate per annum equal to (a)
the Federal Funds Rate for such day, with respect to interest paid by such
Lender, or (b) the applicable rate provided under Section 1.03, with respect to
interest paid by the Borrower. Nothing herein shall relieve any Lender or
Borrower from liability for failure to make the Required Payment.
Section 1.16. Replacement of Notes. Upon receipt of evidence reasonably
satisfactory to the Borrower of the loss, theft, destruction or mutilation of
any Note and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement reasonably satisfactory to the Borrower provided,
however, that if the holder of such Note is the original holder of such Note or
a financial institution with net capital, capital surplus and undivided profits
in excess of $500,000,000 its own agreement of indemnity shall be deemed to be
satisfactory), or in the case of any such mutilation, upon the surrender of such
Note for cancellation, the Borrower will execute and deliver, in lieu of such
lost, stolen, destroyed, or mutilated Note, a new Note of like tenor.
II. SECURITY; SUBORDINATION; USE OF PROCEEDS
Section 2.01. Security for the Obligations; Subordination; Etc.
(a) Collateral. Except as limited in Schedule 2.01 attached hereto, the
Borrower's obligations hereunder, under the Notes and in respect of any Rate
Hedging Obligations entered into with any of the Lenders or any Affiliates of
any of the Lenders shall be secured at all times by:
(i) the unconditional guaranty of each of the Borrower's Subsidiaries
other than Acme Finance, including without limitation each of the Operating
Companies, the License Companies and the Holding Companies;
(ii) a first priority perfected security interest in and lien upon all
presently owned and hereafter acquired tangible and intangible personal
property and fixtures of each of the Companies, except Acme Finance,
including without limitation the Acme Missouri Note Documents, subject only
to (A) any prior Liens expressly permitted under this Agreement and (B) the
exclusion of any FCC License, except to the extent (if any) that such a
security interest is permitted or not prohibited by the Communication Act
of 1934, as amended, and the rules, regulations and policies of the FCC
(but including, to the maximum extent permitted by law, all rights incident
or appurtenant to any such FCC License, including without limitation the
right to receive all proceeds derived or arising from or in connection with
the sale, assignment or transfer thereof);
(iii) first mortgages on all presently owned and hereafter acquired
real estate owned by each of the Companies, subject only to any prior Liens
expressly permitted
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under this Agreement, together with mortgagee's title insurance policies
reasonably acceptable to the Lenders;
(iv) first priority perfected collateral assignments of or leasehold
mortgages on all real estate leases in which any of the Companies now has or may
in the future have an interest and such third party consents, lien waivers,
non-disturbance agreements and estoppel certificates as the Agent shall
reasonably require, together with mortgagee's title insurance policies
acceptable to the Agent (except to the extent that the Borrower, after the use
of commercially reasonable efforts, is unable to obtain any of the foregoing and
the result thereof could not reasonably be expected to have a Material Adverse
Effect);
(v) a first priority perfected collateral assignment and/or pledge of all
of the issued and outstanding stock, partnership, membership or other ownership
interests in each of the Borrower's Subsidiaries and all warrants, options and
other rights to purchase such ownership interests;
(vi) without limiting the generality of Section 2.01(a)(ii), a first
priority perfected assignment of such of the related Acquisition Documents as
the Agent shall require, together with the written consents thereto of the
related Seller(s) and its or their Affiliates, as necessary (except to the
extent that the Borrower, after the use of commercially reasonable efforts, is
unable to obtain any of the foregoing and the result thereof could not
reasonably be expected to have a Material Adverse Effect); and
(vii) without limiting the generality of Section 2.01(a)(ii), first
priority perfected collateral assignments of all such construction contracts,
management agreements, programming agreements, network affiliation agreements,
and other licenses, permits and authorizations (except for licenses and permits
issued by the FCC to the extent it is unlawful to grant a security interest in
such licenses and permits) and other agreements as the Agent shall reasonably
deem necessary to protect the interests of the Lenders, together with such third
party consents, lien waivers and estoppel certificates as the Agent shall
reasonably require (except to the extent that the Borrower, after the use of
commercially reasonable efforts, is unable to obtain any of the foregoing and
the result thereof could not reasonably be expected to have a Material Adverse
Effect).
(b) Subordination. Without limiting the prohibition thereon set forth in
Section 7.01, all existing and hereafter arising indebtedness of the Borrower
and its Subsidiaries to the Parent Companies or any of them shall be
subordinated to any Indebtedness of the Companies to the Agent and the Lenders
pursuant to subordination agreements satisfactory in form and substance to the
Required Lenders and to the Agents counsel (collectively, the "Parent
Subordination Agreements").
(c) Security Documents. All agreements and instruments described or
contemplated in this Section 2.01, together with any and all other agreements
and instruments heretofore or hereafter securing the Notes and the other
Obligations or otherwise executed in connection with this Agreement, are
sometimes hereinafter referred to collectively as the "Security Documents" and
each individually as a "Security Document". The Borrower agrees to execute and
deliver
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all and all Security Documents, in form and substance satisfactory to the Agent,
and to take any and all such action as the Lenders may reasonably request from
time to time in order to cause the Agent and the Lenders to be secured at all
times as described in this Section.
Section 2.02. Use of Proceeds. The proceeds of the Advances shall be
applied (a) to finance Capital Expenditures and Permitted Acquisitions
permitted under this Agreement and (b) for working capital purposes of the
Borrower and the other Companies, including Transaction Costs.
III. CONDITIONS OF MAKING THE LOANS
Section 3.01. Conditions to Amendment and Restatement. The obligations of
the Lenders to enter into this Agreement, thereby increasing the Commitments and
otherwise amending the Original Agreement, on the date hereof and to make the
first Advances thereafter are subject to the following conditions:
(a) Representations and Warranties. The representations and warranties of
the Companies and the Parent Companies set forth in this Agreement and in the
other Loan Documents shall be true and correct in all material respects on and
as of the date hereof and the Borrowers shall have performed in all material
respect all obligations which were to have been performed by it hereunder prior
to the date hereof.
(b) Loan Documents and Organizational Documents. The Borrower shall have
executed and/or delivered to the Agent (or shall have caused to be executed and
delivered to the Agent by the appropriate Persons), the following:
(i) The Notes;
(ii) All of the Security Documents, including without limitation all
Uniform Commercial Code Financing Statements and Termination Statements and
all mortgages, deeds of trusts and amendments thereto, lessor consents and
waivers and related title insurance policies required by the Agent or its
counsel in connection with the Borrower's compliance with the provisions of
Section 2.01 provided that the deliveries required under Section
2.01(a)(iv) may be deferred until the date of the first Loans under Section
1.01);
(iii) Certified copies of the resolutions of the Board of Directors or
Board of Advisors of each Company, or of each Company's stockholders,
partners, members, managers, officers and/or corporate general partner, as
the case may be, authorizing the execution and delivery of the Loan
Documents to which it is a party;
(iv) A copy of (A) the Certificate or Articles of Incorporation of
each corporate Company and each corporate general partner of a partnership
Company, with any amendments thereto, certified by the appropriate
Secretary of State and by the Secretary or an Assistant Secretary of such
Company or general partner, (B) the Articles of Organization or Certificate
of Formation of each Company which is a limited liability
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company, certified by the appropriate Secretary of State and by the Manager
of each Company and (C) the Certificate of Limited Partnership of each
Company which is a limited partnership certified by the appropriate
Secretary of State and the Secretary of the corporate general partner of
such Company;
(v) A copy of the By-Laws of each corporate Company, with any
amendments thereto, certified by such Company's Secretary;
(vi) A copy of the operating agreement of each Company which is a
limited liability company, with any amendments thereto, certified by an
appropriate, duly authorized officer of such Company, each of which
operating agreements shall be reasonably satisfactory to the Agent and
shall provide, among other matters, for appropriate procedures to ensure
the full enforceability of the collateral assignment and pledge of
membership interests to the Agent contemplated by the applicable Security
Documents;
(vii) A copy of the partnership agreement of each Company which is a
partnership, with any amendments thereto, certified by the Secretary of the
corporate general partner;
(viii) For each Company, certificates of legal existence and good
standing (both as to corporate law, if applicable, and, if available, tax
matters) issued as of a reasonably recent date by such Company's state of
organization or formation and any other state in which such Company is
authorized or qualified to transact business;
(ix) To the extent requested by the Agent, true and complete copies of
all Licenses, all other material govermental licenses, franchises and
permits, all material third party consents and all other material leases,
contracts, agreements, instruments and other documents specified in
Schedules 4.04, 4.07, 4.11, 4.12, 4.18 and 4.19;
(x) Such Uniform Commercial Code, Federal tax lien and judgment
searches with respect to the Companies, any Seller transferring assets to a
Company under the related Acquisition Agreement and any other third parties
as the Agent shall require, the results thereof to be satisfactory to the
Agent;
(xi) True and complete copies of the Acquisition Documents, the
Indenture and the Acme Intermediate Indenture, which shall be reasonably
satisfactory to the Agent;
(xii) The Opening Balance Sheet;
(xiii) The Environmental Site Assessments referred to in Section 4.20
and Schedule 4.20;
(xiv) Certificates of insurance evidencing the insurance coverage and
policy provisions required in this Agreement; and
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(xv) Such other supporting documents and certificates as the Agent or
the Lenders may reasonably request from time to time.
(c) The Acme Holdings Equity Contribution. Acme Holdings shall have
consummated the Acme Holdings Equity Financing and shall have made the Acme
Holdings Equity Contribution to the Borrower, through Acme Intermediate, from
the net proceeds thereof and in an amount not less than $42,900,000, and the
Agent shall have received satisfactory evidence thereof.
(d) The Acme Intermediate Equity Contribution. Acme Intermediate and Acme
Finance shall have consummated the Acme Intermediate Offering substantially in
accordance with the Acme Intermediate Offering Memorandum and, from the net
proceeds thereof, shall have made the Acme Intermediate Equity Contribution to
the Borrower in an amount not less than $38,200,000, and the Agent shall have
received satisfactory evidence thereof.
(e) The Offering. The Borrower and Acme Finance shall have consummated the
Offering substantially in accordance with the Offering Memorandum and the
Indenture and the Agent shall have received satisfactory evidence thereof.
(f) Use of Proceeds. (a) The Borrower shall have applied approximately
$146,000,000 of the aggregate proceeds of the Equity Contributions and the
Offering to make an intercompany loan to Acme Missouri in the amount of at least
$132,000,000 and to make capital contributions to Acme Missouri in the amount of
at least $14,000,000 and (b) Acme Missouri shall have used the proceeds of such
loan and capital contributions to fund the KPLR Escrow as contemplated by
Section 1.1 of the KPLR Escrow Agreement.
(g) FCC Filings. The Agent shall have received a true and complete
date-stamped copy of the KPLR Transfer Application, as filed with the FCC on or
before October 1, 1997.
(h) Seller Consents. The Agent shall have received the written consent of
each of the Sellers and the Affiliates thereof (including without limitation the
KPLR Sellers and the KPLR Licensees) necessary in connection with the collateral
assignments required in Section 2.01(a)(vi).
(i) Agrreement of Parent Companies. Acme Holdings, for itself and on behalf
of each of the other Parent Companies, shall have entered into the Affiliate
Agreement.
(j) Kellner Consulting Agreement. Acme Holdings and Jamie Kellner shall
have entered into the Kellner Consulting Agreement, Acme Holdings shall have
assigned all of its rights and obligations thereunder to the Borrower, with Mr.
Kellner's consent, and the same shall be in full force and effect.
(k) Officer's Certificates as to Compliance, Documents, Etc. The Borrower
shall have provided to the Agent a compliance certificate, substantially in the
form of Schedule 3.01(k) hereto or such other form as shall be satisfactory to
the Agent, duly executed
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on behalf of the Borrower by its chief executive officer or chief financial
officer, certifying as to satisfaction by the Borrower of the conditions to
lending set forth in this Section 3.01 and in Sections 3.02 and 3.03, as
applicable, and, specifically, as to certain matters specified therein.
(1) Schedule of Cost Reductions. If, for any period ending on or after the
date hereof, the Borrower wishes to effect pro forma adjustments of EBITDA, as
provided in the definition of "Adjusted EBITDX", arising from cost and expense
reductions relating to any of the Stations acquired through and including the
date hereof (including KPLR-TV), the Borrower shall have delivered to the Agent
(in sufficient copies for all of the Lenders), with respect to each such
completed Acquisition, a detailed schedule of such cost and expense reductions,
which shall be subject to the consent of the Required Lenders.
(m) Company Counsel Opinions. The Agent shall have received:
(i) the favorable written opinions of Goodwin, Procter & Hoar, LLP and
Dickstein, Shapiro, Morin & Oshinsky, LLP, counsel to the Companies, each
dated as of the date hereof, addressed to the Agent and the Lenders and
reasonably satisfactory to the Agent in scope and substance;
(ii) the favorable written opinion of Dickstein, Shapiro, Morin &
Oshinsky, LLP, special communications counsel to the Companies, dated as of
the date hereof, addressed to the Agent and the Lenders and reasonably
satisfactory to the Lenders in scope and substance; and
(iii) the favorable written opinion of special local counsel to the
Companies in the States of Oregon and Tennessee dated as of the date
hereof, addressed to the Agent and the Lenders and reasonably satisfactory
to the Lenders in scope and substance (provided that the delivery of these
local counsel opinions may be deferred until the date of the first Loans
under Section 1.01).
(n) Repayment of Existing Indebtedness. As of the date hereof, the Agent
shall have received evidence that (i) the principal of and interest on, and all
other amounts owing in respect of, Indebtedness, if any, which is to be repaid
on the Closing shall have been (or shall simultaneously be) paid in full in
cash, (ii) any commitments to extend credit under the agreements or instruments
relating to such Indebtedness have been terminated or canceled and (iii) all
guaranties in respect of, and liens securing, any such Indebtedness have been
released (or arrangements for such releases made to the reasonable satisfaction
of the Agent), which requirement shall include receipt by the Agent of all such
executed pay-off letters, Uniform Commercial Code termination statements,
mortgage releases and other instruments as the Agent shall have requested to
release and terminate of record any such liens.
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(o) No Material Adverse Change. As of the date hereof, and since August 15,
1997, no event or circumstance shall have occurred which could have a Material
Adverse Effect.
(p) Legal and Other Fees. As of the date hereof, all fees owed to the
Agent and the Lenders under the Fee Letter and all legal fees and expenses of
counsel to the Agent incurred through such date (including fees and expenses
incurred in connection with the preparation of the Original Agreements and all
related Loan Documents) shall have been paid in full.
(q) Review by Agent's Counsel. All legal matters incident to the
transactions hereby contemplated shall be reasonably satisfactory to counsel for
the Agent.
Section 3.02. Acquisition Loans. Without in any way limiting the discretion
of the Required Lenders to approve or withhold approval (to the extent provided
in the definition of Permitted Acquisitions) of any Acquisition after the date
hereof, or to impose additional reasonable conditions upon their consent to any
such acquisition, the obligations of the Lenders to make any Advances to finance
any Permitted Acquisition after the date hereof are subject to the following
conditions, except to the extent that the Required Lenders may waive such
conditions in writing:
(a) Acquisition Closings.
(i) The transactions contemplated by the applicable Acquisition
Agreement shall have been consummated (except for the payment of that
portion of the purchase price thereunder being paid with the proceeds of
Advances) substantially in accordance with the terms thereof and, in any
event, in a manner reasonably satisfactory to Agent, including without
limitation (A) the repayment in full in cash (simultaneously with, and from
the proceeds of, Advances, or otherwise) or other satisfactory disposition
of all Indebtedness of the applicable Sellers not being assumed by the
Borrower or an Operating Company, and the release of all related liens and
encumbrances on the properties transferred to the Companies under the
applicable Acquisition and (B) the valid assumption by the Borrower or such
Operating Company, or other satisfactory disposition, of all other
liabilities of the applicable Sellers in respect of the assets and
properties transferred under such Acquisition Agreement.
(ii) The Agent shall have received evidence of the receipt of all
material licenses, permits, approvals and consents, if any, required with
respect to such Acquisition and any other related transaction contemplated
by this Agreement (including without limitation the consents of the FCC to
the sale contemplated by such Acquisition Agreement and to the collateral
assignment of any related material agreements or licenses to the Agent, on
behalf of the Lenders), and any other material consents or filings of or
with applicable governmental authorities or other third parties.
(iii) The applicable Sellers shall have consented to the collateral
assignment to the Agent of the rights of the Borrower or the applicable
Operating Company under the Acquisition Agreement and any other agreements
executed thereunder, as required under Section 2.01(a)(vi).
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(iv) The Agent shall have received copies of the legal opinions
delivered by the Seller(s) pursuant to the applicable Acquisition Agreement
in connection with the Acquisition, together with a letter from each Person
delivering an opinion (or authorization within the opinion) authorizing
reliance thereon by the Agent and the Lenders to the extent reasonably
obtainable.
(v) Any other conditions imposed by the Required Lenders in giving
their consent to such Permitted Acquisition shall have been satisfied.
(b) Due Diligence. The Agent and its counsel shall have completed their due
diligence review with respect to the proposed Acquisition, including a review of
all of material agreements and shall be reasonably satisfied with the results of
such review in all material respects.
(c) Officer's Certificates as to Compliance, Documents, Etc. The Borrower
shall have provided to the Agent a compliance certificate, substantially in the
form of Schedule 3.02(c) or such other form as shall be satisfactory to the
Agent, duly executed on behalf of the Borrower by its chief executive officer or
chief financial officer, certifying as to satisfaction by the Borrower of the
conditions to the consummation of the proposed Acquisition as a Permitted
Acquisition under Section 7.04 and the conditions to lending set forth in this
Section 3.02 and in Section 3.03.
(d) Compliance Certificate. If requested by the Agent, the Borrower shall
have executed and delivered (or caused to be executed and delivered by the
appropriate Operating Companies) to the Agent a certificate of representations,
warranties and compliance satisfactory in form and substance to the Agent,
together with updated versions of Schedules to this Agreement and of the
applicable Officer's Certificates delivered pursuant to the Security and Pledge
Agreements, and otherwise adjusting the Companies' representations and
warranties contained herein and therein. To the extent appropriate and related
to such Acquisition and verified by the Agent as such in writing, such
certificate, shall be deemed an amendment of this Agreement and such Security
Documents and shall be incorporated by reference herein and therein.
(e) Other Deliveries. The Companies shall have executed and/or delivered to
the Agent (or shall have caused to be executed and delivered to the Agent by the
appropriate Subsidiary or other person(s), the following:
(i) With respect to the assets to be acquired pursuant to such
Acquisition, and the applicable Seller(s), all Uniform Commercial Code
Financing Statements and Termination Statements and all security
agreements, security and pledge agreements, securities pledge agreements,
mortgages, deeds of trusts and amendments thereto and related title
insurance policies and all other Security Documents necessary and required
by the Agent or its counsel in connection with the Borrower's compliance
with the provisions of Section 2.01;
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(ii) Certified copies of the resolutions of the Board of Directors or
Board of Advisors or of the stockholders, partners, members, managers,
officers or corporate general partner of each applicable Company, as the
case may be, authorizing such Acquisition, which resolutions shall not be
required, unless requested by the Agent, if the opinion of general counsel
required under Section 3.02(f) is provided;
(iii) Such certificates of public officials and copies of material
consents, agreements and other documents and such other supporting
documents and information as the Agent shall reasonably request;
(iv) Phase I Environmental Site Assessments with respect to all owned
and leased real properties to be acquired in connection with the proposed
Acquisition and designated by the Required Lenders, which shall be
reasonably satisfactory in all material respects to the Required Lenders;
(v) Such Uniform Commercial Code, Federal tax lien and judgment
searches as the Agent shall reasonably require, the results thereof to
disclose no liens except liens permitted by this Agreement and liens to be
discharged upon completion of the Acquisition;
(vi) A combined balance sheet for the Companies, pro forma for the
Acquisition and the proposed Advances;
(vii) In connection with any Acquisition involving properties in a new
jurisdiction, or the purchase or formation of a new Subsidiary, or if
required by the Agent, updated certificates of insurance evidencing the
additional insurance coverage and policy provisions required in this
Agreement;
(viii) To the extent applicable, one or more assignment agreements,
effecting the assignment to the appropriate Subsidiary by Acme Holdings or
such other applicable Parent Company, of all of its rights, title and
interest in and to the related Acquisition Documents, together with any
necessary Sellers' consents, which shall be reasonably satisfactory in all
material respects to the Agent;
(ix) In connection with the consummation of the transactions
contemplated by the KPLR Acquisition Documents (other than the KPLR Escrow
Agreement and the KPLR Time Brokerage Agreement), documentation reasonably
satisfactory to the Agent evidencing (i) the renaming of Koplar
Communications, Inc. and Koplar Communications Television, LLC to Acme
Television of Missouri, Inc. and Acme Television Licenses of Missouri,
L.L.C, respectively, as contemplated; and
(x) Such other supporting documents and certificates as the Agent or
the Lenders may reasonably request.
(f) General and Local Counsel Opinions.
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(i) In connection with an Acquisition involving the purchase or
formation of a new Subsidiary and/or the execution of additional Security
Documents or any other Loan Document, or otherwise, if reasonably required
by the Agent, the Agent shall have received the favorable written opinions
of (A) general counsel or regularly employed outside counsel to the
Companies and (B) special FCC counsel to the Companies, in each case dated
the date of such Loans, addressed to the Agent and the Lenders and
substantially in the forms attached as Schedules 3.02(f)(i) and (ii),
respectively.
(ii) Only if reasonably requested in connection with the recording of
any mortgages or similar instruments or any material issues of state law
raised in connection with such Loans or the related Permitted Acquisition,
the Agent shall have received the favorable opinion of local counsel to the
Companies, dated the date of such Loans, addressed to the Agent and the
Lenders and substantially in the form attached as Schedule 3.02(f)(:iii).
(g) Legal Fees. All reasonable legal fees and expenses of counsel to the
Agent incurred through the date of such Loans shall have been paid in full.
(h) Review by Agent's Counsel. All legal matters incident to the
transactions hereby contemplated shall be reasonably satisfactory to counsel for
the Agent.
Section 3.03. All Loans. The obligations of the Lenders to make any Loans
(including the first Advances hereunder and all Advances in respect of Permitted
Acquisitions) are subject to the following conditions:
(a) All representations and warranties of the Companies and the Parent
Companies set forth in this Agreement and in the other Loan Documents shall be
true and correct in all material respects on and as of the Borrowing Date of
such Loans (except to the extent they expressly relate to an earlier specified
date or are affected by transactions or events occurring after the date hereof
and permitted or not prohibited hereunder). Each telephonic or written request
for such Loans shall constitute a representation to such effect as of the date
of such request and as of the date of such borrowing
(b) After giving effect to such Loans (both as of the proposed Borrowing
Date thereof and, on a pro forma basis, the last day of the most recent fiscal
quarter for which financial statements have been delivered to the Lenders under
Section 6.05), no Default shall have occurred and be continuing. Each telephonic
or written request for such Loans shall constitute a representation to such
effect as of the date of such request and as of the date of such borrowing.
(c) The Agent shall have received a properly completed Request for
Advances, together with all such financial and other information as the Agent
shall reasonably require to substantiate the current and pro forma
certifications of no Default contained therein.
(d) The Agent shall have received such other supporting documents and
certificates as the Agent and the Required Lenders may reasonably request.
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Section 3.04. Lender Approvals. For purposes of determining compliance with
the conditions precedent referred to in Sections 3.01, 3.02 and 3.03, on the
date of the first Advances hereunder, each of the Lenders shall be deemed to
have consented to, approved or accepted or be satisfied with each document or
other matter which is the subject of such Lender's consideration under any of
the provisions of such Sections, unless an officer of the Agent responsible for
the transactions contemplated by the Loan Documents shall have received written
notice from such Lender prior to the first Advances hereunder specifying its
objection thereto and such Lender shall have failed to make available to the
Agent such Lender's ratable share of the first Advances.
IV. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and
warrants to the Agent and to the Lenders (which representations and warranties
shall give effect to the consummation of all of the transactions referred to in
Section 3.01 and shall survive the delivery of the Notes and the making of the
Loans) that:
Section 4.01. Financial Statements. The Borrower has heretofore furnished
to the Lenders:
(a) the audited and unaudited balance sheets and related statements of
operations, members' equity and cash flow of the Borrower and its Subsidiaries
listed on Schedule 4.01(a) hereto (the "Financial Statements"); and
(b) the June 30, 1997, balance sheet of the Companies showing their pro
forma financial condition after the consummation of any and all transactions
contemplated to have occurred as of the date hereof, as if they had occurred on
August 31, 1997, attached as Schedule 4.01(b) (as updated pursuant to Section
3.01(b), the "Opening Balance Sheet").
The Financial Statements have been prepared in accordance with GAAP. Since
August 15, 1997, except for the Offering, the Tennessee Acquisition and the
transactions contemplated by the KPLR Acquisition Documents, there has been no
material adverse change in the assets, properties, business or condition
(financial or otherwise) of any of the Companies and no dividends or
distributions have been declared or paid by any of the Companies. None of the
Companies has any contingent obligations, liabilities for taxes or unusual
forward or long-term commitments except as specified in such Financial
Statements and except for the Offering and the transactions contemplated by the
KPLR Acquisition Documents. The Opening Balance Sheet fairly represents the pro
forma financial condition of the Companies as of its date. All financial
projections submitted to the Lenders by the Borrower at the time delivered
(including all projections set forth in the Budget) are believed by the Borrower
to be reasonable in light of all information presently known by the Borrower.
Section 4.02. Organization, Oualification, Etc. Each of the Companies (a)
is a corporation, limited partnership or limited liability company duly
organized or formed, as the case may be, validly existing and in good standing
under the laws of its state of organization or formation, all as specified in
Schedule 4.02, (b) has the power and authority to own its properties and to
carry on its business as now being conducted and as presently contemplated, (c)
has the power and authority to execute and deliver, and perform its respective
obligations under, this Agreement, the Notes and the Security Documents and all
other Loan Documents contemplated
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hereby and (d) is duly qualified to transact business in the jurisdictions
specified in such Schedule 4.02 and in each other jurisdiction where the nature
of its activities requires such qualification except where the failure to so
qualify will not have a Material Adverse Effect. As of the date of this
Agreement neither the Borrower nor any of the other Companies has any
Subsidiaries, except as described in Schedule 4.19.
Section 4.03. Authorization-, Compliance; Etc. The execution and delivery
of, and performance by the Companies of their respective obligations under,
this Agreement, the Notes, the Security Documents, the Acquisition Documents,
the Indenture, the Senior Notes and the other agreements and instruments
relating thereto (all of the foregoing being hereinafter referred to
collectively as the "Transaction Documents") have been duly authorized by all
requisite corporate, partnership and limited liability company action, as
applicable, and will not violate any provision of law, any order, judgment or
decree of any court or other agency of govenment, including without limitation
the FCC, the charter documents or by-laws of any corporate Company, the limited
partnership agreement or certificate of limited partnership of any partnership
Company, the articles of organization or operating agreement of any limited
liability company, or any indenture, agreement or other instrument (including
without limitation any other Transaction Document or any Parent Agreement) to
which any Company is a party, or by which any Company is bound, or be in
conflict with, result in a breach of, or constitute (with due notice or lapse of
time or both) a default under, or except as may be permitted under this
Agreement, result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of the property or assets of any
Company pursuant to, any such indenture, agreement or instrument. Each of the
Transaction Documents constitutes the valid and binding obligation of each of
the Companies and their Affiliates party thereto, enforceable against such party
in accordance with its terms, subject, however to bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the rights and remedies of
creditors generally or the application of principles of equity, whether in any
action in law or proceeding in equity, and subject to the availability of the
remedy of specific performance or of any other equitable remedy or relief to
enforce any right under any such agreement.
Section 4.04. Governmental and Other Consents, Etc.
(a) Except for filings and recordings required under Section 2.01 and the
Security Documents and except as set forth in Schedule 4.04, none of the
Companies is required to obtain any consent, approval or authorization from, to
file any declaration or statement with or to give any notice to, any
Govermnental Authority (including without limitation the FCC), or any other
Person (including, without limitation, any notices required under the applicable
bulk sales law) in connection with or as a condition to the execution, delivery
or performance of any of the Transaction Documents. Except as set forth in such
Schedule 4.04, all consents, approvals and authorizations described in such
Schedule have been duly granted and are in full force and effect on the date
hereof and all filings described in such Schedule have been properly and timely
made.
(b) Notwithstanding the foregoing, (i) from time to time, the Companies may
be required to obtain certain authorizations of or to make certain filings with
the FCC and which are required in the ordinary course of business, (ii) copies
of certain documents, including without limitation certain Transaction
Documents, may be required to be filed with the FCC pursuant to 47 C.F.R.
73.3613, (iii) the FCC must be notified of the consummation of any assignments
or
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transfers of control of FCC authorizations for any television broadcast stations
and ownership reports are required to be filed with the FCC after such
consummation pursuant to 47 C.F.R. 73.3615, and (iv) prior to the exercise of
certain rights or remedies under the Loan Documents by the Agent or the Lenders,
FCC consents and notifications with respect to such exercise may be required to
be timely obtained or made.
Section 4.05. Litigation. Except as specified in Schedule 4.05, there is no
action, suit or proceeding at law or in equity or by or before any governmental
instrumentality or other agency (including without limitation the FCC), now
pending or, to the knowledge of the Borrower, threatened (nor is any basis
therefor known to the Borrower), (a) which questions the validity of any of the
Transaction Documents, or any action taken or to be taken pursuant hereto or
thereto, in a manner or to an extent which would have a Material Adverse Effect,
or (b) against or affecting any Company which, if adversely determined, either
in any case or in the aggregate, could have a Material Adverse Effect.
Section 4.06. Compliance with Laws and Agreements. Except as disclosed in
this Agreement, none of the Companies is a party to any agreement or instrument
or subject to any partnership, membership or other restriction which could have
a Material Adverse Effect. None of the Companies is in violation of any
provision of its corporate charter or by-laws, partnership agreement, articles
of organization or operating agreement, as the case may be, or of any material
indenture, agreement or instrument to which it is a party or by which it is
bound or, to the best of the Borrower's knowledge and belief, of any provision
of law, the violation of which could have a Material Adverse Effect, or any
order, judgment or decree of any court or other agency of government (including
without limitation, the FCC, the FAA and the Copyright Office).
Section 4.07. Licenses. Schedule 4.07 accurately and completely lists all
Licenses (identified by issuing authority, licensee, Station call letters and
expiration date) granted, issued or assigned to any Company as of the date
hereof. Each FCC License specified in such Schedule is held by a License
Company. Except as set forth in Schedule 4.07, the Companies possess all such
Licenses and all copyrights, licenses, trademarks, service marks, trad6 names
and other contract rights, including agreements with public utilities, use,
access or rental agreements, utility easements, network affiliation agreements,
film rental agreements and talent employment agreements that are necessary for
the operation of the Stations, except to the extent the absence thereof could
not reasonably be expected to have a Material Adverse Effect. Each of such
Licenses, copyrights, licenses, patents, trademarks, service marks, trade names
and other rights and agreements is in full force and effect and no material
default by any Company has occurred and is continuing thereunder. As of the date
hereof, except as limited by the provisions of the Communications Act of 1934,
as amended, and the FCC's published rules and regulations and as otherwise
specified on the face of any FCC License, none of the FCC Licenses is subject to
any restriction or condition that would limit in any material respect the
operation of the business as it is now conducted. Except as specified in
Schedule 4.07, there is not, as of the date hereof, pending, or the knowledge of
the Borrower threatened, any action by or before the FCC to revoke, cancel,
rescind or modify (including a reduction in coverage area) any of the FCC
Licenses (other than proceedings to amend FCC rules of general applicability) or
refuse to renew the FCC Licenses, and there is not now issued or outstanding,
pending, or to the knowledge of Borrower threatened, by or before the FCC, any
order to show cause, notice of violation, notice
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of apparent liability, or notice of forfeiture or complaint against Borrower and
or any of its Subsidiaries with respect to any of the FCC Licenses. Except as
specified in Schedule 4.07, none of the FCC Licenses is the subject of a pending
license renewal application and the Borrower has no reason to believe that any
of the FCC Licenses will be revoked or will not be renewed in the ordinary
course.
Section 4.08. The Stations.
(a) Each of the Companies and the Stations is in compliance with all
applicable federal, state and local laws, published rules and regulations,
including without limitation, the Telecommunications Act of 1996, the
Communications Act of 1934, as amended, and the published rules and policies of
the FCC and all rules and laws governing equal employment opportunity, except to
the extent that the failure to so comply could not (either individually or in
the aggregate) reasonably be expected to have a Material Adverse Effect. Without
limiting the generality of the foregoing (except to the extent that the failure
to comply with any of the following could not, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect):
(i) the Companies have filed all material reports and other
submissions required to be filed with the FCC by the Companies or any of
them with respect to the Stations and their operations;
(ii) the operation of the Stations is in compliance in all material
respects with ANSI Standards C95.1-1982 to the extent required under
applicable rules and regulations;
(iii) all of the existing towers used in the operation of the Stations
are obstruction-marked and lighted to the extent required by, and in
accordance with, the published rules and regulations of the FAA and
appropriate notification to the FAA has been filed for each such tower
where required by the published rules and policies of the FCC;
(iv) the Stations are being operated in compliance with the applicable
Licenses; and
(v) the Stations are in material compliance with the provisions of the
Communications Decency Act of 1996 in effect, as well as any and all
published FCC rules and policies in effect to implement such Act.
(b) None of the Companies which own or manage the Stations is subject to
any FCC proceedings in respect of EEO violations and, to the Borrowees best
knowledge, no such proceedings are threatened.
(c) The assets of the Stations are adequate and sufficient for all of the
current operations of the Stations as contemplated as of the date hereof.
Section 4.09. Title to Properties; Condition of Properties.
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(a) Except as set forth on Schedule 4.09, the Companies have good title to
all of their properties and assets (including all of the Stations) free and
clear of all mortgages, security interests, restrictions (other than FCC
restrictions on the transfer of equity interests or FCC authorizations), liens
and encumbrances of any kind, including without limitation liens or encumbrances
in respect of unpaid taxes (collectively, "Liens"), except liens and
encumbrances permitted under this Agreement. Such Schedule 4.09 also sets forth
a description of all real properties owned by the Companies.
(b) Schedule 4.09 accurately and completely lists, and sets forth a
description of, all agreements between any Company and any Person relating to
the location of (i) tower and transmitter sites used in the operation of the
Stations (the "Tower Site Leases") and (ii) offices, studios and other
facilities, and the same constitute the only Tower Site Leases and other leases
necessary in connection with the conduct by the Companies of their businesses as
presently conducted. Each of the Companies enjoys quiet possession under all
leases (including without limitation Tower Site Leases) to which it is a party
as lessee, and all of such leases are valid, subsisting and in full force and
effect. None of such leases contains any provision restricting the incurrence of
indebtedness by the lessee.
(c) Except as specified in such Schedule 4.09, none of the real property
owned by any Company is located within any federal, state or municipal flood
plain zone.
Section 4.10. Interests in Other Businesses. Except as reflected in
Schedule 4.10 or Schedule 4.19 hereto, none of the Companies hold or own any of
the issued and outstanding capital stock, partnership interests, membership
interests or other equity interests, or any rights to acquire the same, of any
corporation, partnership, limited liability company, firm or other entity other
than as specified or permitted in this Agreement.
Section 4.11. Solvency.
(a) The aggregate amount of the full salable value of the assets and
properties of Companies, taken as a whole, exceeds the amount that will be
required to be paid on or in respect of the Companies' existing debts and other
liabilities (including contingent liabilities) as they mature.
(b) No Operating Company's assets and properties constitute unreasonably
small capital for such Company to carry out its business as now conducted and as
proposed to be conducted, including such Company's capital needs, taking into
the account the particular capital requirements of such Company's business and
the projected capital requirements and capital availability thereof.
(c) The Companies do not intend to, nor will the Companies, incur debts
beyond their ability to pay such debts as they mature, taking into account the
timing and amounts of cash reasonably anticipated to be received by each Company
and the amounts of cash reasonably anticipated to be payable on or in respect of
each Company's obligations. The Companies' aggregate cash flow, after taking
into account all anticipated sources and uses of cash, will at all
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times be sufficient to pay all such amounts on or in respect of their
indebtedness when such amounts are required to be paid.
(d) The Borrower believes that no reasonably anticipated final judgment in
a pending action or, to its knowledge, any threatened actions for money damages
will be rendered at a time when, or in an amount such that, any Company will be
unable to satisfy such judgments promptly in accordance with their terms (taking
into account the maximum reasonable amount thereof and the earliest reasonable
time at which such judgments might be rendered). The Borrower believes that the
cash available to each Company, after taking into account all other anticipated
uses of cash (including the payment of all such Company's indebtedness) is
anticipated to be sufficient to pay any such judgments promptly in accordance
with their terms.
(e) No Company is contemplating either the filing of a petition by it under
any state or federal bankruptcy or insolvency laws or the liquidating of all or
a substantial portion of its property, and the Borrower has no knowledge of any
Person contemplating the filing of any such petition against any Company.
Section 4.12. Full Disclosure. No statement of fact made by or on behalf of
the Companies in this Agreement, the Security Documents or in any certificate or
schedule furnished to the Lenders pursuant hereto or thereto contains any untrue
statement of a material fact or omits to state any material fact. There is no
fact presently known to the Borrower which has not been disclosed to the Lenders
in writing which the Borrower reasonably believes has had, or, as far as the
Borrower can reasonably foresee, could have a Material Adverse Effect, other
than facts and circumstances generally known within the broadcast television
industry.
Section 4.13. Margin Stock. The Companies do not own or have any present
intention of acquiring any "margin stock" within the meaning of Regulation U (I
2 CFR Part 22 1), of the Board of Governors of the Federal Reserve System
(herein called "Margin Stock").
Section 4.14. Tax Returns. Each of the Companies has filed all federal,
state and local tax and information returns required to be filed, and has paid
or made adequate provision for the payment of all material federal, state and
local taxes, franchise fees, charges and assessments shown thereon.
Section 4.15. Pension Plans, Etc.
(a) Except as described in Schedule 4.15, neither the Borrower nor any
member of the Controlled Group has any pension, profit sharing or other similar
plan providing for a program of deferred compensation to any employee.
(b) Neither the Borrower nor any member of the Controlled Group has any
material liability (i) under Section 412 of the Code for failure to satisfy the
minimum funding requirements for pension plans, (ii) as the result of the
termination of a defined benefit plan under Title IV of ERISA, (iii) under
Section 4201 of ERISA for withdrawal or partial withdrawal from a multiemployer
plan, or (iv) for participation in a prohibited transaction with an employee
benefit plan as described in Section 406 of ERISA and Section 4975 of the Code.
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Section 4.16. Material Agreements. Except for matters disclosed in
Schedules 4.06(b), 4.07, 4.09, 4.10, 4.16 and 4.22. Schedule 4.16 hereto
accurately and completely lists all agreements, if any, among the stockholders,
partners or members of any of the Companies or the Parent Companies and all
material construction, engineering, management, consulting and other agreements,
if any, which are in effect on the date hereof in connection with the conduct of
the business of the Borrower and the other Companies, including without
limitation the acquisition, construction, extension and/or operation of the
Stations.
Section 4.17. Projections. Attached as Schedule 4.17 are projections of the
operation of the Companies' businesses through December 31, 2002 (the
"Projections").
Section 4.18. Brokers, Etc. Other than fees, if any, that may be payable to
Communications Equity Associates, for which the Borrower has sole
responsibility, none of the Companies has dealt with any broker, finder,
commission agent or other similar Person in connection with the Loans (as
opposed to the Acquisitions) or is under any obligation to pay any broker's fee,
finder's fee or commission in connection with such transactions.
Section 4.19. Capitalization. Attached as Schedule 4.19 is a schematic
diagram of the ownership relationships among the Companies, showing accurate
ownership percentages of the equityholders of record and accompanied by a
statement of authorized and issued equity securities for each such entity as of
the date hereof. Such Schedule 4.19 also includes a narrative indicating, as of
the date hereof (a) which securities, if any, carry preemptive rights; (b) to
the best of the Borrower's knowledge whether there are any outstanding
subscriptions, warrants or options to purchase any securities; (c) whether any
Company is obligated to redeem or repurchase any of its securities, and the
details of any such committed redemption or repurchase; and (d) any other
agreement, arrangement or plan to which any Company is a party or participant or
of which any Company has knowledge which will directly or indirectly affect the
capital structure of the Companies. All such equity securities of the Companies
are validly issued and fully paid and non-assessable, and owned as set forth on
such Schedule 4.19. All such equity securities of the Companies are owned,
legally and beneficially, free of any assignment, pledge, lien, security
interest, charge, option or other encumbrance, except for liens and security
interests granted to the Agent or the Lenders or permitted under Section 7.02
and restrictions on transfer imposed by applicable securities laws, indicated on
the certificates evidencing such equity interests or imposed by the FCC or local
franchising authorities.
Section 4.20. Environmental Compliance.
(a) To the best of the Borrowees knowledge, all real property leased,
owned, controlled or operated by the Companies (the "Properties") and their
existing and, to the best of the Borrower's knowledge, prior uses and activities
thereon, including, but not limited to, the use, maintenance and operation of
each of the Properties and all activities in conduct of business related thereto
comply and have at all times complied in all material respects with all
Environmental Laws.
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(b) None of the Companies, and to the best of the Borrower's knowledge, no
previous owner, tenant, occupant or user of any of the Properties or any other
Person, has engaged in or permitted any operations or activities upon any of the
Properties for the purpose of or in any way involving the handling, manufacture,
treatment, storage, use, generation, release, discharge, refining, dumping or
disposal of a material amount of any Hazardous Materials the removal of which is
required or the maintenance of which is prohibited or penalized.
(c) To the best of the Borrower's knowledge, no Hazardous Material has been
or is currently located in, on, under or about any of the Properties in a manner
which materially violates any Environmental Law or which requires cleanup or
corrective action of any kind under any Environmental Law.
(d) No notice of violation, lien, complaint, suit, order or other notice or
communication concerning any alleged violation of any Environmental Law in, on,
under or about any of the Properties has been received by any Company or, to the
best of the Borrower's knowledge, any prior owner or occupant of any of the
Properties which has not been fully satisfied and complied with in a timely
fashion so as to bring such Property into full compliance with all Environmental
Laws.
(e) The Companies have all permits and licenses required under any
Environmental Law to be issued to them by any Governmental Authority on account
of any or all of its activities on any of the Properties, except to the extent
that the absence of any such permit or license could have a Material Adverse
Effect, and are in material compliance with the terms and conditions of such
permits and licenses. To the best of the Borrower's knowledge, no change in the
facts or circumstances reported or assumed in the application for or granting of
such permits or licenses exist, and such permits and licenses are in full force
and effect.
(f) No portion of any of the Properties has been listed, designated or
identified in the National Priorities List (NPL) or the CERCLA information
system (CERCLIS), both as published by the United States Environmental
Protection Agency, or any similar list of sites published by any Federal, state
or local authority proposed for or requiring cleanup, or remedial or corrective
action under any Environmental Law.
(g) The Borrower, at its expense, has provided (or, if indicated on
Schedule 4.20, will provide within the period specified thereon) prior to the
first Advances after the date hereof to the Agent and the Lenders a "Phase One"
site assessment for each of the Properties designated by the Lenders (including
those designated on Schedule 4.20 and required as a condition to the execution
of this Agreement under Section 3.01), including all owned Properties
(collectively the "Environmental Site Assessments"), prepared by an
environmental consulting firm of national reputation reasonably satisfactory to
the Lenders, together with a letter (to the extent that Borrower is able to
obtain such letter, after using commercially reasonable efforts), from such
firm to the Agent authorizing the Agent and the Lenders to rely thereon. Each
of the Environmental Site Assessments provided to the Agent and the Lenders is,
to the best of the Borrower's knowledge, true and accurate in all material
respects. In addition, the Borrower has provided (or, if indicated on Schedule
4.20, will provide within the period specified thereon) to
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the Agent and the Lenders true and accurate responses to the Agent's
Environmental Questionnaire as to each of the other Properties.
Section 4.21. Investment Company Act. None of the Companies is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, or a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company," or of a "subsidiary company"
of a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
Section 4.22. Labor Matters. No Company is experiencing any strike, labor
dispute, slow down or work stoppage due to labor disagreements which has had, or
could reasonably be expected to have, a Material Adverse Effect; there is no
such strike, dispute, slow down or work stoppage threatened against any Company;
none of the Companies is subject to any collective bargaining or similar
arrangements.
Section 4.23. Delaware Code Provisions. None of the charter documents,
partnership agreements, the operating agreements or other organizational
documents of the Borrower and its Subsidiaries contain any provision similar to
those set forth in Section 102(b)(2) of Title 8 of the Delaware Code.
V. FINANCIAL COVENANTS. The Borrower covenants and agrees that, so long as
any Lender has any obligation to extend credit to the Borrower hereunder, and
for so long thereafter as there remains outstanding any portion of any
Obligation, whether now existing or arising hereafter, the Borrower and its
Subsidiaries will (on a consolidated or combined basis, as applicable):
Section 5.01. Minimum EBITDA. For the periods of one (1), two (2) and three
(3) fiscal quarters ending March 3 1, June 30 and September 3 0, 1998 and for
each period of four (4) fiscal quarters ending on December 31, 1998 and each
Quarterly Date thereafter indicated below, maintain EBITDA not less than the
following:
Period Ending Minimum EBITDA
March 31, 1998 $1,300,000
June 30, 1998 $4,000,000
September 30, 1998 $6,300,000
December 31, 1998 $9,300,000
March 31, 1999 $12,000,000
.June 30, 1999 $12,600,000
September 30, 1999 $13,800,000
December 31, 1999 $14,100,000
March 31, 2000 $16,900,000
June 30, 2000 $19,700,000
September 30, 2000 $22,400,000
December 31, 2000 $25,200,000
March 31, 2001 $26,800,000
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June 30, 2001 $28,300,000
September 30, 2001 $29,900,000
December 31, 2001 $31,400,000
March 31, 2002 $32,300,000
June 30, 2002 $33,250,000
September 30, 2002 $34,200,000
Section 5.02. Maximum Total Debt Leverage. As of each Quarterly Date
indicated below, maintain a ratio of Total Debt to Adjusted EBITDA for the
period of four (4) fiscal quarters ending on such Quarterly Date not exceeding
the following:
Maximum Ratio of Total
Ouarterly Date(s) Debt to Adjusted EBITDA
September 30,2000 and December 31, 2000 7.75:1.00
March 31, 2001 and June 30, 2001 6.50:1.00
September 30, 2001 and December 31, 2001 6.00:1.00
March 31, 2002 and each Quarterly Date
thereafter 5.50:1.00
Section 5.03. Maximum Secured Debt Leverage. (a) As of December 31, 1997,
March 31, 1998, and June 30, 1998, maintain a ratio of Secured Debt to
Annualized Adjusted EBITDA for the one (1), two (2) or three (3) fiscal quarter
period, respectively, ending on such Quarterly Date and (b) as of each Quarterly
Date thereafter indicated below, maintain a ratio of Adjusted EBITDA for the
period of four (4) fiscal quarters ending on such Quarterly Date, in each case
as set forth in the following table:
Maximum Ratio of Secured Debt to
Ouarterly Date(s) (Annualized) Adjusted EBITDA
December 31, 1997, through December 3 1,
1998 4.00:1.00
March 31, 1999 and June 3 0, 1999 3.50:1.00
September 30, 1999 and each Quarterly Date
thereafter 3.00:1.00
Section 5.04. Cash Interest Coverage, For each period indicated below,
maintain a ratio of EBITDA to Cash Interest Expense of at least the following:
Minimum Ratio of EBITDA
Period(s) to Cash Interest
Each of the periods commencing on the date
hereof and ending December 31, 1997, March
31, 1998 and June 30, 1998 2.50:1.00
Each four (4) fiscal quarter period ending
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September 30, 1998, through September 30, 2.50:1.00
2000
Each four (4) fiscal quarter period ending
December 31, 2000 and each Quarterly Date 1.50:1.00
thereafter
Section 5.05. Restricted Payments. Not directly or indirectly declare,
order, pay or make any Restricted Payment or set aside any sum or property
therefor except that the Companies may make the following payments so long as no
Default shall exist as of the date of any such proposed payment or after giving
effect thereto:
(a) The Subsidiaries may pay dividends and make distributions to the
Borrower or other Subsidiaries holding equity interests in the payor.
(b) The Operating Companies may repay indebtedness owed to the Borrower.
(c) The Operating Companies and the Borrower may make intercompany loans,
distributions or capital investments to or in one another, subject to the
limitations set forth in Section 7.01 and 7.08.
VI. AFFIRMATIVE COVENANTS. The Borrower hereby covenants and agrees to and
with each of the Lenders that, so long as any Lender has any obligation to
extend credit to the Borrower hereunder, and for so long thereafter as there
remains outstanding any portion of any Obligation, whether now existing or
hereafter arising, the Borrower and each of its Subsidiaries shall:
Section 6.01. Preservation of Assets; Compliance with Laws, Etc.
(a) Do or cause to be done all things necessary to preserve, renew and keep
in full force and effect its corporate, partnership or limited liability company
existence, as the case may be, all material rights, licenses, permits and
franchises (including all Licenses) and comply in every material respect with
all laws and regulations applicable to it (including without limitation the
Communications Act of 1934, as amended, the Copyright Act of 1976, as amended,
and all other published rules, regulations, administrative orders and policies
of the FCC) and all material agreements to which it is a party, including
without limitation the Indenture, the Acquisition Documents, all network
affiliation agreements and all agreements with its stockholders, members or
partners, as the case may be, unless the non-compliance, non-renewal,
termination, or violation of any such material agreement or agreement has not
had, and could not have, a Material Adverse Effect;
(b) at all times maintain, preserve and protect all material trade names
and proprietary rights;
(c) at all times maintain in full force and effect a License Agreement
between each Operating Company holding Station assets and the related License
Company, and provide a true and complete copy thereof to the Agent;
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(d) at all times maintain in full force and effect for each Subsidiary
which is a partnership or limited liability company a partnership agreement or
operating agreement, as the case may be, which is reasonably satisfactory to the
Agent and which provides, among other matters, for appropriate procedures to
ensure the full enforceability of the collateral assignment and pledge of
partnership or membership interests to the Agent contemplated by the applicable
Security Documents (it being understood and agreed that this requirement has
been waived as to the Oregon Subsidiaries and the Tennessee Subsidiaries until
the earlier to occur of December 15, 1997 or the consummation of the Permitted
Restructurings); and
(e) preserve all the remainder of its material property used or useful in
the conduct of its business and keep the same in good repair, working order and
condition (reasonable wear and tear and damage by fire or other casualty
excepted), and from time to time, make or cause to be made all needful and
proper repairs, renewals, replacements, betterments and improvements thereto, so
that the business carried on in connection therewith may be conducted at all
times in the ordinary course in a manner substantially consistent with past
practices.
Section 6.02. Insurance.
(a) Keep all of its insurable properties now or hereafter owned adequately
insured at all times against loss or damage by fire or other casualty to the
extent customary with respect to like properties of companies conducting similar
businesses; maintain public liability, business interruption, broadcasters'
liability and workers' compensation insurance insuring such Company to the
extent customary with respect to companies conducting similar businesses, all by
financially sound and reputable insurers and furnish to the Lenders satisfactory
evidence of the same (including certification by the chief executive officer of
the Borrower of timely renewal of, and timely payment of all insurance premiums
payable under, all such policies, which certification shall be included in the
next succeeding Compliance Report delivered pursuant to Section 6.05(d)); notify
each of the Lenders of any material change in the insurance maintained on its
properties after the date hereof and furnish each of the Lenders satisfactory
evidence of any such change; maintain insurance with respect to its tower,
transmission and studio facilities and related equipment in an amount equal to
the full replacement cost thereof-, provide that each insurance policy
pertaining to any of its insurable properties shall:
(i) name the Agent, on behalf of the Lenders, (A) as loss payee
pursuant to a so-called "standard mortgagee clause" or "Lender's loss
payable endorsement", with respect to property insurance, or (B) as
additional insured, with respect to liability insurance;
(ii) provide that no action of any Company shall void any such policy
as to the Agent or the Lenders, and
(iii) provide that the insurer(s) shall notify the Agent of any
proposed cancellation of such policy at least thirty (30) days in advance
thereof (unless such proposed cancellation arises by reason of non-payment
of insurance premiums in which case such notice shall be given at least ten
(10) days in advance thereof) and that the
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Agent or the Lenders will have the opportunity to correct any deficiencies
justifying such proposed cancellation.
(b) Promptly following the occurrence of any Casualty Event affecting any
asset or property (whether or not such property constitutes Collateral) (the
"Damaged Property") of any Company resulting in Insurance Proceeds aggregating
$500,000 or more, give prompt notice thereof to the Agent and cause such
Insurance Proceeds to be paid to the Agent for deposit into the Collateral
Account, as additional collateral security for the payment of the Obligations,
pending disbursement thereof as hereinafter provided. If, on or before the last
day of the applicable Restoration Period, the Borrower or any Subsidiary shall
not have restored, repaired or replaced the Damaged Property (or, if earlier, on
the date such Company shall have determined not to restore, repair or replace
the Damaged Property) the Insurance Proceeds so deposited in the Collateral
Account shall be applied to repay the Notes, to the extent required in Section
1.06(b).
(c) In the event of a Casualty Event affecting any Damaged Property of any
Company, whether or not subject to Section 6.02(b), and provided that no Event
of Default shall have occurred and be continuing, the Agent or the Lenders will
deliver to the Borrower (for the benefit of such Company) any Insurance Proceeds
therefrom, if the Borrower so elects following notice thereof provided by the
Agent, provided that (i) such Company shall use such proceeds for the
restoration or replacement of the Damaged Property within the applicable
Restoration Period, (ii) the Borrower shall have demonstrated to the reasonable
satisfaction of the Lenders that the Damaged Property will be restored to
substantially its previous condition or will be replaced by substantially
identical property or assets and (iii) if the Agent, on behalf of the Lenders,
had a security interest in and lien upon the Damaged Property, the Lenders shall
have received, at their request, a favorable opinion from the Borrower's
counsel, in form and substance satisfactory to the Agent, as to the perfection
of the Agent's security interest in and lien upon such restored or replaced
property or asset and such evidence satisfactory to the Agent as to the priority
of such security interest and liens. If the Borrower fails to elect the
disbursement of such Insurance Proceeds as provided in the foregoing sentence
within five (5) Business Days following receipt of the Agent's notice, the
Borrower shall be deemed to have elected that such Insurance Proceeds be applied
to the prepayment of the Loans and, if the related Casualty Event was subject to
Section 6.02(b), the permanent reduction of the Commitments provided in such
Section and in Section 1.06.
(d) If the Borrower receives any disbursements of Insurance Proceeds as
contemplated by Section 6.02(c), but fails to restore or replace the Damaged
Property within the applicable Restoration Period, as required under Section
6.02(c), then the Borrower shall return all such disbursements to the Agent for
application, together with the balance of any related Insurance Proceeds not so
disbursed, to the prepayment of the Loans and, if the related Casualty Event was
subject to Section 6.02(b), the permanent reduction of the Commitments provided
in such Section and in Section 1.06.
(e) The Agent may, if directed by the Required Lenders upon the occurrence
and during the existence of any Event of Default, elect to apply any Insurance
Proceeds paid into the Collateral Account or otherwise received by the Agent
pursuant to this Section 6.02 to the
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replacement, restoration and/or repair of the Damaged Property, in lieu of
effecting the prepayment of the Loans required under Section 1.06(b) or 6.02(d).
(f) If the Borrower or the Agent elects to replace, restore and/or repair
the Damaged Property as provided in Section 6.02(c) or (e), the related
Insurance Proceeds (and any earnings thereon) held in the Collateral Account
shall be applied to the replacement, restoration and repair of the Damaged
Property and advanced by the Agent in periodic installments upon compliance by
the Borrower with such reasonable conditions to disbursement as may be imposed
by the Agent, including, but not limited to, reasonable retention amounts and
receipt of lien releases and, if a Casualty Event results in the Agent's receipt
of Insurance Proceeds aggregating $ 1,000,000 or more, disbursement of such
Insurance Proceeds jointly to the Borrower and any contractors, subcontractors
and materialmen to whom payment is owed in connection with such repair,
replacement and/or restoration.
(g) Following the occurrence and the continuance of any Event of Default,
the Agent shall have no obligation to release any proceeds from the Collateral
Account to the Borrower as provided above and all such proceeds shall be subject
to the provisions of the Security Agreements. All Insurance Proceeds remaining
in the Collateral Account after application to the repair, replacement and/or
restoration of Damaged Property pursuant to this Section may, at the option of
the Agent, be applied to the prepayment of the Loans or (if consented to by the
Required Lenders) released to the Borrower.
(h) With respect to any Casualty Event resulting in Insurance Proceeds
aggregating $500,000 or more, the Agent shall be entitled at its option to
participate in any compromise, adjustment or settlement in connection with any
claims for damage or destruction under any policy or policies of insurance, and
the Borrower shall, within five (5) Business Days after request therefor,
reimburse the Agent for all reasonable out-of-pocket expenses (including
reasonable attorneys' fees and disbursements) incurred by the Agent in
connection with such participation. None of the Companies shall make any
compromise, adjustment or settlement in connection with any such claim without
the approval of the Agent.
(i) To the extent, if any, that any improved real property (whether owned
or leased) of the Companies that is mortgaged as required under Section
2.01(a)(iii) or Section 2.01(a)(iv) is situated in a flood zone designated as
type "X', "B", or "V" by the U.S. Department of Housing and Urban Development,
obtain and maintain flood insurance in coverage and amount satisfactory to the
Required Lenders.
Section 6.03 Taxes, Etc. Pay and discharge or cause to be paid and
discharged all taxes, assessments and governmental charges or levies imposed
upon it or upon its income and profits or upon any of its property, real,
personal or mixed, or upon any part thereof, before the same shall become in
default, as well as all lawful claims for labor, materials and supplies or
otherwise, which, if unpaid, might become a lien or charge upon such properties
or any part thereof; ]provided that no Company shall be required to pay and
discharge or cause to be paid and discharged any such tax, assessment, charge,
levy or claim so long as the validity thereof shall be contested in good faith
by appropriate proceedings and it shall have set aside on its books adequate
reserves with respect to any such tax, assessment, charge, levy or claim, so
contested;
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and provided, further that, in any event, payment of any such tax, assessment,
charge, levy or claim shall be made before any of its property shall be seized
or sold in satisfaction thereof.
Section 6.04. Notice of Proceedings, Defaults, Adverse Change, Etc.
Promptly (and in any event within five (5) days after the discovery by the
Borrower thereof) give written notice to the Agent of (a) any proceedings
instituted or threatened against it by or in any federal, state or local court
or before any commission or other regulatory body, whether federal, state or
local, including without limitation the FCC, which, if adversely determined,
could have a Material Adverse Effect; (b) any notices of default received by any
Company (together with copies thereof, if requested by any Lender) with respect
to (i) any alleged default under or violation of any of its material licenses,
permits or franchises (including the Licenses), any Tower Site Lease, or any
other material agreement (including without limitation the Indenture, the Senior
Notes and any material Acquisition Document) to which it is a party, or (ii) any
alleged default with respect to, or acceleration or other action under any
evidence of material Indebtedness of any Company or any mortgage, indenture or
other agreement relating thereto; (c) (i) any notice of any material violation
or administrative or judicial complaint or order filed or to be filed against
any Company and/or any real property owned or leased by it alleging any
violations of any law, ordinance and/or regulation or requiring it to take any
action in connection with the release and/or clean-up of any Hazardous
Materials, or (ii) any notice from any govenmental body or other Person
alleging that any Company is or may be liable for costs associated with a
release or clean-up of any Hazardous Materials or any damages resulting from
such release; (d) any change in the condition, financial or otherwise, of any
Company or Parent Company which could have a Material Adverse Effect; or (e) the
occurrence of any Default or Event of Default.
Section 6.05. Financial Statements and Reports. Furnish to the Agent (with
multiple copies for each of the Lenders):
(a) Within one hundred twenty (120) days after the end of fiscal year 1997
and within ninety (90) days after the end of each subsequent fiscal year, the
consolidated (or, if applicable, combined) balance sheets and statements of
income, equity and cash flows of the Borrower and each Holding Company, together
with supporting schedules in form and substance satisfactory to the Lenders,
audited (solely as to such consolidated or combined financial statements) by,
and accompanied with the opinion of, independent certified public accountants
selected by the Borrower and reasonably acceptable to the Required Lenders (the
"Accountants"), which opinion (i) shall not be qualified as to going concern or
scope of audit, (ii) shall be to the effect that such financial statements
present fairly the consolidated financial condition and results of operation of
the Companies as of the dates and for the periods indicated, in accordance with
GAAP applied on a basis consistent with that of the preceding year, and shall
otherwise be in form reasonably satisfactory to the Required Lenders, and (iii)
shall contain a report by the Accountants to the effect that the Accountants
have examined the provisions of this Agreement and that, to the best of their
knowledge, no Event of Default has occurred under Article V (or, if such an
event has occurred, a statement explaining its nature and extent); provided,
however, that in issuing such statement, the Accountants shall not be required
to exceed the scope of normal auditing procedures conducted in connection with
their opinion referred to above;
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(b) Within forty-five (45) days after the end of each quarter in each
fiscal year, the consolidated (or, if applicable, combined) statements of
income, equity and cash flows of (i) the Borrower and (ii) each Holding Company,
together with supporting schedules, setting forth in each case in comparative
form the corresponding figures from the preceding fiscal period of the same
duration, prepared by the Borrower in accordance with GAAP (except for the
absence of notes) and certified by the Borrower's chief financial officer, such
statements of income, equity and cash flow to be for the quarter then ended and
the period from the beginning of the then current fiscal year to the end of such
quarter (in each case subject to normal audit and year-end adjustments) and to
include (i) a comparison of month to month actual results to results for the
comparable period of the preceding fiscal year and projected results set forth
in the Budget for such period for each Station that is on the air, and (ii) for
each Station not on the air, a schedule of Capital Expenditures made during such
quarter;
(c) Concurrently with the delivery of any annual financial statements
required by Section 6.05(a) and any quarterly financial statements required by
Section 6.05(b), a certificate in the form of Schedule 6.05 hereto (or in a form
otherwise satisfactory to the Agent) signed on behalf of the Borrower by the
chief financial officer or chief executive officer of the Borrower, setting
forth the calculations contemplated in Article V of this Agreement and
certifying as to the fact that such Person has examined the provisions of this
Agreement and that no Default has occurred and is continuing (or, if such event
has occurred, a statement explaining its nature and extent), which certificate
shall also provide detailed reconciliations breaking out the results of any
Operating Companies included in such financial statements;
(d) (i) On or before January 31 of each fiscal year, an updated cost budget
prepared on a monthly basis and approved by the Borrower, including planned
Capital Expenditures and other improvements, with updated financial projections
(collectively, the "Budget"), for the operation of the Borrower's businesses
during the current fiscal year, setting forth in detail reasonably satisfactory
to the Lenders the projected results of operations of the Borrower and its
subsidiaries and stating underlying assumptions, and (ii) within thirty (30)
days after the effective date thereof, notice of any material changes or
modifications in the Budget;
(e) Promptly upon their becoming available, and in any event within thirty
(30) Business Days after receipt thereof, all Nielsen and other rating reports
regarding any Station, if any, received by any Company;
(f) Promptly, and in any event within ten (10) days, after the Borrower or
any member of the Controlled Group (i) is notified by the Internal Revenue
Service of its liability for the tax imposed by Section 4971 of the Code, for
failure to make required contributions to a pension, or Section 4975 of the
Code, for engaging in a prohibited transaction, (ii) notifies the PBGC of the
termination of a defined benefit pension plan, if there are or may not be
sufficient assets to convert the plan's benefit liabilities as required by
Section 4041 of ERISA, (iii) is notified by the PBGC of the institution of
pension plan termination proceedings under Section 4042 of ERISA or that it has
a material liability under Section 4063 of ERISA, or (iv) withdraws from a
multiemployer pension plan and is notified that it has withdrawal liability
under Section 4202 of ERISA which is material, copies of the notice or other
communication given or sent;
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(g) Promptly upon receipt or issuance thereof, and in any event within
thirty (30) Business Days after such receipt, copies of all final audit reports
submitted to any Company by its accountants in connection with each yearly,
interim or special audit of the books of any Company made by such accountants,
including any material related correspondence between such accountants and the
Borrower's management;
(h) Promptly upon circulation thereof, and in any event within ten (10)
Business Days after such circulation, copies of any material written reports
issued by any Company to any of its stockholders, members, partners or material
creditors relating to the Notes or any material change in any Company's
financial condition;
(i) Within ten (1 0) days after the receipt or filing thereof by any
Company, as applicable, copies of any periodic or special reports filed by any
Company with the FCC or any state or local govenmental body having jurisdiction
over any Station or License, and copies of any material notices and other
material communications from the FCC or any such state or local governmental
body which specifically relate to any Company, any Station or any License, but
in each case only if such reports or communications indicate any material
adverse change in such Company's standing before the FCC, or in respect of any
License or if copies thereof are requested by the Agent;
(j) Within ten (10) days after the receipt or filing thereof by any
Company, copies of (i) any registration statements, prospectuses and any
amendments and supplements thereto, and any regular and periodic reports
(including without limitation reports on Form 10-K, Form 10-Q or Form 8-K), if
any, filed by any Company with any securities exchange or with the United States
Securities and Exchange Commission (the "SEC"); and (ii) any letters of comment
or correspondence with respect to filings or compliance matters sent to any
Company by any such securities commission or the SEC in relation to any Company
and its respective affairs; and
(k) As soon as reasonably possible after request therefor, such other
information regarding its operations, assets, business, affairs and financial
condition or regarding the Companies or (to the extent available to the Borrower
without undue effort and expense) their stockholders, members, partners or other
Affiliates, including the Parent Companies, as the Agent may reasonably request,
including without limitation copies of any and all material agreements to which
any Company is a party from time to time.
Section 6.06. Inspection. Permit employees, agents and representatives of
the Lenders to inspect, during normal business hours, its premises and its books
and records and to make abstracts or reproductions thereof. In connection with
any such inspections, the Lenders will use reasonable efforts to avoid an
unreasonable disruption of the Companies' businesses and, to the extent possible
or appropriate absent any Default, will give reasonable notice thereof.
Section 6.07. Accounting System. Maintain a system of accounting in
accordance with generally accepted accounting principles and maintain a fiscal
year ending December 31 for each of the Companies.
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Section 6.08. Appraisals. If any Lender determines in good faith that it is
required, by applicable law or by the Comptroller of Currency or any other
Governmental Authority, to obtain appraisals as to the market value of any real
property constituting Collateral, obtain such appraisals, at the sole cost and
expense of the Borrower and in conformity with all requirements of applicable
law, as from time to time in effect.
Section 6.09. Additional Assurances. From time to time hereafter:
(a) without limiting the generality of Section 2.01, execute and deliver or
cause to be executed and delivered, such additional instruments, certificates
and documents, and take all such actions, as the Agent or the Lenders shall
reasonably request for the purpose of implementing or effectuating the
provisions of this Agreement and the other Loan Documents, including without
limitation (i) the items set forth in Schedule 2.01 which require action after
the date hereof, as stated in such Schedule, and (ii) only if reasonably
requested by the Agent, the execution and delivery to the Agent of a mortgage or
deed of trust or collateral assignment of lease or leasehold mortgage in form
and substance satisfactory to the Agent (in a recordable form and in such number
of copies as the Agent shall have requested) covering any real properties
acquired by the Borrower or any of the Subsidiaries, together with any necessary
consents relating thereto;
(b) without limiting the generality of Section 2.01, at the request and
direction of the Agent, cooperate with the Agent and the Lenders from time to
time in preparing, executing and/or filing and recording such (i) timely
continuation statements under the Uniform Commercial Code with respect to
financing statements filed under Section 2.01(a), (ii) new financing statements
and (iii) conforming amendments to the Security Documents as shall be necessary
from time to time to reflect the passage of time and other changed circumstances
and to assure continued compliance with the Loan Documents and with Section
2.01; and
(c) upon the exercise by the Agent or the Lenders of any power, right,
privilege or remedy pursuant to this Agreement or any other Loan Document which
requires any consent, approval, registration, qualification or authorization of
any Governmental Authority, execute and deliver all applications,
certifications, instruments and other documents and papers that the Agent or
Lenders may be so required to obtain.
Section 6.10. Compliance with Environmental Laws.
(a) Comply, and cause all tenants or other occupants of any of the
Properties to comply in all material respects with all Environmental Laws and
not generate, store, handle, process, dispose of or otherwise use and use
commercially reasonable efforts not to permit any tenant or other occupant of
any of the Properties to generate, store, handle, process, dispose of or
otherwise use Hazardous Materials in, on, under or about the Property in
violation of any law, rule, regulation or statute that could lead or potentially
lead to imposition on any Company or the Agent or any Lender or any of the
Properties of any liability or lien of any nature whatsoever under any
Environmental Law.
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(b) Notify the Agent promptly in the event of any spill or other release of
any Hazardous Material in, on, under or about any of the Properties which is
required to be reported to a Governmental Authority under any Environmental Law,
promptly forward to the Agent copies of any notices received by any Company
relating to any alleged violation of any Environmental Law and promptly pay
when due any fine or assessment against the Lenders, any Company or any of the
Properties relating to any Environmental Law; provided that, no Company shall be
obligated to pay any such fine or assessment so long as the validity thereof
shall be contested in good faith by appropriate proceedings and it shall have
set aside on its books adequate reserves with respect to any fine or assessment
and provided further that, in any event, such payment shall be made before any
of such Properties are seized or sold in satisfaction thereof.
(c) If at any time it is determined that the operation or use of any of
the Properties violates any applicable Environmental Law or that there is any
Hazardous Material located in, on, under or about the Properties which under any
Environmental Law requires special handling in collection, treatment, storage or
disposal or any other form of cleanup or remedial or corrective action, then,
within thirty (30) days after receipt of notice thereof from a Governmental
Authority (or such other time period as may be specified in the notice sent by
such Governmental Authority) take, at its sole cost and expense, such actions as
may be necessary to fully comply in all respects with all Environmental Laws,
upon becoming aware thereof, provided, however, that if such compliance cannot
reasonably be completed within such thirty (30) day period, the Borrower shall
commence such necessary action within such thirty (30) day period and shall
thereafter diligently and expeditiously proceed to fully comply in all respects
and in a timely fashion with all Environmental Laws. Nothing herein shall
prohibit the Borrower from asserting any good faith defenses against the
government in any govenmental demands and bringing in third parties.
(d) If a lien is filed against any of the Properties by any Govenmental
Authority resulting from the need to expend or the actual expending of monies
arising from an action or omission, whether intentional or unintentional, of any
Company or for which any Company is responsible, resulting in the releasing,
spilling, leaking, leaching, pumping, emitting, pouring, emptying or dumping of
any Hazardous Material, then, within thirty (30) days from the date that such
Company is first given notice such lien has been placed against the Properties,
either (i) pay the claim and remove the lien or (ii) furnish a cash deposit,
bond or such other security with respect thereto as is satisfactory in all
respects to the Lenders and is sufficient to effect a complete discharge of such
lien on the Properties provided that, no Company shall be obligated to furnish a
cash deposit, bond or such other security so long as the validity of such lien
shall be contested in good faith by appropriate proceedings and it shall have
set aside on its books adequate reserves with respect thereto; and provided
further that, in any event, such payment shall be made in satisfaction of such
lien before any of such Properties shall be seized or sold in satisfaction
thereof.
(e) Perform any and all Remedial Work necessary under all Environmental
Laws applicable (now or in the future) to the Companies or their businesses
unless the failure to do so could not reasonably be expected to have a Material
Adverse Effect.
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Section 6.11. Permitted Restructurings, Acquisition Restructurings.
(a) Effect the Permitted Restructurings, and provide to the Agent
satisfactory evidence thereof, within three (3) Business Days following the
effective date of the necessary FCC approval thereof Following the consummation
of the Permitted Restructurings, all references to the Tennessee Subsidiaries
and the Oregon Subsidiaries in the Loan Documents shall be deemed to mean the
Delaware Entities (which are the survivors of the mergers contemplated by the
Permitted Restructurings).
(b) Within forty-five (45) days following the consummation of the Utah
Acquisition, cause (i) the FCC Licenses relating to Television Station K-ZAR-TV
to be transferred from Roberts Broadcasting to Acme Television Licenses of Utah,
L.L.C:, (ii) the assets used in operating such Station to be transferred from
Roberts Broadcasting to Acme Television of Utah, L.L.C., and (iii) the
concurrent dissolution of Roberts Broadcasting, and provide to the Agent
satisfactory evidence thereof.
(c) Subject to receipt of the necessary FCC consent (application for which
shall have been made within ten (10) Business Days after the date hereof), cause
(i) the FCC Licenses relating to Television Station VIBXX-TV (formerly WINT-TV)
to be transferred from Crossville TV Limited Partnership to Acme Television
Licenses of Tennessee, L.L.C., (ii) the assets used in operating such Station to
be transferred from Crossville TV Limited Partnership to Acme Television of
Tennessee, L.L.C. and (iii) the concurrent dissolution of Crossville TV Limited
Partnership on or before December 15, 1997, and provide to the Agent
satisfactory evidence thereof (the transactions described in this paragraph (c)
and in paragraph (b) above being referred to collectively as the "Acquisition
Restructurings").
(d) On or before the consummation of each of the Permitted Restructurings
and each of the Acquisition Restructurings, (i) comply with all applicable
provisions of Section 2.01, including the execution and/ delivery (by the
Delaware Entities and any other Companies, as appropriate) of such additional
agreements, instruments, certificates, documents, consents and other papers as
the Agent or the Required Lenders may reasonably require, and (ii) deliver to
the Agent such additional opinions of counsel as the Agent or the Required
Lenders may reasonably require.
VII. NEGATIVE COVENANTS. The Borrower covenants and agrees that, so long as
any Lender has any obligation to extend credit to the Borrower hereunder for so
long thereafter as there remains outstanding any portion of any Obligation,
whether now existing or arising hereafter, unless the Required Lenders shall
otherwise consent in writing in accordance with the terms of Article XII,
neither the Borrower nor any of its Subsidiaries will, directly or indirectly:
Section 7.01. Indebtedness. Incur, create, assume, become or be liable,
directly, indirectly or contingently, in any manner with respect to, or permit
to exist, any Indebtedness or liability, except:
(a) Indebtedness of the Borrower to the Lenders hereunder, under the Loan
Documents and under the Notes;
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(b) the guaranties of the Borrower's Subsidiaries required under Section
2.01;
(c) any Rate Hedging Obligations with one or more of the Lenders or their
affiliates;
(d) Indebtedness of the Borrower and the Operating Companies existing on
the date hereof and described in Schedule 7.01 hereto; provided however, that
the terms of such indebtedness shall not be modified or amended in any material
respect, nor shall payment thereof be extended, without the prior written
consent of the Required Lenders;
(e) Indebtedness of the Borrower and Acme Finance under the Indenture and
the Senior Notes and the guaranties thereof provided by the Borrower's
Subsidiaries as required under the Indenture;
(f) Indebtedness of the Borrower and the Operating Companies in respect of
endorsements of negotiable instruments for collection in the ordinary course of
business;
(g) Indebtedness of the Borrower and the Operating Companies under Capital
Leases and purchase money Indebtedness relating to the purchase price of real
estate and equipment to be used in the Companies' businesses, in the aggregate
principal amount (including any such amounts set forth on Schedule 7.01) of not
more than $20,000,000 outstanding at any time;
(h) Indebtedness owed by the Operating Companies to the Borrower, provided
that such Indebtedness is collaterally assigned to the Agent, and all evidences
thereof are collaterally assigned and delivered to the Agent, as required under
Section 2.01(a);
(i) Indebtedness in respect of (i) taxes, assessments, govermental
charges or levies and claims for labor, materials and supplies, and (ii)
judgments or awards which have been in force for less than the applicable appeal
peri6d and which do not constitute Events of Default under paragraph (c) of
Article VIII, so long as (A) execution is not levied thereunder or (B) in
respect of which any Borrower or Subsidiary shall at the time in good faith be
prosecuting an appeal or proceedings for review and in respect of which a stay
of execution shall have been obtained pending such appeal or review; and
Indebtedness assumed by the Borrower, a Holding Company or an Operating
with the consent of the Required Lenders in connection with a Permitted
Acquisition.
Section 7.02. Liens. Create, incur, assume, suffer or permit to exist any
mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on
any of its assets or ownership interests, now or hereafter owned, other than:
(a) liens securing the payment of taxes, assessments or governmental
charges or levies either not yet due or the validity of which is being contested
in good faith by appropriate proceedings, and as to which it shall have set
aside on its books adequate reserves;
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deposits under workers' compensation, unemployment insurance and social security
laws, or to secure the performance of bids, tenders, contracts (other than for
the repayment of borrowed money) or leases, or to secure statutory obligations
or surety or appeal bonds, or to secure indemnity, performance or other similar
bonds arising in the ordinary course of business;
(c) liens existing on the date hereof and described on Schedule 7.02
attached hereto;
(d) liens against the Companies imposed by law, such as vendors',
carriers', lessors', warehouser's or mechanics' liens, incurred by it in good
faith in the ordinary course of business;
(e) liens arising out of a prejudgment attachment, a judgment or award
against it with respect to which it shall currently be prosecuting an appeal, a
stay of execution pending such appeal having been secured, except any such lien
arising in connection with a judgment, attachment or proceeding which gives rise
to an Event of Default under paragraph (k) or (1) of Article VIII;
(f) liens in favor of the Agent or the Lenders and their affiliates
securing the Notes or the other obligations of the Companies to the Lenders
hereunder or under Rate Hedging Obligations entered into with any Lender or its
affiliate;
(g) liens against the Borrower or the Operating Companies arising under or
securing Capital Leases and liens or mortgages securing purchase money
Indebtedness described in Section 7.01(g), Provided that the obligation secured
by any such lien shall not exceed one hundred percent (I 000/o) of the lesser of
cost or fair market value as of the time of the acquisition of the property
covered thereby and that each such lien or mortgage shall at all times be
limited solely to the item or items of property so acquired;
(h) the collateral assignment and pledge of the membership interests in the
Borrower to the holders of the Acme Intermediate Notes as required under the
Acme Intermediate Indenture;
(i) restrictions, easements and minor irregularities in title which do not
and will not materially interfere with the occupation, use and enjoyment by any
Company of such properties and assets in the normal course of its business as
presently conducted or materially impair the value of such properties and assets
for the purpose of such business;
(j) liens existing on any asset prior to their acquisition in connection
with a Permitted Acquisition thereof by any Borrower or Subsidiary and not
created in contemplation of such Permitted Acquisition; provided that the
Required Lenders shall have consented to such liens in connection with such
Permitted Acquisition;
(k) liens on security deposits with respect to leases of office space and
other liens arising by operation of law or under leases to secure landlords or
lessors, or under leases or rental agreements made in the ordinary course of
business and confined to the premises or property rented and the tangible
property located thereon; and
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(1) Uniform Commercial Code financing statements filed solely for notice or
precautionary purposes under operating leases which do not secure Indebtedness
and which are limited to the items of equipment leased pursuant to the lease in
question.
Section 7.03. Disposition of Assets; etc. Sell, lease, transfer or
otherwise dispose of its properties, assets, rights, licenses and franchises to
any Person (including without limitation dispositions in exchange for similar
assets and properties and commonly referred to as "asset swaps"), except for:
(a) dispositions made in the ordinary course of business, including the
disposition, without replacement, of equipment which is obsolete or no longer
needed by the Companies in the conduct of their businesses and the replacement
of equipment with other equipment of at least equal utility and value', provided
that the Agent's or the Lenders' lien upon such newly acquired equipment shall
have the same priority as the Agent's or the Lenders' lien upon the replaced
equipment subject to any prior liens permitted by Section 7.02(e) and (g);
(b) the disposition by the Companies of additional assets (all of which
dispositions may be made free from the liens of the Security Documents);
provided, however, that (i) the selling Company or Companies shall have received
payment in cash or cash equivalents of at least eighty-five percent (85%) of
both gross and net proceeds from such disposition of assets (other than
like-kind exchanges under Section 1031 of the Internal Revenue Code), (ii) I 00%
of the Adjusted Net Cash Proceeds received by such Companies shall be used in
accordance with Section 1.06(c); (iii) no Specified Default shall exist on the
date of any such disposition, and immediately after giving effect thereto; (iv)
the Borrower shall have provided to the Agent updated Projections through the
Expiration Date showing compliance, after giving effect to such disposition,
with all of the Borrower's obligations under this Agreement through such date;
and (v) such disposition shall have been approved, pursuant to all required
corporate or other action, by the Companies and their equityholders and the
Agent shall have received satisfactory evidence to such effect.
Section 7.04. Fundamental Changes, Acquisitions.
(a) Form any subsidiary or otherwise change the capital structure or
organization of the Companies from that set forth in Schedule 4.19, except (i)
pursuant to the Permitted Restructurings and the Acquisition Restructurings and
(ii) in connection with the formation of any Operating Subsidiary, Holding
Company or License Company, as contemplated hereunder and in compliance with
Section 2.01 and all other applicable provisions of the Loan Documents, as part
of a Permitted Acquisition; (b) permit or suffer any amendment of its charter,
partnership, or limited liability company documents which could have a Material
Adverse Effect (it being expressly agreed that the inclusion in any such charter
documents of any provision similar to those set forth in Section 102(b)(2) of
Title 8 of the Delaware Code is prohibited under this Section); (c) (i)
dissolve, liquidate, consolidate with or merge with, or otherwise acquire any
Station, or all or any substantial portion of the ownership interests or assets
or properties of any corporation, partnership, limited liability company or
other entity or (ii) acquire any other material assets, other than pursuant to
(A) Permitted Acquisitions and Capital Expenditures
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permitted hereunder and (B) purchases of inventory and supplies in the ordinary
course of business; (d) repurchase any shares of capital stock, partnership
interests or membership interests; or (e) issue any additional shares of capital
stock, membership interests or partnership interests, except for securities (i)
in respect of which the issuing Company has no obligation to redeem or to pay
cash distributions or dividends, (ii) the issuance of which does not result in
an Event of Default and (iii) which shall have been collaterally assigned or
pledged to the Agent as required hereunder.
(b) Notwithstanding the foregoing, the Companies may merge or consolidate
with each other if (i) the surviving or resulting corporation in a merger
involving the Borrower is the Borrower, (ii) the Lenders retain their collateral
position and security interests contemplated by Section 2.01 and (iii) the
Licenses with respect to the operation of the Stations remain- in the License
Companies.
Section 7.05. Local Marketing Agreements, Etc. Enter into any LMA or other
similar arrangement, other than Permitted LMAS.
Section 7.06. Management. Turn over the management of its properties,
assets, rights, licenses and franchises to any Person other than a full-time
employee of the Companies.
Section 7.07. Sale and Leaseback. Enter into any arrangements, directly or
indirectly, with any Person whereby it shall sell or transfer any property,
real, personal or mixed, used or useful in its business, whether now owned or
hereafter acquired, and thereafter rent or lease such property; provided,
however, that the Borrower and the Operating Companies may engage in such
transactions to the extent structured as Capital Leases and subject to the
limitations in Section 7.01(g).
Section 7.08. Investments. Except for Permitted Investments, purchase,
invest in or otherwise acquire or hold securities, including without limitation
capital stock, partnership interests, membership interests and other equity
interests, and evidences of indebtedness of, or make loans or advances to, or
enter into any arrangement for the purpose of providing funds or credit to, any
other Person.
Section 7.09. Change in Business and Activities. Engage, directly or
indirectly, in any business other than the businesses in which it is currently
engaged or related businesses engaged in pursuant to any Permitted Acquisition.
Notwithstanding anything to the contrary set forth herein, (a) the Holding
Companies shall engage in no business other than to act as holding companies for
the Operating Companies and the License Companies, (b) the Operating Companies
and the License Companies shall not engage in any activities inappropriate to
the purposes for which they were formed, as specified in the respective
definitions of such terms set forth in Article XI, and (c) Acme Finance shall
engage in no business other than to act as a co-issuer of the Senior Notes.
Section 7.10. Accounts Receivable. Sell, assign, discount or dispose in any
way of any accounts receivable, promissory notes or trade acceptances held by
any Company, with or
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without recourse, except for collection (including endorsements) in the ordinary
course of business.
Section 7.1 1. Transactions with Affiliates. Except for transactions (a)
contemplated by the License Agreements, (b) in accordance with existing
agreements, true and complete copies of which have been provided to the Lenders,
and (c) in connection with, and expressly contemplated by, Permitted
Acquisitions, enter into any transaction, including, without limitation, the
purchase, sale or exchange of property or assets or the rendering or accepting
of any service with or to any Affiliate of any Company, except in the ordinary
course of business and pursuant to the reasonable requirements of its business
and upon terms not less favorable to such Company than it could obtain in a
comparable arrm's-length transaction with a third party other than such
Affiliate.
Section 7.12. Amendment of Certain Agreements, Etc. (a) Amend, modify or
terminate any License, any agreement or instrument evidencing Subordinated Debt
or any material agreement to which any Company is a party (including without
limitation the Indenture, the Senior Notes and any material Acquisition
Document, which shall be deemed to include the KPLR Escrow Agreement, the KPLR
Acquisition Agreement and the KPLR Time Brokerage Agreement), or enter into any
material agreement, in each case, if the effect thereof would be (i) to confer
additional rights upon the other party or parties thereto which could have a
Material Adverse Effect or (ii) to increase materially the obligations of any
Company thereunder or (b), in any event, subject to applicable law, elect to
terminate or amend any License Agreement if the effect thereof could have a
Material Adverse Effect.
Section 7.13. ERISA. (a) Fail to make contributions to pension plans
required by Section 412 of the Code, (b) fail to make payments required by Title
IV of ERISA as the result of the termination of a single employer pension plan
or withdrawal or partial withdrawal from a multiemployer pension plan or (c)
fail to correct a prohibited transaction with an employee benefit plan with
respect to which it is liable for the tax imposed by Section 4975 of the Code.
Section 7.14. Margin Stock. Use or permit the use of any of the proceeds of
the Loans, directly or indirectly, for the purpose of purchasing or carrying, or
for the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry, any Margin Stock or for any other purpose which
might constitute the transactions contemplated hereby a "purpose credid" within
the meaning of Regulation U (I 2 CFR Part 22 1) of the Board of Governors of the
Federal Reserve System, or cause any Loan, the application of proceeds thereof
or this Agreement to violate Regulation G, Regulation U, Regulation T or
Regulation X of the Board of Governors of the Federal Reserve System or any
other regulation of such Board or the Securities Exchange Act of 1934, as
amended, or any rules or regulations promulgated under such statutes.
Section 7.15 Negative Pledges, etc. Enter into any agreement after the
date hereof, prohibiting (a) any Company from amending or otherwise modifying
this Agreement or any other Transaction Document or (b) the creation or
assumption of any lien upon the properties, revenues or assets of any Company,
whether now owned or hereafter acquired.
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VIII. DEFAULTS. In each case of happening of any of the following events
(each of which is herein sometimes called an "Event of Default"):
(a) any representation or warranty made by or on behalf of any Company or
any of its Affiliates (including without limitation the Parent Companies) in
this Agreement or any other Loan Documents or in any report, certificate,
financial statement or other instrument furnished in connection with this
Agreement or the borrowing hereunder, shall prove to be false or misleading in
any material respect when made or reconfirmed;
(b) default in the payment or mandatory prepayment of any installment of
the principal of any Note or any payment of any installment of the principal of
any other indebtedness of any Company to the Agent or any Lender, when the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment or by acceleration or otherwise;
(c) default in the payment of any installment of any interest on any Note,
or any premium or fee, or any payment in respect of any Rate Hedging Obligations
entered into with the Agent or any Lender, or any other indebtedness of any
Company to the Agent or any Lender for more than five (5) Business Days after
the date when the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment or by acceleration or otherwise;
(d) default by any Person other than the Agent or any Lender in the due
observance or performance of, or compliance with, any covenant or agreement
contained in Article V, Sections 6.02 and 6.03 (but only if the same involves
any seizure of property), 6.06 and 6.10 or Article VII of this Agreement;
(e) default by any Person other than the Agent or any Lender in the due
observance or performance of, or compliance with, any other covenant, condition
or agreement to be observed or performed pursuant to the terms of this Agreement
or pursuant to the terms of any other Loan Document or of any Rate Hedging
Obligation entered into with the Agent or any Lender or its affiliate, which
default is not referred to in paragraphs (a) through (d), inclusive, of this
Article VIII and which default shall continue unremedied for thirty (30) days
after the earlier to occur of (i) the -Borrower's discovery of such default, or
(ii) written notice thereof from the Agent or any Lender to the Borrower,
provided, however, that if any such default cannot be remedied, then such
default shall be deemed to be an Event of Default as of the date of the
occurrence thereof;
(f) any default under or with respect to the Senior Notes or the Indenture
or with respect to any other evidence of Indebtedness of the Borrower or any
other Company (other than to the Lenders hereunder) for borrowed money which,
when aggregated with all other such defaults of the Companies or any of them,
exceeds $500,000, if the effect of such default is to permit the holder of such
Indebtedness to accelerate the maturity of such Indebtedness, unless such holder
shall have permanently waived the right to accelerate the maturity of such
Indebtedness on account of such default;
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(g) (i) the Borrower or any Operating Company or License Company shall
lose, fail to keep in force, suffer the termination, suspension or revocation of
or terminate, forfeit or suffer an adverse amendment to any Main Station License
at any time held by it, the loss, termination, suspension, revocation or
amendment of which could have a Material Adverse Effect; (ii) any governmental
regulatory authority shall conduct a hearing on the renewal of any Main Station
License, where there is a substantial likelihood of the termination, revocation,
suspension or adverse amendment of such Main Station License and the same could
have a Material Adverse Effect; or (iii) any govenmental regulatory authority
shall commence an action or proceeding seeking the termination, suspension,
revocation or adverse amendment of any Main Station License, there is a
substantial likelihood of such termination, suspension, revocation or adverse
amendment and the same could have a Material Adverse Effect;
(h) the transmission of the broadcast signal(s) of any Station(s) shall be
interrupted at any time for more than (i) forty-eight (48) consecutive hours on
two (2) occasions, whether or not consecutive, in any twelve (12) month period,
unless such interruption occurs by reason of force majeure, or (ii) in the event
of force majeure, fourteen (14) days, in each case, unless (and only so long as)
all damages, liabilities and other effects of such interruption of service
(including any Material Adverse Effect) are fully covered by business
interruption insurance;
(i) any Company shall (i) discontinue its business (except as permitted
hereunder or as permitted in connection with a Permitted Acquisition or a
disposition of assets permitted under Section 7.03), (ii) apply for or consent
to the appointment of a receiver, trustee, custodian or liquidator of it or any
of its property, (iii) admit in writing its inability to pay its debts as they
mature, (iv) make a general assignment for the benefit of creditors, (v) be
adjudicated a bankrupt or insolvent or be the subject of an order for relief
under Title II of the United States Code or (vi) file a voluntary petition in
bankruptcy, or a petition or an answer seeking reorganization or an arrangement
with creditors or to take advantage of any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution or liquidation law or statute, or
an answer admitting the material allegations of a petition filed against it in
any proceeding under any such law or corporate action shall be taken for the
purpose of effecting any of the foregoing;
(j) there shall be filed against any Company an involuntary petition
seeking reorganization of such company or the appointment of a receiver,
trustee, custodian or liquidator of such company or a substantial part of its
assets, or an involuntary petition under any bankruptcy, reorganization or
insolvency law of any jurisdiction, whether now or hereafter in effect and such
involuntary petition shall not have been dismissed within sixty (60) days
thereof;
(k) final judgment for the payment of money which, when aggregated with all
other outstanding judgments against the Companies or any of them, exceeds
$500,000 (exclusive of amounts covered by insurance or actually contributed in
cash by third party obligors with respect to such judgments) shall be rendered
against the Borrower or any other Company, and the same shall remain
undischarged (unless fully bonded upon terms reasonably satisfactory to the
Required Lenders) for a period of thirty (30) consecutive days, during which
execution shall not be effectively stayed;
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(1) the occurrence of any attachment of any deposits or other property of
the Borrower or any other Company in the hands or possession of the Agent or any
of the Lenders, or the occurrence of any attachment of any other property of the
Borrower or any other Company in an amount which, when aggregated with all other
attachments against the Companies or any of them, exceeds $500,000 and which
shall not be discharged within sixty (60) days of the date of such attachment;
(m) for any reason, other than in connection with the Permitted
Restructurings, (i) Acme Holdings shall cease to control the Borrower, (ii) Acme
Intermediate shall cease to own all of the issued and outstanding membership and
other equity interests in the Borrower, (iii) the Borrower shall cease to own
and control all of the issued and outstanding equity interests of each of the
Holding Companies or (iv) the respective Holding Companies shall cease to own
and control, directly or indirectly, all of the issued and outstanding equity
interests of each of the License Companies and Operating Companies (in each case
except for de minimus membership interests in limited liability companies held
by other Companies, excluding Acme Finance, as specified in Schedule 4.19, for
purposes of complying with statutory requirements in jurisdictions which do not
acknowledge single-member limited liability companies);
(n) for any reason, a change in the ownership of the membership interests
in Acme Holdings shall occur and, as a result thereof, investment funds managed
by Alta Communications, Inc., CEA Capital Partners, BancBoston Ventures, Inc.
and Trust Company of the West shall cease to hold (i) as owners of at least
50.1% of the Class B Founder Units in Acme Holdings, the right to approve or
refuse approval of certain material actions specified in Section 3.04 of the
Amended and Restated Limited Liability Company Agreement of Acme Holdings dated
as of September 30, 1997, as originally executed and delivered, or (ii)
indirectly through their membership interests in Acme Holdings, a combined
interest in the Borrower representing at least 50.1% of the Borrower's
consolidated economic value;
(o) for any reason, Acme Missouri shall fail to consummate the KPLR
Acquisition on or before June 30, 1998; or
(p) for any reason (other than the gross negligence of the Agent or the
Lenders), any material Security Document or other Loan Document shall not be in
full force and effect in all material respects or shall not be enforceable in
all material respects in accordance with its terms, or any security interest(s)
or lien(s) granted pursuant thereto which is, or are in the aggregate, material
shall fail to be perfected, or any party thereto other than the Agent or the
Lenders shall contest the validity of any material lien(s) granted under, or
shall disaffirm its obligations under, any material Security Document or other
Loan Document;
then and upon every such Event of Default and at any time thereafter during the
continuance of such Event of Default, at the election of the Required Lenders as
provided in Article XII, the Commitments shall terminate and the Notes and any
and all other Indebtedness of the Borrower to the Lenders shall immediately
become due and payable, both as to principal and interest, without presentment,
demand, prior notice, or protest, all of which are hereby expressly waived,
anything contained herein or in the Notes or other evidence of such indebtedness
to the contrary notwithstanding (except in the case of an Event of Default under
paragraph (i) or (j) of this
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Article VIII which, under applicable law, would result in the automatic
acceleration of the Borrower's Indebtedness, in which event the Commitments
shall automatically terminate and such Indebtedness shall automatically become
due and payable).
IX. REMEDIES ON DEFAULT, ETC. In case any one or more Events of Default
shall occur and be continuing, the Agent and the Lenders may proceed to protect
and enforce their rights by an action at law, suit in equity or other
appropriate proceeding, whether for the specific performance of any agreement
contained in this Agreement, any Security Document or the Notes, or for an
injunction against a violation of any of the terms hereof or thereof or in and
of the exercise of any power granted hereby or thereby or by law, all subject to
the provisions of Article XII. In the event that the Agent shall apply for the
appointment of, or taking possession by, a trustee, receiver or liquidator of
the Borrower or any other Company or of any other similar official, to hold or
liquidate all or any substantial part of the properties or assets of the
Borrower or such Company following the occurrence of a default in payment of any
amount owed to the Agent or any Lender hereunder, the Borrower, for itself and
on behalf of the Companies (with all due and proper authorization of the Boards
of Directors, Boards of Advisors, stockholders, partners, members and managers,
as the case may be, of the Companies), hereby jointly and severally consent to
such appointment and taking of possession and agree to execute and deliver any
and all documents requested by the Agent relating thereto (whether by joining in
a petition for the voluntary appointment of, or entering no contest to a
petition for the appointment of, such an official or otherwise, as appropriate
under applicable law), provided, however, that such appointment of a receiver or
liquidator shall only occur at such time and under conditions which are in
compliance with the rules, regulations and policies of the FCC, as further
described in Section 14.12. No right conferred upon the Agent or the Lenders
hereby or by any Security Document or the Notes shall be exclusive of any other
right referred to herein or therein or now or hereafter available at law, in
equity, by statute or otherwise.
X. THE AGENT.
Section 10.01. Appointment, Powers and Immunities.
(a) Each Lender hereby irrevocably (subject to Section 10.08) designates
and appoints Canadian Imperial Bank of Commerce, which designation and
appointment is coupled with an interest, as the Agent of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes Canadian Imperial Bank of Commerce, as the Agent of such Lender, to
take such action on its behalf under the provisions of this Agreement and the
other Loan Documents and to exercise such powers and perform such duties as are
expressly delegated to the Agent by the terms of this Agreement and the other
Loan Documents, together with such other powers as are reasonably incidental
thereto.
(b) The Agent (which term as used in this sentence and in Section 10.05 and
the first sentence of Section 10.06 shall include reference to its affiliates
and its own and such affiliates' officers, directors, employees and agents)
shall not: (i) have any duties or responsibilities to be a trustee for any
Lender; (ii) be responsible to the Lenders for any recitals, statements,
representations or warranties contained in this Agreement, or in any certificate
or other document referred to or provided for in, or received by either of them
under, this Agreement, or for the
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value, validity, effectiveness, genuineness, enforceability, perfection or
sufficiency of this Agreement, any Note, any Security Document or any other
document referred to or provided for herein or for any failure by any Company or
any other Person to perform any of its obligations hereunder or thereunder;
(iii) be required to initiate or conduct any litigation or collection
proceedings hereunder except to the extent requested by the Required Lenders;
and (iv) be responsible for any action taken or omitted to be taken by it
hereunder or under any other document or instrument referred to or provided for
herein or in connection herewith, except for its own gross negligence or willful
misconduct.
(c) The Agent may employ agents and attoneys-in-fact and shall not be
responsible for the negligence or misconduct of any such agents or
attoneys-in-fact it selects with reasonable care.
(d) Subject to the foregoing, to Article XII and to the provisions of any
intercreditor agreement among the Lenders in effect from time to time, the Agent
shall, on behalf of the Lenders, (i) hold and apply any and all Collateral, and
the proceeds thereof, at any time received by it, in accordance with the
provisions of the Security Documents and this Agreement; (ii) exercise any and
all rights, powers and remedies of the Lenders under this Agreement, the
Security Documents and the other Loan Documents, including the giving of any
consent or waiver or the entering into of any amendment, subject to the
provisions of Article XII; (iii) execute, deliver and file UCC Financing
Statements, mortgages, deeds of trust, lease assignments and other such
agreements, and possess instruments on behalf of any or all of the Lenders; and
(iv) in the event of acceleration of the Borrower's Indebtedness hereunder, sell
or otherwise liquidate or dispose of any portion of the Collateral held by it
and otherwise exercise the rights of the Lenders hereunder and under the
Security Documents.
(e) The Lenders hereby authorize the Agent, at its option and in its
discretion, to release any Lien granted to or held by the Agent upon any
Collateral (i) upon termination of the Commitments and payment in full of all of
the Obligations, (ii) constituting property sold or to be sold or disposed of as
part of or in connection with any disposition expressly permitted hereunder or
under any other Loan Document or to which the Required Lenders have consented or
(iii) otherwise pursuant to and in accordance with the provisions of any
applicable Loan Document. Upon request by the Agent at any time, the Lenders
will confirm in writing the Agent's authority to release Collateral pursuant to
this Section.
Section 10.02. Reliance by Agent. The Agent shall be entitled to rely upon
any certification, notice or other communication (including any communication by
telephone, telex, telegram or cable) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or Persons,
and upon advice and statements of legal counsel, independent accountants and
other experts selected by the Agent. As to any matters not expressly provided
for by this Agreement, the Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder in accordance with instructions
signed by the Required Lenders or the Lenders, as the case may be, and such
instructions and any action taken or failure to act pursuant thereto shall be
binding on the Lenders.
Section 10.03. Events of Default. The Agent shall not be deemed to have
knowledge of the occurrence of an Event of Default (other than the non-payment
of principal of or interest on
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the Notes) unless such Agent has received written notice from any Lender or the
Borrower specifying such Event of Default and stating that such notice is a
"Notice of Default". In the event that the Agent receives such a notice of the
occurrence of an Event of Default, the Agent shall give prompt notice thereof to
the Lenders (and shall give each Lender prompt notice of each such non-payment).
The Agent shall (subject to Section 10.07) take such action with respect to such
Event of Default as shall be directed by the Required Lenders, as provided under
Article XII, provided that, unless and until the Agent shall have received such
directions, the Agent may (but shall not be obligated to) take such action on
behalf of the Lenders, or refrain from taking such action, with respect to such
Event of Default as it shall deem advisable in the best interest of the Lenders.
Section 10.04. Rights as a Lender. With respect to its Commitment and the
Advances made by CIBC hereunder, CIBC shall have the same rights and powers
hereunder as any other Lenders and may exercise the same as though its
affiliate, Canadian Imperial Bank of Commerce, were not acting as the Agent. The
Agent and its affiliates (including CIBC) may, without having to account
therefor to the Lenders and without giving rise to any fiduciary or other
similar duty to any Lender, accept deposits from, lend money to and generally
engage in any kind of banking, trust or other business with the Borrower and any
of their affiliates as if it were not acting as an Agent and as if CIBC were not
a Lender, and the Agent may accept fees and other consideration from any Company
for services in connection with this Agreement or otherwise without having to
account for the same to the Lenders.
Section 10.05. Indemnification. The Lenders agree to indemnify the Agent
(to the extent not reimbursed under Section 14.02, but without limiting the
obligations of the Borrower under such Section 14.02), ratably in accordance
with the aggregate principal amount of the Notes held by the Lenders (or, if no
such principal or interest is at the time outstanding, ratably in accordance
with their respective Commitments), for any and all liabilities, obligations,
losses, damages, penalties, action, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against the Agent in any way relating to or arising out
of this Agreement or any Security Document or any other Loan Documents or the
transactions contemplated by or referred to herein or therein (including,
without limitation, the costs and expenses which the Borrower is obligated to
pay under Section 14.02) or the enforcement of any of the terms of this
Agreement or of any Security Document or of any other Loan Document, provided
that no Lender shall be liable for any of the foregoing to the extent they arise
from the gross negligence or willful misconduct of the party to be indemnified.
Section 10.06. Non-Reliance on Agent and other Lenders. Each Lender agrees
that it has, independently and without reliance on the Agent or any other
Lenders, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Companies and its own decision
to enter into this Agreement and that it will, independently and' without
reliance upon the Agent or any other Lenders, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
analysis and decisions in taking or not taking action under this Agreement. The
Agent shall not be required to keep itself informed as to the performance or
observance by the Companies or the Parent Companies of this Agreement or any
other Loan Document or to inspect the properties or books
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of the Companies. Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by the Agent
hereunder, the Agent shall have no duty or responsibility to provide and Lender
with any credit or other information concerning the affairs, financial condition
or businesses of the Companies (or the Parent Companies or any other of the
Borrower's Affiliates) which may come into the possession of the Agent or any of
its affiliates. Notwithstanding the foregoing, the Agent will provide to the
Lenders any and all information reasonably requested by them and reasonably
available to the Agent promptly upon such request.
Section 10.07. Failure to Act. Except for action expressly required of the
Agent hereunder, the Agent shall in all cases be fully justified in failing or
refusing to act hereunder unless it shall be indemnified to its satisfaction by
the Lenders against any and all liability and expense which may be incurred by
it by reason of taking or continuing to take any such action.
Section 10.08. Resignation or Removal of Agent. Canadian Imperial Bank of
Commerce (or any other Agent hereunder), may resign as the Agent at any time by
giving ten (1O) days' prior written notice thereof to the Lenders and the
Borrower. Any such resignation shall take effect at the end of such ten (10) day
period or upon the earlier appointment of a successor Agent by the Required
Lenders as provided below. Upon any resignation of Canadian Imperial Bank of
Commerce, (or any other Agent hereunder), the Required Lenders shall appoint a
successor agent from among the Lenders or, if such appointment is deemed
inadvisable or impractical by the Required Lenders, another financial
institution with a combined capital and surplus of at least $500,000,000, which
successor agent is reasonably acceptable to the Borrower, provided that the
Borrower consent to such appointment will not be required if a Default then
exists and is continuing hereunder. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent. After the effective date of the resignation of an Agent
hereunder, the retiring Agent shall be discharged from its duties and
obligations hereunder, provided that the provisions of this Article X shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as the Agent. In the event that there shall
not be a duly appointed and acting Agent, (i) the Borrower agrees to make each
payment due to the Agent hereunder and under the Notes and the other Loan
Documents, if any, directly to each Lender entitled thereto, pursuant to written
instructions provided by the resigning Agent or, after such resignation, the
Lenders, and to provide copies of each certificate or other document required to
be furnished to the Agent hereunder, if any, directly to each Lender, and (ii)
any and all obligations of the Borrower in respect of the Agency Fee incurred
after such event shall be suspended until the appointment of a new Agent.
Section 10.09. Cooperation of Lenders. Each Lender shall (a) promptly
notify the other Lenders and the Agent of any Event of Default known to such
Lender under this Agreement and not reasonably believed to have been previously
disclosed to the other Lenders; (b) provide the other Lenders and the Agent with
such information and documentation as such other Lenders or the Agent shall
reasonably request in the performance of their respective duties hereunder,
including, without limitation, all information relative to the outstanding
balance of principal, interest and other sums owned to such Lender by the
Borrower; and (c) cooperate with the Agent with respect to any and all
collections and/or foreclosure procedures at any time commenced
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against the Borrower or otherwise in respect of the Collateral by the Agent in
the name and on behalf of the Lenders.
XI. DEFINITIONS.
As used herein the following terms have the following respective meanings:
Accountants. See Section 6.05.
Acme Finance. Acme Finance Corporation, a corporation wholly owned by the
Borrower.
Acme Holdings. Acme Television Holdings, L.L.C., a Delaware limited liability
company and the ultimate parent of the Borrower.
Acme Holdings Equity Financing. See the Recitals.
Acme Holdings Equity Contribution. See the Recitals.
Acme Intermediate. Acme Intermediate Holdings, LLC, a Delaware limited liability
company which owns 99.5% of the membership interests in the Borrower, the
remaining .5% being held by Acme Subsidiary Holdings II, LLC.
Acme Intermediate Equity Contribution. See the Recitals.
Acme Intermediate Indenture. See the Recitals.
Acme Intermediate Notes. See the Recitals.
Acme Intermediate Offering. See the Recitals.
Acme Missouri. Acme Television Licenses of Missouri, Inc., a Missouri
corporation and the wholly owned Subsidiary of the Borrower. The Borrower
contemplates that, upon the consummation of the YPLR Acquisition, Acme Missouri
will be renamed Acme Television Holdings of Missouri, Inc.
Acme Missouri Note Documents. The $132,000,000 promissory note dated as of
September 30, 1997 issued to the Borrower by Acme Missouri to evidence the
intercompany loan made to Acme Missouri on the date hereof with a portion of the
proceeds of the Offering, together with any and all documents executed in
connection therewith or related thereto.
Acme Subsidiary III. Acme Subsidiary Holdings III, LLC, a Delaware limited
liability company wholly owned by the Borrower which owns .5% of Acme Television
Licenses of New Mexico, L.L.C., Acme Television of New Mexico, L.L.C., Acme
Television Licenses of Utah, L.L.C. and Acme Television of Utah, L.L.C.
Aquisition. See the definition of "Permitted Acquisition" set forth below.
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Acquisition Agreement. With respect to any Permitted Acquisition, the respective
acquisition, purchase or other agreement which sets forth the terms and
conditions of such acquisition.
Acquisition Documents. With respect to any Permitted Acquisition, the respective
Acquisition Agreement, escrow agreement, time brokerage agreement, LMA and other
agreements executed pursuant thereto and in connection therewith from time to
time.
Acquisition Restructurings. See Section 6.11.
Adjusted EBITDA. For any period, EBITDA for such period plus Programming
Payments made during such period and listed on Schedule 1 1.0 I hereto; adjusted
during any such period during which the Borrower or its Subsidiaries acquired or
disposed of any Station or other property (including, for purposes hereof,
acquisitions of cash flow accomplished through LMAs permitted under clause (a)
of the definition of "Permitted LMA" set forth below) other than in the ordinary
course, as permitted under this Agreement, subject to the approval of the
Lenders in the reasonable exercise of their discretion, by (a) excluding
therefrom the portion thereof attributable to any Station or other property sold
or disposed of by any Company other than in the ordinary course of business
during such period as if such Station or other property were not owned at any
time by the Companies during such period, and (b) including therein the portion
thereof attributable to any Station or other property (by Permitted Acquisition
or Permitted LMA) acquired by any Company other than in the ordinary course of
business during such period as if such Station or property were owned by the
Companies at all times during such period, such portion to include pro forma
adjustments for any net cost and expense reductions relating to such Station
specified in the related Schedule of Cost Reductions provided prior to the
consummation of such Acquisition or under Section 3.01(l), as applicable,
provided that the Required Lenders shall have consented to such adjustments in
writing. For purposes of this definition, the portion of EBITDA attributable to
any Station or other property for any period shall be determined in a manner
consistent in all relevant respects with the method used to determine EBITDA,
but on a non-consolidated basis. The determination of EBITDA of any Station
shall account for only those items included in the definition of, EBITDA that
are directly attributable to such Station and the operation thereof and shall
not include, for any period prior to the acquisition thereof by any Company
thereof, any corporate overhead or similar charges of the prior owner of such
Station.
Adjusted Net Cash Proceeds. With respect to any disposition of assets purchased
by the Companies after the date hereof in accordance with the requirements of
Section 7.04, the Net Cash Proceeds thereof minus the related Excluded Proceeds,
if any.
Advance(s). See Section 1.01.
Affiliate(s). Any Person that directly or indirectly controls, or is under
common control with, or is controlled by, the, Borrower and, if such Person is
an individual, any member of the immediate family (including parents, spouse,
children and siblings) of such individual and any trust whose principal
beneficiary is such individual or one or more members of such immediate
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family and any Person who is controlled by any such member or trust. As used in
this definition, "control", including, its correlative meanings, "controlled
by" and "under common control with", shall mean possession, directly or
indirectly, of power to direct or cause the direction of management or policies
(whether through ownership or securities or partnership or other ownership
interests, by contract or otherwise), provided that, in any event, any Person
that owns directly or indirectly securities having ten percent (I 00/o) or more
of the voting power for the election of directors or other governing body of a
corporation or ten percent (10%) or more of the ownership interests of any other
Person (other than as a limited partner of such other Person) will be deemed to
control such corporation or other Person. Notwithstanding the foregoing, no
individual shall be an Affiliate solely by reason of his or her being a
director, officer or employee of the Borrower or any Subsidiary.
Affiliate Agreement. The Affiliate Agreement of even date herewith by and
between the Borrower, the Parent Companies and the Agent.
Agency Fee. See Section 1.07.
A2ent. See the Preamble.
Annualized Adjusted EBITDA. (a) For any period of one fiscal quarter, Adjusted
EBITDA for such period multiplied by four( 4); (b) for any period of two (2)
fiscal quarters Adjusted EBITDA for such period multiplied by two (2); and (c)
for any period of three (3) fiscal quarters Adjusted EBITDA for such period
multiplied by one and one-third (I 1/3).
Applicable Margin. See Section 1.03.
Assignee. See Section 1.13.
Assignment and Acceptance. See Article XIII.
Audited Financial Statements. See Section 1.03.
Borrower. See the Preamble.
Borrowing Date. With respect to any Advances requested hereunder, the date such
Advances are to be made.
Budget. See Section 6.05.
Business Day. (a) For all purposes other than as provided in clause (b) below,
any day other than a Saturday, Sunday or legal holiday on which banks in New
York, New York are open for the transaction of a substantial part of their
commercial banking business; and (b) with respect to all notices and
determinations in connection with, and payments of principal and interest on,
LIBOR Loans, any day that is a Business Day described in clause (a) and that is
also a day for trading by and between banks in U.S. Dollar deposits in the
London interbank market.
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Capital Expenditures. For any period, expenditures, (including the aggregate
amount of Capital Lease Obligations incurred during such period) made by the
Borrower and the Operating Companies to acquire or construct fixed assets, plant
or equipment (including renewals, improvements and replacements, but excluding
repairs and acquisitions permitted hereunder) during such period, computed in
accordance with GAAP.
Capital Lease. Any lease of property (real, personal or mixed) which, in
accordance with GAAP and Statement No. 13 of the Financial Accounting Standards
Board, would be permitted or required to be capitalized on the lessee's balance
sheet.
Capital Lease Obligations. All obligations of any of the Companies to pay rent
or other amounts under a lease of (or other agreement conveying the right to
use) property (real, personal or mixed) to the extent such obligations are
required to be classified and accounted for as a capital lease on any such
Company's balance sheet under GAAP. For purposes of this Agreement, the amount
of such obligations shall be the capitalized amount thereof, determined in
accordance with GAAP.
Cash Interest Expense. For any period, Interest Expense for such period which is
payable, or currently paid, in cash.
Casually Event. Any loss of, or damages to, or any condemnation or other taking
of any assets or property of the Borrower or any of its Subsidiaries for which
the Borrower or any Subsidiary receives insurance proceeds, proceeds of a
condemnation award or other compensation.
CERCLA. The Comprehensive Environmental Response, Compensation and Liability Act
of 1989 (42 USC 9601, et. M.).
CIBC. See the Preamble.
Code. The Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.
Collateral. Collectively, any and all collateral referred to herein and in the
Security Documents.
Collateral Account. See Section l(d) of each of the Security Agreements.
Commitment Reduction Notice. See Section 1.06.
Commitment Fee. See Section 1.07.
Commitments. See Section 1.01.
Companies. Collectively, the Borrower and all of its Subsidiaries.
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Compliance Report. See Section 6.05.
Compliance Report Delivery Date. See Section 1.03.
Controlled Group. All trades or businesses (whether or not incorporated) under
common control that, together with the Borrower, are treated as a single
employer under Section 414(b) or 414(c) of the Code or Section 40001 of ERISA.
Copyright Office. The United States Copyright and Trademark Office or any other
federal government agency which may hereafter perform its functions.
Corporate Overhead. Amounts payable by a Subsidiary to the Borrower in respect
of reasonable accounting, legal and other general expenses applicable to the
operation of the Borrower and its Subsidiaries, which expenses are not
specifically related to the operation of a Station.
Damaged Property. See Section 6.02.
Default. (a) An Event of Default or (b) any event or condition that, but for the
requirement that time elapse or notice be given, or both, would constitute an
Event of Default.
Defaulting Lender. Any Lender with respect to which a Lender Default is in
effect.
Delaware Entities. See the definition of "Permitted Restructurings" set
forth below.
DMA. Designated Market Area.
Dollars and Dollar. Lawful money of the United States of America.
EBITDA. For any period, Net Income for such period, plus, to the extent deducted
in the determination of such Net Income and not restored in accordance with the
definition of such term, (a) Interest Expense, (b) depreciation, (c)
amortization, (d) taxes in respect of income and profits expensed during such
period, (e) the recognition of expenses related to the amortization of program
license and rental fees; and (f) other non-cash expenses; in each case, for such
period and determined on a consolidated basis, after eliminating intercompany
items, in accordance with GAAP, minus Programming Payments made during such
period.
Effective Date. See Section 1.08.
Environmental Laws. Any and all present and future Federal, state, local and
foreign laws, rules or regulations, and any orders or decrees, in each case as
now or hereafter in effect, relating to the regulation or protection of human
health, safety or the environment or to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals or toxic or hazardous
substances or wastes into the indoor or outdoor environment, including, without
limitation, ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage,
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disposal, transport or handling of pollutants, contaminants, chemicals or toxic
or hazardous substances or wastes.
Environmental Site Assessments. See Section 4.20.
Equity Contributions. Collectively, the Acme Holdings Equity Contribution and
the Acme Intermediate Equity Contribution.
ERISA. The Employee Retirement Security Act of 1974, as amended.
Expiration Date. September 30, 2002.
Event of Default. See Article VIII.
Excluded Proceeds. With respect to any disposition of assets purchased by the
Companies after the date hereof in accordance with the requirements of Section
7.04, that portion of the Net Cash Proceeds thereof which is less than or equal
to the portion of the funds used to finance the acquisition of such assets
derived from cash equity contributions to the Borrower, provided that (a) such
amount shall have been specified as such on the Schedule of Sources of
Acquisition Funds delivered to the Agent in connection with, and prior to, such
Acquisition, and (b) such equity contributions shall have been made on terms and
conditions reasonably satisfactory to the Required Lenders.
FAA. The Federal Aviation Administration or any other federal governmental
agency which may hereafter perform its functions.
FCC. The Federal Communications Commission or any other federal governmental
agency which may hereafter perform its functions.
FCC Licenses. Any Licenses issued by the FCC.
Federal Funds Rate. For any period, a fluctuating interest rate per annum (based
on a 360 day year) equal for each day during such period to the weighted average
of the rates of interest charged on overnight federal funds transactions with
member banks of the Federal Reserve System arranged by Federal funds brokers on
such day, as published for any day which is a Business Day by the Federal
Reserve Bank of New York (or, in the absence of such publication, as reasonably
determined by the Agent).
Fee Letter. The letter agreement dated as of September 18, 1997 between the
Borrower, CIBC and the Agent with respect to the payment of certain fees.
Financial Statements. See Section 4.01.
Funded Debt. Without duplication, all Indebtedness with respect to any of the
following: (a) money borrowed (whether recourse or non-recourse), including
principal and overdue interest and premiums, (b) Rate Hedging Obligations, (c)
obligations evidenced by a bond,
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debenture, note or other like written obligation to pay money, (d) Capital
Lease Obligations, (e) obligations under conditional sales or other title
retention agreements or secured by any Lien, (f) any letters of credit, bankers
acceptances or similar instruments (including reimbursement obligations with
respect thereto), (g) the deferred unpaid purchase price of property or
services, except trade payables and accrued expenses incurred in the ordinary
course of business, or (h) any guaranty of any or all of the foregoing.
Funding Fee. See Section 1.07.
GAAP. Generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or such other entity as may be approved by a
significant segment of the accounting profession, as in effect on December 31,
1996, applied on a basis consistent with (a) the application of the same in
prior fiscal periods, (b) that employed by the Accountants in preparing the
financial statements referred to in Section 6.05(a) and (c) the accounting
principles generally utilized in the broadcast television industry.
Governmental Authoritiy. Any nation or government, any state or other political
subdivision thereof and any entity exercising any executive, legislative,
judicial, regulatory or administrative functions of, or pertaining to,
government.
Hazardous Materials. (a) any petroleum or petroleum products, flammable
materials, explosives, radioactive materials, asbestos, urea formaldehyde foam
insulation, and transformers or other equipment that contain polychlorinated
biphenyls ("TCB's"), (b) any chemicals or other materials or substances that are
now or hereafter become defined as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous materials", "extremely hazardous
wastes", "restricted Hazardous wastes", "toxic substances", "toxic pollutants",
"contaminants", "pollutants" or words of similar import under any Environmental
Law and (c) any other chemical or other material or substance, exposure to which
is now or hereafter prohibited, limited or regulated under any Environmental
Law.
Holding Companies. Collectively, each of the wholly owned Subsidiaries of the
Borrower organized to wholly own the License Companies and Operating Companies
in a designated market.
Indebtedness or indebtedness. As applied to any Person, (a) all items (except
items of capital stock, capital or paid-in surplus or of retained earnings)
which, in accordance with GAAP, would be included in determining total
liabilities as shown on the liability side of a balance sheet of such Person as
at the date as of which Indebtedness is to be determined, including Capital
Lease Obligations but excluding Indebtedness of the Companies with respect to
trade obligations and other normal accruals in the ordinary course of business
not yet due and payable or not more than ninety (90) days in arrears measured
from the date of billing (other than any such other obligations which such
Person is contesting in good faith and for which proper reserves have been
established); (b) all indebtedness secured by any mortgage, pledge, lien or
conditional sale or other title retention agreement to which any property or
asset owned
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or held by such Person is subject, whether or not the indebtedness secured
thereby shall have been assumed; and (c) all indebtedness of others which such
Person has directly or indirectly guaranteed, endorsed (otherwise than for
collection or deposit in the ordinary course of business), discounted or sold
with recourse or agreed (contingently or otherwise) to purchase or repurchase or
otherwise acquire, or in respect of which such Person has agreed to supply or
advance funds (whether by way of loan, stock or equity purchase, capital
contribution, makewell or otherwise) or otherwise to become directly or
indirectly liable.
Indemnified Liabilities. See Section 14.14.
Indemnified Parties. See Section 14.14.
Indenture. See the Recitals.
Insurance Proceeds. With respect to any Casualty Event, any proceeds of
insurance, condemnation award or other compensation in respect thereof.
Interest Adjustment Date. See Section 1.03.
Interest Expense. For any period, the aggregate amount (determined on a
consolidated or consolidating basis, as appropriate, after eliminating
intercompany items, in accordance with GAAP) of interest accrued (whether or not
paid) during such period (including without limitation the Commitment Fee, the
Agency Fee the interest component of Capital Lease Obligations but excluding the
Funding fee and all interest in respect of overdue -trade payables) by the
Companies in respect of all Indebtedness for borrowed money.
Interest Period. With respect to each LIBOR Loan, the period commencing on the
date such Loan is made or converted from a Prime Rate Loan, or the last day of
the immediately preceding Interest Period, as to LIBOR Loans being continued as
such, and ending one (1), two (2), three (3) or six (6) months thereafter, as
the Borrower may elect in the applicable Request for Advances or Interest Rate
Option Notice, provided that:
(i) any Interest Period (other than an Interest Period determined
pursuant to clause (iv) below) that would otherwise end on a day that is
not a Business Day shall be extended to the next succeeding Business Day
unless such Business Day falls in the next calendar month, in which case
such Interest Period shall end on the immediately preceding Business Day;
(ii) if the Borrower shall fail to give notice as provided in Section
1.04, the Borrower shall be deemed to have requested a conversion of the
affected LIBOR Loan to a Prime Rate Loan on the last day of the then
current Interest Period with respect thereto;
(iii) any Interest Period relating to a LIBOR Loan that begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (iv) below, end on the last
Business Day of a calendar month;
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(iv) any Interest Period related to a LIBOR Loan that would otherwise
end after the final maturity date of the Loans shall end on such final
maturity date;
(v) notwithstanding clauses (iv) and (v) above, no Interest Period
shall have a duration of less than one (1) month.
Interest Rate Option Notice. A notice given by the Borrower to the Agent of the
Borrower's election to convert Loans to a different type or continue Loans as
the same type, in accordance with Section 1.04(a).
Issuers. See the Recitals.
Kellner Consulting Agreement. The Consulting Agreement by and between the
Borrower, as assignee of Acme Holdings, and Jamie Kellner dated as of June 17,
1997, as originally executed and delivered and as amended from time to time in
compliance with Section 7.12.
Koplar Management A2reement. The Management Agreement by and between Borrower,
as assignee of Acme Holdings, and Edward J. Koplar, to be entered into upon
consummation of the KPLR Acquisition, as provided in, and substantially in the
form of Exhibit E to, the KPLR Acquisition Agreement, as originally executed and
delivered and as amended from time to time in compliance with Section 7.12.
KPLR Acquisition. The acquisition by Acme Missouri of all of the issued and
outstanding shares of capital stock (other than certain designated management
shares to be redeemed simultaneously therewith) of Koplar Communications, Inc.,
owner and operator of Television Station KPLR-TV licenses to St. Louis,
Missouri, pursuant to the KPLR Acquisition Agreement.
KPLR Acquisition Agreement. The Stock Purchase Agreement dated as of July _,
1997 among Acme Missouri (as assignee of Acme Holdings) and Koplar
Communications, Inc. and its stockholders.
KPLR Acquisition Documents. Collectively, the KPLR Acquisition Agreement, the
KPLR Escrow Agreement, the KPLR Time Brokerage Agreement and any and all other
documents executed in connection therewith.
KPLR Escrow Funds. The cash amount of $143,000,000, as adjusted under Section
1.1 of the KPLR Escrow Agreement, to be delivered to an escrow agent by Acme
Missouri pursuant to the KPLR Escrow Agreement.
KPLR Escrow Agreement. The Escrow Agreement dated as of September 8, 1997
among Acme Missouri (as assignee of Acme Holdings) and the KPLR Sellers.
KPLR Licensees. Koplar Communications, Inc. and Koplar Communications
Television, LLC.
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KPLR Transfer Application. The application on FCC Form 315 requesting the FCC's
approval of the transfer of control of Koplar Communications, Inc., which
application was required to be filed by FCC counsel to the KPLR Sellers, or
delivered for filing to FCC counsel to the Borrower, immediately following
receipt of the KPLR Escrow Funds by the Escrow Agent (as defined in the KPLR
Escrow Agreement) under Article I of the KPLR Escrow Agreement.
KPLR Sellers. Collectively, Koplar Communications, Inc., and its stockholders.
Lender Default. (a) The refusal (which has not been retracted) of a Lender to
make available its portion of any Loan or (b) a Lender having notified the
Borrower and/or the Agent in writing that it does not intend to lend under this
Agreement; in either case other than by reason of any failure of the Borrower to
meet any material condition precedent thereto hereunder.
Lenders. See the Preamble.
LIBOR Base Rate. With respect to each day during each Interest Period pertaining
to any LIBOR Loan, the rate per annum determined by the Agent to be the
arithmetic mean of the offered rates for deposits in Dollars with a term
comparable to such Interest Period that appears on the Telerate British Bankers
Assoc. Interest Settlement Rates Page (as defined below) at approximately I 1:00
A.M., London time, on the second full Business Day preceding the first day of
such Interest Period; provided, however' that if there shall at any time no
longer exist a Telerate British Bankers Assoc. Interest Settlement Rates Page,
the term "LIBOR Base Rate" shall mean, with respect to each day during each
Interest Period pertaining to any LIBOR Loan, the rate per annum equal to the
rate at which the Agent is offered Dollar deposits at or about 1 0:00 A.M., New
York City time, two (2) Business Days prior to the beginning of such Interest
Period in the London interbank deposit market where the eurodollar and foreign
currency and exchange operations in respect of its LIBOR Loans are then being
conducted for delivery on the first day of such Interest Period for the number
of days comprised therein and in an amount comparable to the wnount of its LIBOR
Loan to be outstanding during such Interest Period. As used herein, the term
"Telerate British Bankers Assoc. Interest Settlement Rates Pape7' means the
display designated as Page 3750 on the Telerate System Incorporated Service (or
such other page as may replace such page on such service for the purpose of
displaying the rates at which Dollar deposits are offered by leading banks in
the London interbank deposit market).
LIBOR Loans. Loans bearing interest at a rate determined on the basis of the
LIBOR Rate.
LIBOR Rate. With respect to each day during each Interest Period pertaining to a
LIBOR Loan, a rate per annum determined for such day in accordance with the
following formula (rounded upward, if necessary, to the nearest 1/16th of 1%):
LIBOR Base Rate
1.00 - LIBOR Reserve Requirements
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LIBOR Reserve Requirements. For any day as applied to a LIBOR Loan, the
aggregate (without duplication) of the rates (expressed as a decimal fraction)
of reserve requirements in effect on such day (including without limitation
basic, supplemental, marginal and emergency reserves) under any regulations of
the Board of Governors of the Federal Reserve System (or other Governmental
Authority having jurisdiction with respect thereto) prescribed for eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of
such Board) maintained by a member bank of the Federal Reserve System; provided,
however, that LIBOR Reserve Requirements shall be calculated without giving
effect to any increase of the rate of reserve applicable to any Lender which is
specifically imposed on such Lender under a memorandum of understanding with a
Federal Reserve Bank.
License Agreements. The several Operating Agreements between the Operating
Companies and the respective License Companies.
License Companies. Collectively, the wholly owned Subsidiaries of each of the
Holding Companies formed for the sole purpose of holding one or more FCC
Licenses in the market served by the Stations(s) owned and operated by the
related respective Operating Company, itself being a subsidiary of such Holding
Company.
Licenses. A license, authorization or permit to construct, own or operate any
Station granted by the FCC or any other Govenmental Authority. The term
"License" shall include each of the Licenses set forth on Schedule 4.07.
Liens. See Section 4.09.
LMA. A local marketing agreement, program service agreement or time brokerage
agreement between a broadcaster and a television station licensee pursuant to
which the broadcaster provides programming to, and retains the advertising
revenues of, such licensee's station in exchange for fees paid to such licensee.
Loan Documents. This Agreement, the Notes, the Security Documents, the Affiliate
Agreement and all other agreements, instruments and certificates contemplated
hereby and thereby, including without limitation any Rate Hedging Agreements
entered into with any of the Lenders or their Affiliates.
Loans. The Advances.
Main Station License. A main station license issued by the FCC authorizing a
Station's primary transmissions, and not any auxiliary licenses held by such
Station.
Management Services. Senior management and supervisory services provided to the
Borrower by the Parent Companies under the Management Agreement dated June 17,
1997 among the Borrower and the Parent Companies.
Margin Stock. See Section 4.13.
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Material Adverse Effect. (a) An adverse effect on the validity or enforceability
of this Agreement or any of the other Loan Documents in any material respect,
(b) an adverse effect on the condition (financial or other), business, results
of operations or properties of the Borrower and its Subsidiaries, taken as a
whole, in any material respect or (c) an impairment of the ability of the
Companies to fulfill their obligations under this Agreement or any other Loan
Document to which any Company is a party, in any material respect.
Net Cash Proceeds. With respect to any disposition of assets by any Company
(including any LMA by any Company, as "licensee" thereunder), the aggregate
amount of all cash payments received by such Company, directly or indirectly, in
connection with such disposition, whether at the time thereof or after such
disposition under deferred payment arrangements or investments entered into or
received in connection with such disposition, minus the aggregate amount of any
legal, accounting, regulatory, title and recording tax expenses, commissions
and other fees and expenses paid by any Company in connection with such
disposition, and minus any income taxes payable by. any Company or its
stockholders, partners or members in connection with such disposition.
Net Income. For any period, net income of the Borrower and its Subsidiaries from
their respective operations, after deducting all operating expenses, provisions
for all taxes and reserves (including reserves for deferred income taxes) and
all other proper deductions (including Interest Expense), but excluding any
extraordinary gains derived from any sales of assets made during such period, to
the extent such gains or losses are properly includable in the determination of
Net Income for such period, and excluding the effect of Trades during such
period, all determined on a consolidated basis, after eliminating intercompany
items in accordance with GAAP.
New Mexico Acquisition. The acquisition of the right to construct Television
Station KAUOTV, licensed to Albuquerque New Mexico, pursuant to the Asset
Purchase Agreement dated as of August 22, 1997 by and among Minority
Broadcasters of Santa Fe, Inc. and ACME Television Licenses of New Mexico,
L.L.C.
Notes. See Section 1.01.
Obligations. The Loans and the other obligations of the Companies under this
Agreement and the other Loan Documents, including without limitation any and all
future loans, advances, debts, liabilities, obligations, covenants and duties
owing by the Companies to the Agent and the Lenders, or any of them, of any kind
or nature, whether or not evidenced by any note, mortgage or other instrument,
whether arising by reason of an extension of credit, loan, letter of credit
guarantee, indemnification or in any other manner, whether direct or indirect
(including those acquired by assignment), absolute or contingent, due or to
become due, now existing or hereafter arising and however acquired. The term
"Obligations" also includes, without limitation, all interest, charges,
expenses, fees (including attorneys', accountants', appraisers', consultants'
and other fees) and any other sums chargeable to the Companies under this
Agreement or any other Loan Documents.
Offering. See the Recitals.
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Offering Memorandum. See the Recitals.
Opening Balance Sheet. See Section 4.01.
Oregon Holdings. ACME Television Holdings of Oregon, L.L.C., an Oregon limited
liability company wholly owned 99% by the Borrower and 1% by the Oregon License
Company
Oregon License Company. ACME Television Licenses of Oregon, L.L.C., an Oregon
limited liability company owned 99% by the Oregon Holding Company and 1% by the
Oregon Operating Company
Oregon Operating Company. ACME Television of Oregon, L.L.C., an Oregon limited
liability company owned 99% by the Oregon Holding Company and 1% by the Oregon
License Company
Oregon Subsidiaries. The Oregon Holding Company, the Oregon License Company and
the Oregon Operating Company.
Operating Companies. Collectively, the wholly owned Subsidiaries of each of the
Holding Companies formed for the sole purpose of owning and operating the
television broadcast Station in the market served by such Holding Company.
Original Agreement. See the Recitals.
Original Note. See the Recitals.
Parent Companies. Collectively, Acme Holdings, Acme Intermediate, Acme
Subsidiary Holdings, LLC, Acme Subsidiary Holdings II, LLC, Acme Intermediate
Finance, Inc. and their controlled Affiliates from time to time.
Parent Subordination Agreements. See Section 2.01.
Permitted Acquisition. The acquisition by the Borrower or any Operating Company
and License Company, whether by way of the purchase of assets or stock, by
merger or consolidation or otherwise, of substantially all of the assets of or
ownership interests in a television broadcast property (each, an "Acquisition),
which Acquisition shall have been approved in writing by the Required Lenders in
their sole and absolute discretion. Without in any way limiting the discretion
of the Required Lenders, at a minimum, all Permitted Acquisitions will be
subject to the fulfillment of the following conditions:
(a) If such Acquisition involves the purchase of stock or other
ownership interests, the same shall be effected in such a manner as to
assure that the acquired entity becomes a wholly owned Subsidiary of the
Borrower or of a Holding Company;
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(b) No later than (1) thirty (30) days prior to the consummation of
any such acquisition or, if earlier, ten (10) business days after the
execution and delivery of the related Acquisition Agreement, the Borrower
shall have delivered to the Agent (in sufficient copies for all the
Lenders) copies of executed counterparts of such Acquisition Agreement,
together with all Schedules thereto, the forms of any additional agreements
or instruments to be executed at the closing thereunder (to the extent
available), and all applicable financial information, including new
Projections, updated to reflect such acquisition and any related
transactions, (2) promptly following a request therefor, copies of such
other information or documents relating to such Acquisition as any Lender
shall have reasonably requested, and (3) promptly following the
consummation of such acquisition, certified copies of the agreements,
instruments and documents referred to above to the extent the same has been
executed and delivered at the closing under such Acquisition Agreement;
(c) The aggregate amount of all consideration payable by the Borrower
and/or any Subsidiaries in connection with such acquisition (other than
earn-outs and customary postclosing adjustments, escrows, holdbacks and
indemnities and indebtedness permitted under Section 7.01) or otherwise
expressly permitted by the Required Lenders in their sole discretion shall
be payable on the date of such acquisition;
(d) Neither the Borrower nor any Subsidiary shall, in connection with
any such Acquisition, assume or remain liable with respect to any
indebtedness (including any material tax or ERISA liability) of the related
Seller, except (i) to the extent permitted under Section 7.01 or otherwise
expressly permitted by the Required Lenders in their sole discretion and
(ii) obligations of the Seller incurred in the ordinary course of business
and necessary or desirable to the continued operation of the underlying
properties, and any other such liabilities or obligations not permitted to
be assumed or otherwise supported by any of the Companies hereunder shall
be paid in full or released as to the assets being so acquired on or before
the consummation of such acquisition;
(e) All other assets and properties acquired in connection with any
such Acquisition shall be free and clear of any liens, charges and other
encumbrances other than permitted under Section 7.02 or as otherwise
expressly permitted by the Required Lenders in their sole discretion;
(f) All FCC Licenses associated with such Acquisition shall be
acquired by a License Company (or acquired by a Holding Company and
immediately transferred to the related License Company), which shall enter
into a License Agreement with the related Operating Company with respect
thereto, and all other assets shall be acquired by such Operating Company;
(g) The Borrower shall have complied as applicable with all of the
provisions in Sections 2.01 and 3.02, including the execution and delivery
of such additional agreements, instruments, certificates, documents,
consents, environmental site assessments, opinions and other papers as the
Required Lenders may require;
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(h) Immediately prior to any such Acquisition and after giving effect
thereto, no Default shall have occurred or be continuing;
(i) Without limiting the generality of the foregoing, after giving
effect to such Acquisition the Borrower shall be in compliance with the
provisions of Article V, (i) calculated on a pro forma basis as of the end
of and for the period of four (4) consecutive fiscal quarters most recently
ended prior to the date of such Acquisition for which financial statements
are required to be provided (and have been so delivered) under Section 6.05
and (ii) under the Borrower's updated Projections referred to above. The
Borrower shall provide to the Agent a certificate signed on behalf of the
Borrower by its chief financial officer demonstrating such compliance in
reasonable detail;
(j) If, for any subsequent fiscal period, the Borrower wishes to
effect 1)ro forma adjustments of EBITDA, as provided in the definition of
"Adjusted EBITDA" arising from cost and expense reductions relating to the
Station being acquired pursuant to such Acquisition, then, prior to the
consummation of such Acquisition, the Borrower shall deliver to the Agent
(in sufficient copies for all of the Lenders) a detailed schedule of such
cost and expense reductions (together with any such schedule delivered
under Section 3.01(i), in each case, a "Schedule of Cost Reductions"),
which shall be subject to the consent of the Required Lenders;
(k) If (i) such Acquisition is to be financed, directly or indirectly,
with the proceeds of equity contributions to the Borrower and (ii) the
Borrower wishes to exclude an amount equal thereto from the portion of the
Net Cash Proceeds of any Disposition of the acquired assets, for purposes
of Section 1.06(c), then, at least five (5) Business Days before the
consummation of such Acquisition, the Borrower shall deliver to the Agent
(in sufficient copies for all of the Lenders) (1) a schedule of its sources
of funds for such Acquisition, specifying the equity component thereof (in
each case, a "Schedule of Sources of Acquisition Funds"), and (2) the
documents pursuant to which such equity will be invested in the Borrower,
reflecting terms and conditions reasonably satisfactory to the Required
Lenders;
(1) On or before the consummation of each such Acquisition, the
Borrower shall deliver to the Agent (in sufficient copies for all the
Lenders) and to the Agent's counsel a compliance certificate, substantially
in the form of Schedule 11.02(a) hereto or such other form as shall be
satisfactory to the Agent, duly executed by the Borrower's chief executive
officer or chief financial officer, certifying as to the matters set forth
above with respect to such Acquisition. In the event that such Acquisition
is financed, in whole or in part, with the proceeds of Loans hereunder, the
foregoing requirement shall be deemed satisfied upon delivery of the
compliance certificate required under Section 3.02(c), in the form of
Schedule 3.02(c), in connection with such Loans;
(m) On or before the consummation of each such Acquisition involving
the purchase or formation of a new Subsidiary and/or the execution of
additional Security Documents or any other Loan Document, or otherwise, if
reasonably required by the Agent, the Agent shall have received the
favorable written opinions of (i) general counsel to the Companies
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and (ii) special FCC counsel to the Companies, in each case dated the date
of such Loans, addressed to the Agent and the Lenders and substantially in
the forms attached as Schedules 11.02Ub and (c) hereto; and
(n) Only if reasonably requested in connection with the recording of
any mortgages or similar instruments or any material issues of state law
raised in connection with such Acquisition, the Agent shall have received
the favorable opinion of local counsel to the Companies, dated the date of
such Acquisition, addressed to the Agent and the Lenders and substantially
in the form attached as Schedule 11.02(d) hereto.
Notwithstanding anything contained in this Agreement to the contrary, the KPLR
Acquisition, the Tennessee Acquisition, the Utah Acquisition and the New Mexico
Acquisition shall constitute Permitted Acquisitions hereunder; provided, that
such Acquisitions are consummated substantially in accordance with the terms set
forth in the Acquisition Agreements with respect to each such acquisition, true
and complete copies of which have been provided to the Lenders.
Permitted Investments.
(a) Investments in property to be used by the Subsidiaries in the
ordinary course of business;
(b) current assets arising from the sale of goods and services in the
ordinary course of business;
(c) investments (of one year or less) in direct or guaranteed
obligations of the United States, or any agency thereof,
(d) investments (of 90 days or less) in certificates of deposit of the
Lenders or any other domestic commercial bank of recognized standing having
capital, surplus and undivided profits in excess of $1 00,000,000,
membership in the Federal Deposit Insurance Corporation ("FDIC") and senior
debt rated carrying one of the two highest ratings of Standard & Poor's
Ratings Service, A Division of McGraw Hill, Inc., or Moody's Investors
Service, Inc. (an "Approved Institution");
(e) investments (of 90 days or less) in commercial paper given one of
the two highest ratings by Standard and Poor's Ratings Service, A Division
of McGraw Hill, Inc., or by Moody's Investors Service, Inc;
(f) investments redeemable at any time without penalty in money market
instruments placed through the Lenders or Approved Institutions;
(g) existing investments by the Companies in wholly owned
Subsidiaries;
(h) repurchase agreements fully collateralized by United States
government securities;
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(i) deposits fully insured by the FDIC;
(j) short-term loans to employees and advances to employees in the
ordinary course of business for the payment of bona fide, properly
documented, business expenses to be incurred on behalf of the Companies,
provided that the aggregate outstanding amount of all such loans and
advances shall not exceed $250,000 in the aggregate at any time;
(k) investments made in connection with Permitted Acquisitions
hereunder and otherwise in compliance with the terms and conditions of
this Agreement and the other Loan Documents;
(1) investments in wholly owned Subsidiaries formed after the date of
this Agreement, provided that (i) such Investments do not exceed $500,000
in aggregate amount as to all such Subsidiaries as a group and (ii) at the
time any such investment is made and after giving effect thereto, there
exists no Default;
(m) Rate Hedging Obligations entered into in the ordinary course of
the Borrower's or a Subsidiary's business;
(n) options to purchase television broadcast station licenses and
related assets (or capital stock of Persons owning such assets) having an
option price of any amount not in excess of $ 1 00,000 entered into in
connection with the execution of local marketing agreements and Investments
pursuant to local marketing agreements to operate television broadcast
stations which are combined with such an option; and
(o) deposits made pursuant to legally binding agreements to acquire
television broadcast station licenses and related assets (or capital stock
of Persons owing such assets), which acquisitions constitute Permitted
Acquisitions hereunder, in an amount not to exceed five percent (5%) of the
purchase price; provided that the Station to be acquired will be owned by
an Operating Company upon consummation of the contemplated Acquisition and
provided, further, that deposits made under this clause shall cease to be
treated as Permitted Investments upon forfeit of such deposit for any
reason.
Permitted LMA. (a) An LMA entered into in connection with, and in anticipation
of, including without limitation the LMA evidenced by the KPLR Time Brokerage
Agreement, a Permitted Acquisition, (b) an LMA of any Station owned by a
Company, where a License Company is the "licensee" thereunder, provided that
such LMA shall be treated as an asset sale for purposes of the provisions of
Section 1.06(b) and all payments received in connection therewith shall be
applied to repay the Notes as provided under such Section, or (c) an LMA of a
broadcast television station other than the Companies' Stations, where an
Operating Company is the "programmer" or "broker" thereunder, provided that the
aggregate amount payable to the licensee under such LMA, when aggregated with
all other payments under such LMAS, shall not exceed $500,000 in any fiscal
year.
Permitted Restructurings. (a) The formation of new Delaware limited liability
companies (the "Delaware Entities") with names and functions identical to those
of the respective existing
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Oregon Subsidiaries and Tennessee Subsidiaries and (b) the merger of each
existing Oregon Subsidiary and each existing Tennessee Subsidiary into the new
Delaware entity of the same name, in each case with such Delaware entity being
the surviving company.
Person or Person. Any individual, corporation, partnership, joint venture,
trust, business unit, unincorporated organization, or other organization,
whether or not a legal entity, or any government or any agency or political
subdivision thereof.
Pricing Period. See Section 1.03.
Pricing Ratio. See Section 1.03.
Prime Rate. As of any date, the fluctuating interest rate per annum equal to the
greater of (a) the rate established by Canadian Imperial Bank of Commerce from
time to time at its office in New York City as its "Base Rate" for commercial
loans in United States Dollars, and (b) the Federal Funds Rate plus one half of
one percent (1/2%) in each case, including any applicable adjustments for
reserves or Federal Deposit Insurance Corporation requirements. The Prime Rate
is not necessarily intended to be the lowest rate of interest determined by
Canadian Imperial Bank of Commerce in connection with extensions of credit.
Prime Rate Loans. Loans bearing interest at a rate determined on the basis of
the Prime Rate.
Programming. All programming and film rights and all rights to broadcast
television programming of any kind, whether held under license, lease,
agreement, contract or otherwise for use by the Borrower or its Subsidiaries in
connection with any of the Stations, including without limitation all rights for
programming of movies, television series productions, children's programming,
sports productions, news coverage and other television viewing products, and the
rights to all video tapes, films and other materials now or hereafter
constituting or embodying such programming.
Programming Payments. For any period, all actual cash payments required to be
made by the Borrower or any of its Subsidiaries in respect of Programming and
all cancellations, buy-backs, reversals, termination or assignments of any of
the foregoing.
Projections. See Section 4.17.
Properties. See Section 4.20.
Ouarterly Dates. See Section 1.03(d).
Rate Hedging Agreements. Any written agreements evidencing Rate Hedging
Obligations, including without limitation the LIBOR provisions of this
Agreement.
Rate Hedging Obligations. Any and all obligations of the Borrower, whether
direct or indirect and whether absolute or contingent, at any time created,
arising, evidenced or acquired (including all renewals, extensions,
modifications and amendments thereof and all substitutions
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therefor), in respect of-. (a) any and all agreements, arrangements, devices
and instruments designed or intended to protect at least one of the parties
thereto from the fluctuations of interest rates, exchange rates or forward rates
applicable to such party's assets, liabilities or exchange transactions,
including without limitation dollar-denominated or cross currency interest rate
exchange agreements, forward currency exchange agreements, interest rate cap or
collar protection agreements, forward rate currency or interest rate options,
puts and warrants and so-called "rate swap" agreements; and (b) any and all
cancellations, buy-backs, reversals, terminations or assignments of any of the
foregoing.
Recovering Party. See Section 1.14.
Recovery. See Section 1.14.
Regulatory Change. With respect to any Lender, any change after the date of this
Agreement in any law, rule or regulation (including without limitation
Regulation D) of the United States, any state or any other nation or political
subdivision thereof, including without limitation the issuance of any final
regulations or guidelines, or the adoption or making after the date of this
Agreement of any interpretation, directive or request, applying to a class of
banks in which such Lender is included under any such law, rule or regulation
(whether or not having the force of law and whether or not failure to comply
therewith would be unlawful) by any court or governmental or monetary authority
charged with the interpretation thereof.
Regulation D. Regulation D of the Board of Governors of the Federal Reserve
System, as the same may be amended or supplemented from time to time.
Reinvestment Period. See Section 1.06.
Remedial Work. All activities, including, without limitation, cleanup design and
implementation, removal activities, investigation, field and laboratory testing
and analysis, monitoring and other remedial and response actions, taken or to be
taken, arising out of or in connection with Hazardous Materials, including
without limitation all activities included within the meaning of the terms
"removal," "remedial action" or "response," as defined in 42 U.S.C. Section
9601(23), (24) and (25).
Request for Advances. See Section 1.04.
Required Financial Statements. See Section 1.03.
Required Lenders. At any time (a) Lenders (excluding Defaulting Lenders) holding
at least fifty percent (500/o) of the sum of the aggregate outstanding principal
amount of the Loans and the aggregate amount of the unused Commitments; or (b)
if any one Lender and its affiliates own more than fifty percent (50%) of such
sum, Lenders (excluding Defaulting Lenders) holding at least sixty-six and
two-thirds percent (66 2/3%) of the sum of the aggregate outstanding principal
amount of the Loans and the aggregate amount of the unused Commitments.
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Restoration Period. With respect to any Casualty Event resulting in the proceeds
of insurance, condemnation award or other compensation, one hundred eighty (I
80) days following receipt by the Borrower, or any other Company, of such
proceeds or such longer period as the Borrower shall reasonably request, if the
Borrower or such Company has commenced such restoration or replacement within
forty-five (45) days after receipt of such proceeds and thereafter diligently
pursues such restoration or replacement to completion.
Restricted Payment. Any distribution or payment of cash or property, or both,
directly or indirectly (a) in respect of any Subordinated Debt or (b) to any
Subsidiary or to any partner, member, stockholder, optionholder, warrantholder
or other equityholder of any of the Companies, any of the Parent Companies or of
any of their respective Affiliates for any reason whatsoever, including without
limitation, salaries, loans, debt repayment, consulting fees, management fees,
expense reimbursements and dividends, distributions, put, call or redemption
payments and any other payments in respect of equity interests; provided,
however, that Restricted Payments shall not include
(i) reasonable Transaction Costs,
(ii) transactions that comply with Section 7.11;
(iii) reasonable Corporate Overhead;
(iv) Tax Distributions; and
(v) monthly payments made to the Parent Companies for corporate
overhead expenses reasonably incurred by each Parent Company for Management
Services which do not relate to the operation of specific Stations directly
or indirectly owned or operated by the Borrower, including without
limitation the following:
(A) insurance premiums,
(B) organizational filing fees,
(C) SEC and other regulatory fees,
(D) legal, accounting, audit and tax fees,
(E) reimbursement payments to investors for their ordinary
course out-of-pocket expenses,
(F) trustee and rating agency fees and
(G) the fees and expenses of board meetings; and
(vi) payments made to fund obligations under the Kellner Consulting
Agreement, the Koplar Management Agreement and other reasonable
compensation payable under employment and/or consulting agreements.
Revolving Lines of Credit. See Section 1.01.
Roberts Broadcasting. Roberts Broadcasting of Salt Lake City, L.L.C.
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Schedule of Cost Reductions. See the definition of such term set forth above in
the definition of "Permitted Acquisitions".
Schedule of Sources of Acquisition Funds. See the definition of such term set
forth above in the definition of "Permitted Acquisition".
Secured Debt. All Indebtedness of the Borrower and its Subsidiaries (a) under
the Notes and (b) of the type secured as described in Section 7.02(g).
Security Agreements. Collectively, the Security and Pledge Agreements executed
from time to time by the Borrower and its Subsidiaries as required under Section
2.01, as amended, restated, replaced, supplemented or otherwise modified from
time to time.
Security Document(s). See Section 2.01.
Seller. With respect to any acquisition permitted hereunder, the owner of the
stock (or other ownership interests) to be acquired, or the entity the assets
and properties of which are to be acquired, by the related respective Company
pursuant to such acquisition.
Senior Notes. See the Recitals.
Specified Default. An Event of Default arising under any of the following
paragraphs of Article VIII:
(a) paragraph (b) or (c);
(b) paragraph (d), if such Event of Default arose from the Borrower's
failure to observe, perform or comply with its obligations under any of the
provisions of Article V or Section 6.06, 7.04, 7.09, 7.12 or 7.15;
(c) paragraph (d), if such Event of Default arose from the Borrower's
failure to observe, perform or comply with its obligations under any of the
provisions of Section 7.01, 7.02, 7.07 or 7.13, but only if the same shall
involve the incurrence of indebtedness or liens, the sale or transfer of
property, the making of investments or loans, the sale of receivables, the
consummation of transactions or the violation of the Code, ERISA or any
governmental regulation, as the case may be, valued, or involving
consideration, penalties or other payments, in excess of $250,000 in the
aggregate for all such Events of Default;
(d) paragraph (e), if such Event of Default arose from the Borrower's
failure to observe, perform or comply with its obligations under any of the
provisions of Sections 6.05 (a), (b) or (c), but only if the same shall
have continued without remedy for more than forty-five (45) days; and
(e) paragraph (f), (g), (h), (i), (k), (1), (o) or (p).
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None of the provisions of this Agreement which refer to any Specified Default
shall affect the rights of the Agent or the Lenders to exercise any rights or
remedies under the Loan Documents or applicable law arising upon the occurrence
of an Event of Default.
Stations. All of the television stations owned or managed by the Companies,
where each such station consists of all of the properties and operating rights
constituting a complete, fully integrated system for transmitting broadcast
television signals from a transmitter licensed by the FCC, together with any
subsystem ancillary thereto, without payment of any fee by the Persons receiving
such signals.
Subordinated Debt. Any Indebtedness which is subject to a Parent Subordination
Agreement.
Subsidiary. (a) Any corporation, association, joint stock company, business
trust or other similar organization of which more than 50% of the ordinary
voting power for the election of a majority of the members of the board of
directors or other governing body of such entity is held or controlled by the
Borrower or a Subsidiary of the Borrower; (b) any other such organization the
management of which is directly or indirectly controlled by the Borrower or a
Subsidiary of the Borrower through the exercise of voting power or otherwise; or
(c) any joint venture, association, partnership, limited liability company or
other entity in which the Borrower or a Subsidiary of the Borrower has more than
a 50% equity interest. All of the Borrower's Subsidiaries as of the date hereof
are listed on Schedule 4.02. For purposes of this Agreement, a Subsidiary of the
Borrower or of one of its Subsidiaries shall be deemed to be "wholly owned" so
long as the Borrower, or a wholly owned Subsidiary of the Borrower, shall own at
least 99.5% of the aggregate equity interests therein.
Tax Distributions. In any period, collectively, any and all distributions made
to Acme Intermediate, the proceeds of which are ultimately paid to members of
Acme Intermediate or Acme Holdings to provide for the payment of taxes, as
required under the Operating Agreement for Acme Intermediate or Acme Holdings in
respect of:
(a) the taxable income of the Borrower (after taking into account all
of the Borrower prior tax losses, to the extent such losses have not
previously been deemed to reduce the taxable income of the Borrower), based
on the approximate highest combined tax rate that applies to any one of
such members, and
(b) any audit of any member (or of the Borrower) with respect to a
prior taxable year and paid or payable by such member during the most
recent taxable year, as and to the extent that such amounts are
attributable to the member being allocated more taxable income than was
previously reported to such member as a result of any position taken by the
Borrower or Acme Holdings in determining and reporting its taxable income
for the year in question;
provided, however, that:
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(i) such Tax Distributions shall be made within a reasonable time on
or before the due date for tax payments by members on income of the
Borrower in respect of which the Tax Distribution is made;
(ii) the amount distributable under clause (b) above (relating to tax
audit adjustments) shall not exceed the sum of- (1) the excess of.- (A) the
amount that would have been distributable under clause (a) above in respect
of the income of the Borrower as adjusted by the tax audit, over (B) the
amount that was actually distributed by the Borrower in respect of such
income, plus (2) interest and penalties actually payable to the taxing
authority as a result of the audit adjustment; and
(iii) the Borrower shall provide to the Lenders not later than 30 days
prior to making each Tax Distribution a written explanation, prepared by
the Borrower's Chief Financial Officer, showing (A) the calculation of the
highest combined tax rate that the Borrower proposes to use in making such
Tax Distribution, (B) the due dates for tax payments by members in respect
of which the Tax Distribution is to be made, and (C) the calculation of any
Tax Distribution under clause (b) above, which explanation shall be subject
to the Lenders' approval as accurate prior to the making of the Tax
Distribution, which approval shall not be unreasonably withheld or delayed.
Taxes. See Section 1.10.
Temporary Prepayment See Section 1.06.
Tennessee Acquisition. The acquisition of all of the partnership interests of
Crossville TV Limited Partnership, the licensee of Television Station WBXX-TV
(formerly WINT-TV), Channel 20, licensed to Crossville, Tennessee, pursuant to
the Purchase Agreement dated as of May 28, 1997 by and among Crossville TV
Limited Partnership, its limited partners, C.W. TV, Inc. and Acme Television
Licenses of Tennessee, LLC and Acme Television of Tennessee, LLC.
Tennessee Holdings. ACME Television Holdings of Tennessee, L.L.C., a Tennessee
limited liability company wholly owned 99% by the Borrower and I% by the
Tennessee License Company.
Tennessee License Company. ACME Television Licenses of Tennessee, L.L.C., a
Tennessee limited liability company owned 99% by the Tennessee Holding Company
and 1% by the Tennessee Operating Company.
Tennessee Operating Company. ACME Television of Tennessee, L.L.C., a Tennessee
limited liability company owned 99% by the Tennessee Holding Company and 1 % by
the Tennessee License Company.
Tennessee Subsidiaries. The Tennessee Holding Company, the Tennessee License
Company and the Tennessee Operating Company.
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Total Debt. At any time, all outstanding Funded Debt of the Borrower and its
Subsidiaries, determined on a consolidated basis, after eliminating intercompany
items, in accordance with GAAP.
Tower Site Leases. See Section 4.09.
Trades. Those items of income and expense of the Companies which do not
represent the right to receive payment in cash or the obligation to make payment
in cash and which arise pursuant to so-called trade or barter transactions.
Transaction Costs. For any period, nonrecurring out-of-pocket expenses
(including attorneys' fees, investment banking fees and facility fees) accrued
by the Companies to Persons which are not Affiliates of any Company during such
period in connection with the closing of the transactions under this Agreement,
the Offering, any Permitted Acquisition and any other transactions occurring
after the date hereof which are consented to in writing by the Required Lenders.
Transaction Documents. See Section 4.03.
Utah Acquisition. The acquisition of all of the membership interests of Roberts
Broadcasting of Salt Lake City, L.L.C., which holds a construction permit from
the FCC for Television Station KZAR-TV, Channel 16, licensed to Salt Lake City,
Utah, pursuant to (a) the Membership Contribution Agreement dated as of August
22, 1997 by and among Roberts Broadcasting, Michael V. Roberts and Steven C.
Roberts and ACME Television Holdings of Utah, L.L.C. ("ACME Utah"), as assignee
(under Section 9.4 thereof) of ACME Holdings, providing for the transfer to Acme
Utah of a forty-nine percent (49%) membership interest in Roberts Broadcasting,
and (b) the exercise of the Option, as defined in the Option Agreement referred
to in the foregoing Membership Contribution Agreement, providing for the
transfer to ACME Utah of the remaining fifty-one percent (5 1 %) in membership
interests in Roberts Broadcasting.
XII. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS; SEPARATE
ACTIONS BY THE LENDERS.
(a) This Agreement (including the Schedules hereto) and the other Loan
Documents constitute the entire agreement of the parties herein and supersede
any and all prior agreements, written or oral, as to the matters contained
herein, and no modification or waiver of any provision hereof or of the Notes or
any other Loan Documents, nor consent to the departure by any Company therefrom,
shall be effective unless the same is in writing, and then such waiver or
consent shall be effective only in the specific instance, and for the purpose,
for which given. Except as hereafter provided, the consent of the Required
Lenders shall be required and sufficient (i) to amend, with the consent of the
Borrower, any term of this Agreement, the Notes or any other Loan Document or to
waive the observance of any such term (either generally or in a particular
instance or either retroactively or prospectively); (ii) to take or refrain from
taking any action under this Agreement, the Notes, any other Loan Document or
applicable law, including without limitation (A) the acceleration of the payment
of the Notes, (B) the termination of the
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Commitments, (C) the exercise of the Agent's and the Lenders' remedies hereunder
and under the Security Documents and (D) the giving of any approvals, consents,
directions or instructions required under this Agreement, the Security
Documents; provided that no such amendment, waiver or consent shall, without the
prior written consent of each of the Lenders directly affected thereby, (1)
extend the fixed maturity or reduce the principal amount of, or reduce the
amount or extend the time of payment of any principal of, or interest on, any
Note, (2) increase or extend any Commitment of any Lender or extend the
Expiration Date (it being understood that waivers or modifications of conditions
precedent, covenants, Defaults or Events of Default shall not constitute any
such increase or extension), (3) release any guaranties or any Collateral,
unless such release of guaranty or Collateral is in connection with a sale of
Collateral permitted hereby or to which any required consent of the Required
Lenders has been given and substantially all of the Net Cash Proceeds of such
sale are used to repay the Borrower's indebtedness to the Lenders hereunder or
otherwise used in a manner permitted hereunder, (4) change the pro rata
provisions of Section 1.15 or the percentage referred to in the definition of
"Required Lenders" contained in Article XI or (5) amend the provisions of this
Article XII, and no such amendment, waiver or consent shall, without the prior
written consent of the Agent, amend, modify or otherwise affect the rights or
duties of the Agent under this Agreement or any other Loan Document; and
provided. further. that neither notice to, nor the consent of, the Borrower
shall be required for any modification, amendment or waiver of the provisions of
this Article XII governing the number of Lenders required to consent to any act
or omission under the Loan Documents or, subject to Article XIII, of the
definition of "Required Lenders".
(b) Any amendment or waiver effected in accordance with this Article XII
shall be binding upon each holder of any Note at the time outstanding, each
future holder of any Note and the Borrower. The Lenders' failure to insist
(directly or through the Agent) upon the strict performance of any term,
condition or other provision of this Agreement, any Note, or any of the Security
Documents or other Loan Documents, or to exercise any right or remedy hereunder
or thereunder, shall not constitute a waiver by the Lenders of any such term,
condition or other provision or default or Event of Default in connection
therewith, nor shall a single or partial exercise of any such right or remedy
preclude any other or future exercise, or the exercise ' of any other right or
remedy; and any waiver of any such term condition or other provision or of any
such default or Event of Default shall not affect or alter this Agreement, any
Note or any of the Security Documents or other Loan Documents, and each and
every term, condition and other provision of this Agreement, the Notes, the
Security Documents and the other Loan Documents shall, in such event, continue
in full force and effect and shall be operative with respect to any other then
existing or subsequent default or Event of Default in connection therewith. An
Event of Default hereunder and a default under any Note or under any of the
Security Documents or other Loan Documents shall be deemed to be continuing
unless and until cured or waived in writing by the Required Lenders or all of
the Lenders, as provided in paragraph (a) above.
XIII. BENEFIT OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS.
(a) This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders and the Agent and their respective successors and
permitted assigns, and all subsequent holders of any of the Notes or any portion
thereof.
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(b) Each Lender may assign its rights and interests under this Agreement,
the Notes and the Security Documents and/or delegate its obligations hereunder
and thereunder, in whole or in part, and sell participations in the Notes and
the Security Documents as security therefor, to any bank or financial
institution with net capital, capital surplus and undivided profits in excess of
$500,000,000, provided as follows:
(i) No Lender shall make any assignment, other than an assignment in
whole or to a separately organized branch or an affiliate of the same
Lender, if, after giving effect thereto, such Lender would hold less than
$5,000,000 of the then aggregate outstanding principal amount of the Notes,
notwithstanding this provision any Lender may make assignments in any
amount to any other existing Lender, subject to the Agent's and the
Borrower's consent, which consent will not be unreasonably withheld or
delayed, provided that the Borrower's consent will not be required if a
Default (other than a de minimus default under the Loan Documents) then
exists and is continuing hereunder.
(ii) Any such assignment made other than to a separately organized
branch, or an affiliate of, a Lender shall reflect an assignment of such
assigning Lender's Notes and Commitments which is in an aggregate principal
amount of at least $ 1,000,000, and if greater, shall be an integral
multiple of $1,000,000.
(iii) Notwithstanding any provision of this Agreement to the contrary,
each Lender may at any time assign all or any portion of its rights under
this Agreement and each of the other Loan Documents, including, without
limitation, the Notes held by such Lender, to a Federal Reserve Bank (or
equivalent thereof in the case of Lenders chartered outside of the United
States); provided that no such assignment shall release a Lender from any
of its obligations and liabilities under the Loan Documents. Any Federal
Reserve Bank (or equivalent thereof) which receives such an assignment from
any Lender may make further assignments of such rights in accordance with
the provisions of this Section.
(iv) Any assignments and/or delegations made hereunder shall be
pursuant to an instrument of assignment and acceptance (the "Assignment
and Acceptance") substantially in the form of Schedule 13(b)(iv) and the
parties to each such assignment shall execute and deliver to the Agent for
its acceptance the Assignment and Acceptance together with any Note or
Notes subject thereto. Upon such execution and delivery, from and after the
effective date specified in each Assignment and Acceptance, which
effective date shall be at least five (5) Business Days after the execution
thereof, (A) the assignee thereunder shall become a party hereto and, to
the extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder with Commitments as set forth therein and
(B) the assigning Lender thereunder shall, to the extent provided in such
assignment, be released from its obligations under this Agreement as to
that portion of its obligation being so assigned and delegated. The
Assignment and Acceptance shall be deemed to amend this Agreement to the
extent, and only to the extent, necessary to reflect the addition of the
assignee as a Lender and the resulting adjustment of Commitments arising
from the purchase by and delegation to such
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assignee of all or a portion of the rights and obligations of such
assigning Lender under this Agreement.
(v) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and the assignee together with the Note or Notes subject
to such assignment and payment by the assignee to the Agent of a
registration and processing fee of $3,500, the Agent shall accept such
Assignment and Acceptance. Promptly upon delivering such Assignment and
Acceptance to the Agent, the assigning Lender shall give notice thereof to
the Borrower pursuant to a Notice of Assignment and Acceptance
substantially in the form of Schedule 13(b)(y) and addressed to the Agent
and the Borrower. Within five (5) Business Days after receipt of such
notice, the Borrower shall, execute and deliver to the Agent in exchange
for each such surrendered Note a new Note payable to the order of such
assignee in an amount equal to the portion of the applicable Commitment(s)
assumed by such assignee pursuant to such Assignment and Acceptance and a
new Note payable to the order of the assigning Lender in an amount equal to
the portion of the applicable Commitment(s) retained by it hereunder. Such
new Notes shall be dated the effective date of such Assignment and
Acceptance and shall otherwise be in substantially the form provided in
Section 1.01. Canceled Notes shall be returned to the Borrower upon the
execution and delivery of such new Notes.
(vi) Each Lender may sell participations in all or a portion of its
rights and obligations under this Agreement (including, without limitation,
all or a portion of its Commitment and the Notes held by it); provided,
however, that, (A) the selling Lender shall remain obligated under this
Agreement to the extent as it would if it had not sold such participation,
(B) the selling Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (C) at no time shall the
selling Lender agree with such participant to take or refrain from taking
any action hereunder or under any other Loan Document, except that the
selling Lender may agree not to consent, without such participant's
consent, to any of the actions referred to Article XII, to the extent that
the same require the consent of each Lender hereunder, (D) all amounts
payable by the Borrower hereunder shall be determined as if such Lender had
not sold such participation and no participant shall be entitled to receive
any greater amount pursuant to this Agreement than the selling Lender would
have been entitled to receive in respect of the amount of the participation
transferred by such Lender to such participant had no such transfer
occurred, and (E) the Borrower, the Agent and the other Lenders shall
continue to deal solely and directly with the selling Lender in connection
with such Lendees rights and obligations under this Agreement.
(vii) Except for an assignment made to a separately organized branch
or an Affiliate of a Lender, no assignment or participation referred to
above shall be permitted without the prior written consent of the Agent and
the Borrower, which consent shall not be unreasonably withheld or delayed,
provided that the Borrower's consent will not be required if an Event of
Default (other than a de minimus default under the Loan Documents) then
exists and is continuing hereunder.
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(viii) The Borrower may not assign any of its rights or delegate any
of its duties or obligations hereunder.
(ix) Any Lender may, in connection with any assignment or
participation pursuant to this Section, disclose to the assignee or
participant any information relating to the Companies, the Parent Companies
and their respective Affiliates furnished to such Lender by or on behalf of
the Borrower and such assignee or participant shall treat such information
as confidential.
XIV. MISCELLANEOUS.
Section 14.01. Survival. This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto, shall survive the making by the Lenders of the Loans and shall
continue in full force and effect so long as any Obligation is outstanding and
unpaid or any Lender has any obligation to advance funds to the Borrower or any
other Company hereunder. In addition, notwithstanding anything herein or under
applicable law to the contrary, the provisions of this Agreement and the other
Loan Documents relating to indemnification or payment of fees, costs and
expenses, including without limitation the provisions of Sections 1.08, 1.10,
1.11, 10.05, 14.02 and 14.14, shall survive the payment in full of all Loans,
the termination or expiration of the Commitments and any termination of this
Agreement or of any other Loan Document.
Section 14.02. Fees and Expenses; Indemnity; Etc. The Borrower agrees (a)
to pay or reimburse the Agent for all its reasonable out-of-pocket costs and
expenses incurred in connection with the development, preparation, negotiation,
interpretation and execution of, and any amendment, supplement or modification
to, this Agreement, the Notes and any other Loan Documents and the consummation
and administration of the transactions contemplated hereby, including without
limitation the reasonable fees and disbursements of (i) counsel to the Agent,
and (ii) such agents of the Agent not regularly in its employ, and accountants,
other auditing services, consultants and appraisers engaged by or on behalf of
the Agent or by the Borrower at the request of the Agent (collectively, "Third
Parties"); (b) to pay or reimburse the Agent for all its reasonable costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement, the Notes and any other Loan Documents, including,
without limitation, the reasonable fees and disbursements of (i) counsel to the
Agent and (ii) Third Parties; (c) following the occurrence of an Event of
Default and during the continuance hereunder, to pay or reimburse the Lenders
for the reasonable fees and disbursements of counsel for the respective Lenders
engaged for the preservation or enforcement of such Lendees rights under this
Agreement or any other Loan Documents relating to such Event of Default; (d) to
pay, indemnify, and hold each Lender and the Agent harmless from, any and all
recording and filing fees and taxes, lien discharge fees and taxes, intangible
taxes and any and all liabilities with respect to, or resulting from any delay
in paying, stamp, excise and other taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Agreement, the Notes and any other Loan Documents; and (e)
to pay, indemnify, and hold each Lender and the Agent (and their respective
directors, officers, employees, agents and other affiliates)
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harmless from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of, or any transaction contemplated
by, any Loan Document or the use or proposed use of the proceeds of the Loans or
the refinancing or restructuring of the credit arrangement provided under this
Agreement in the nature of a "workout 'or any proceedings with respect to the
bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or
liquidation of any Company or any other party other than the Lender or Agent to
any Loan Document (all the foregoing in this clause (e), collectively, the
"indemnified liabilities"), provided, that the Borrower shall have no
obligation hereunder to the Agent or any Lender with respect to indemnified
liabilities arising from the gross negligence or willful misconduct of the Agent
or any such Lender.
Section 14.03. Notice.
(a) All notices, requests, demands and other communications
provided for hereunder (including without limitation Requests for Advances)
shall be in writing (including telecopied communication) and mailed or
telecopied or delivered to the applicable party at the addresses indicated
below.
If to the Agent:
Canadian Imperial Bank of Commerce
425 Lexington Avenue
NewYork, NewYork 10017
Attention: Syndications
Telecopy No.: (212) 856-3799
and if to any Lender, at the address set forth on the appropriate signature page
hereto or, with respect to any assignee of the Notes under Article XIII, at the
address designated by such assignee in a written notice to the other parties
hereto;
in each case (except for routine communications), with a copy to:
Elizabeth H. Munnell, Esq.
Edwards & Angell
101 Federal Street
Boston, Massachusetts 021 10
Telecopy No.: (617) 439-4170
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If to the Borrower:
Acme Television, LLC
650 Town Center Drive
Suite 850
Costa Mesa, California 92626
Attention: Mr. Tom Allen
Telecopy No.: (714) 445-5726
with a copy (except for routine communications) to:
Emanuel Faust, Esq.
Dickstein, Shapiro, Morin & Oshinsky LLP
21 01 L Street N.W.
Washington, DC 20037
Telecopy No.: (202) 887-0689
with a copy (except for routine communications) to:
H. David Henken, Esq.
Goodwin, Proctor & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Telecopy No.: (617) 523-1231
with a copy (except for routine communications) to:
Mr. James Collis
CEA Capital Partners
17 State Street 35th Floor
New York, New York 10004
Telecopy No.: (212) 425-1420
or, as to each party, at such other address as shall be designated by such
parties in a written notice to the other party complying as to delivery with the
terms of this Section. All such notices, requests, demands and other
communication shall be deemed given upon receipt by the party to whom such
notice is directed.
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(b) The address of the Agent for payment hereunder is as follows:
Morgan Guaranty Trust Company
60 Wall Street
New York, New York 10260
ABA: 021000238
Attention: For the Account of Canadian Imperial Bank of Commerce
Account No.: 630-00-480
For further credit to Agented Loans,
Re: Acme Television
Telecopy No.: (212) 856-3799
Section 14.04. Governing Law. This Agreement and the Notes shall be
construed in accordance with and governed by the internal laws of the State of
New York.
Section 14.05. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.
(a) THE BORROWER, TO THE EXTENT THAT IT MAY LAWFULLY DO SO, HEREBY CONSENTS
TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF EACH OTHER
STATE WHERE A STATION IS NOW OR HEREAFTER LOCATED AND THE UNITED STATES DISTRICT
COURTS FOR THE SOUTHERN DISTRICT OF NEW YORK AND THE DISTRICTS OF EACH SUCH
STATE WHERE A STATION IS NOW OR HEREAFTER LOCATED, AS WELL AS TO THE
JURISDICTION OF ALL COURTS TO WHICH AN APPEAL MAY BE TAKEN FROM SUCH COURTS, FOR
THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF ANY OF ITS
OBLIGATIONS ARISING HEREUNDER OR UNDER THE NOTES OR THE OTHER LOAN DOCUMENTS OR
WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY, AND EXPRESSLY WAIVES ANY
AND ALL OBJECTIONS IT MAY HAVE AS TO VENUE, INCLUDING, WITHOUT LIMITATION, THE
INCONVENIENCE OF SUCH FORUM, IN ANY OF SUCH COURTS. IN ADDITION, TO THE EXTENT
THAT IT MAY LAWFULLY DO SO, THE BORROWER CONSENTS TO THE SERVICE OF PROCESS BY
PERSONAL SERVICE OR U.S. CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED,
ADDRESSED TO THE BORROWER AT THE ADDRESS PROVIDED HEREIN. TO THE EXTENT THAT THE
BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY
COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN,
RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT, THE NOTES AND THE OTHER LOAN
DOCUMENTS TO THE MAXIMUM EXTENT PERMITTED BY LAW.
(b) WAIVER OF JURY TRIAL. THE BORROWER HEREBY VOLUNTARILY AND IRREVOCABLY
WAIVES TRIAL BY JURY IN ANY ACTION
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BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN
DOCUMENTS.
Section 14.06. Severability. Any provision of this Agreement, the Notes or
any of the Security Documents or other Loan Documents which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
Section 14.07. Section Headings, Etc. Any Article and Section headings in
this Agreement are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose.
Section 14.08. Several Nature of Lenders' Obligations. Notwithstanding
anything in this Agreement, the Notes or any of the Security Documents to the
contrary, all obligations of the Lenders hereunder shall be several and not
joint in nature, and in the event any Lender fails to perform any of its
obligations hereunder, the Borrower shall have no recourse against any other
Lender(s) who has (have) performed its (their) obligations hereunder. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement, subject to the provisions of Article XII,
and it shall not be necessary for any other Lender to be joined as an additional
party in any proceeding for such purpose.
Section 14.09. Counterparts. This Agreement may be executed by the parties
hereto in several counterparts hereof and by the different parties hereto on
separate counterparts hereof, each of which shall be an original and all of
which counterparts shall together constitute one and the same agreement.
Delivery of an executed signature page of this Agreement by facsimile
transmission shall be effective as an in hand delivery of an original executed
counterpart hereof.
Section 14.10. Knowledge and Discovery. All references in this Agreement
to "knowledge" of, or "discovery" by, the Borrower shall mean actual knowledge
and shall be deemed to include, without limitation, any such knowledge of, or
discovery by, the Borrower or any executive officer of the Borrower.
Section 14.11. Amendment of Other Agreements. All references in this
Agreement to other documents and agreements to which the Lenders are not parties
shall be deemed to refer to such documents and agreements as presently
constituted and, except for any amendments and modifications not prohibited
under Section 7.12, not as hereafter amended or modified unless the Lenders
shall have expressly consented in writing to such amendment(s) or
modification(s).
Section 14.12. FCC Approvals. Notwithstanding anything herein or in any of
the Security Documents to the contrary, but without limiting or waiving in any
way the Borrower's obligations under Section 2.0 1, the Agents and the Lenders'
rights hereunder and under the Security Documents are subject to the
Communications Act of 1934, as amended, and all applicable policies, rules and
regulations of the FCC. The Agent and the Lenders will not take any action
pursuant to this Agreement or the Security Documents which would constitute or
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result in any assignment or transfer control of any FCC License, whether de jure
or de facto, if such assignment or transfer of control would require under then
existing law (including the Communications Act of 1934, as amended, and the
published policies, rules and regulations promulgated by the FCC), the prior
approval of the FCC, without first obtaining such approval. The Agent and the
Lenders specifically agree that (a) voting rights in the ownership interests of
the Companies will remain with the holders thereof even in an Event of Default
unless and until any required prior consent of the FCC shall be obtained to the
transfer of such voting rights; (b) in an Event of Default, there will be either
a private or public sale of the membership interests of the Companies; and (c)
prior to the exercise of member or other equityholder rights by a purchaser at
such sale, the prior consent of the FCC, pursuant to 47 U.S.C. 3 1 0(d), in each
case only if required, will be obtained prior to such exercise. The Borrower
agrees to take any action which the Agent or any Lender may reasonably request
in order to cause the Agent and the Lenders to obtain and enjoy the full rights
and benefits granted to by this Agreement and the other Loan Documents,
including specifically, at the cost and expense of the Borrower, the use of its
commercially reasonable efforts to assist in obtaining approval of the FCC or
any state or municipality or other governmental authority for any action or
transaction contemplated by this Agreement or any Security Document which is
then required by law, and specifically, without limitation, upon request
following an Event of Default, to prepare, sign and file (or cause to be filed)
with the FCC or such state or municipality or other governmental authority the
assignors, transferor's or controlling person's portion of any application or
applications for consent to (i) the assignment of any FCC License or transfer or
control thereof, (ii) any sale or sales of property constituting any Collateral
by or on behalf of the Lenders or (iii) any assumption by the Agent or the
Lenders or their designees of voting rights or management rights in property
constituting any Collateral effected in accordance with the terms of this
Agreement.
Section 14.13. Disclaimer of Reliance. Neither the Borrower nor the Lenders
have relied on any oral representations concerning any of the terms or
conditions of the Loans, the Notes, this Agreement or any of the Security
Documents in entering into the same. The Borrower acknowledges and agrees that
none of the officers of the Agent or any Lender has made any representations
that are inconsistent with the terms and provisions of this Agreement, the Notes
and the Security Documents, and neither the Borrower nor any of its Affiliates
has relied on any oral promises or representations in connection therewith.
Section 14.14. Environmental Indemnification. Without limiting the
generality of Section 14.02, in consideration of the execution and delivery of
this Agreement by the Lenders and the making of the Loans, the Borrower hereby
indemnifies, exonerates and holds the Lenders and each of their respective
officers, directors, employees and agents (collectively, the "Indemnified
Parties") free and harmless from and against any and all actions, causes of
action, suits, losses, costs, liabilities and damages, and expenses incurred in
connection therewith (irrespective of whether any such Indemnified Party is a
party to the action for which indemnification hereunder is sought), including
reasonable attorneys' fees and disbursements (collectively, the "Indemnified
Liabilities"), incurred by the Indemnified Parties or any of them as a result
of, or arising out of, or relating to:
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(a) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to the
protection of the environment or the release by any Company of any Hazardous
Material; or
(b) the presence on or under, or the escape, seepage, leakage, spillage,
discharge, emission, discharging or releases from, any real property owned or
operated by any Company of any Hazardous Material (including any losses,
liabilities, damages, injuries, costs, expense or claims asserted or arising
under any Environmental Law), regardless of whether caused by, or within the
control of, any Company;
except, in cases (a) and (b) above, for any such Indemnified Liabilities arising
for the account of a particular Indemnified Party by reason of the relevant
Indemnified Party's negligence or misconduct, and if and to the extent that the
foregoing undertaking may be unenforceable for any reason, the Borrower agrees
to make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law.
Notwithstanding anything to the contrary herein contained, the obligations and
liabilities under this Section shall survive and continue in full force and
effect and shall not be terminated, discharged or released in whole or in part
irrespective of whether all the Obligations have been paid in full or the
Commitments have been terminated and irrespective of any foreclosure of any
mortgage, deed of trust or collateral assignment on any real property or
acceptance by any Lender of a deed or assignment in lieu of foreclosure.
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IN WITNESS WHEREOF, the Agent, the Lenders and the Borrower have caused
this Agreement to be duly executed by their duly authorized representatives, as
a sealed instrument, all as of the day and year first above written.
BORROWER:
ACME TELEVISION, LLC
By:/s/Douglas E. Gealy
-----------------------------------
Douglas E. Gealy, President
AGENT:
CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY
By/s/Matthew Jone
---------------------------------------
Matthew Jones, Executive Director
CIBC Oppenheimer Corp., as agent
LENDER:
CIBC INC.
By:/s/Matthew Jones
-----------------------------------
Matthew Jones, Executive Director
CIBC Oppenheimer Corp., as agent
Address for Notices to CIBC Inc.:
CIBC Inc.
425 Lexington Avenue
New York, New York 10017
Telecopy: (212) 856-3558
Attention: Syndications
<PAGE>
LENDER:
NATIONSBANK, N.A.
By:/s/Mary Garrity
-----------------------------------
Mary Garrity, Vice President
Address for Notices to NationsBank:
NationsBank
800 Market Street, 12th Floor
St. Louis, Missouri 63101
Telecopy: (314) 466-6499
Telephone:(314) 466-7920
Attention: Mary Garrity
<PAGE>
LENDER:
UNION BANK OF CALIFORNIA, N.A.
By:/s/Peter Connoy
-----------------------------------
Peter Connoy, Assistant Vice President,
Communications/Media Division
Address for Notices to Union Bank of
California:
Union Bank of California
445 South Figueroa Street - 15th Floor
Los Angeles, California 90071
Telecopy: (213) 236-5747
Telephone: (213) 236-6903
Attention: Peter Connoy
<PAGE>
LENDER:
BANK OF MONTREAL, CHICAGO BRANCH
By:/s/Tom Calder
-----------------------------------
Tom Calder, Director
Communications Department
Address for Notices to Bank of Montreal:
Bank of Montreal
Media/Communications
U.S. Corporate Banking
430 Park Avenue
New York, New York 10022
Telecopy: (212) 605-1648
Telephone: (212) 605-1529
Attention: Christopher T. Young
- ------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of September 30, 1997
by and among
ACME TELEVISION, LLC,
ACME FINANCE CORPORATION,
The GUARANTORS Named Herein
and
CIBC WOOD GUNDY SECURITIES CORP. and
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
as Initial Purchasers
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
1. Definitions................................................... 1
2. Exchange Offer................................................ 5
3. Shelf Registration............................................ 8
(a) Initial Shelf Registration.............................. 8
(b) Subsequent Shelf Registrations.......................... 9
(c) Supplements and Amendments.............................. 9
4. Damage Amounts................................................ 10
5. Registration Procedures....................................... 11
6. Registration Expenses......................................... 22
7. Indemnification............................................... 24
8. Rules 144 and 144A............................................ 27
9. Underwritten Registrations.................................... 28
10. Miscellaneous................................................. 28
(a) Remedies................................................ 28
(b) Enforcement............................................. 29
(c) No Inconsistent Agreements.............................. 29
(d) Adjustments Affecting Registrable Notes................. 29
(e) Amendments and Waivers.................................. 29
(f) Notices................................................. 29
(g) Successors and Assigns.................................. 30
(h) Counterparts............................................ 30
(i) Headings................................................ 31
(j) Governing Law........................................... 31
(k) Severability............................................ 31
(l) Entire Agreement........................................ 31
(m) Notes Held by the Obligors or Their
Affiliates............................................. 31
-i-
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NOTES REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") dated as of
September 30, 1997, by and among ACME TELEVISION, LLC, a Delaware limited
liability company (the "COMPANY"), ACME FINANCE CORPORATION, a Delaware
corporation (together with the Company, the "Issuers"), the Guarantors set forth
herein (together with the Issuers, the "Obligors") and CIBC WOOD GUNDY
SECURITIES CORP. and MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
(together, the "INITIAL PURCHASERS").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of September 24, 1997, by and among the Obligors and the
Initial Purchasers (the "PURCHASE AGREEMENT") relating to the sale by the
Issuers to the Initial Purchasers of $175,000,000 aggregate principal amount at
maturity of 10 7/8% Senior Discount Notes due 2004 of the Issuers (referred to
together with the joint and several guarantees of the Guarantors as the
"NOTES").
In order to induce the Initial Purchasers to enter into the Purchase
Agreement, the Obligors have agreed to provide the registration rights set forth
in this Agreement for the benefit of the Initial Purchasers and the Holders. The
execution and delivery of this Agreement is a condition to the Initial
Purchasers' obligation to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
ADVICE: See Section 5.
APPLICABLE PERIOD: See Section 2(b).
CLOSING: See the Purchase Agreement.
COMPANY: See the introductory paragraph to this Agreement.
DAMAGE AMOUNTS: See Section 4(a).
EFFECTIVENESS DATE: The 150th day after the Issue Date.
EFFECTIVENESS PERIOD: See Section 3(a).
<PAGE>
EVENT DATE: See Section 4(b).
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
EXCHANGE NOTES: See Section 2(a).
EXCHANGE OFFER: See Section 2(a).
EXCHANGE REGISTRATION STATEMENT: See Section 2(a).
FILING DATE: The 45th day after the Issue Date.
GUARANTORS: ACME Television Licenses of Missouri, Inc., a
Missouri corporation, ACME Television Holdings of Oregon, LLC, an Oregon limited
liability company, ACME Television Holdings of Tennessee, LLC, a Tennessee
limited liability company, ACME Television Holdings of Utah, LLC, a Delaware
limited liability company, ACME Television Holdings of New Mexico, LLC, a
Delaware limited liability company, ACME Television Licenses of Oregon, LLC, an
Oregon limited liability company, ACME Television Licenses of Tenessee, LLC, a
Tennessee limited liability company, ACME Television Licenses of New Mexico,
LLC, a Delaware limited liability company ACME Television of Oregon, LLC, an
Oregon limited liability company, ACME Television of Tennessee, LLC, a Tennessee
limited liability company, and ACME Subsidiary Holdings III, LLC, a Delaware
limited liability company.
HOLDER: Any holder of a Registrable Note or Registrable Notes.
INDEMNIFIED PERSON: See Section 7(c).
INDEMNIFYING PERSON: See Section 7(c).
INDENTURE: The Indenture, dated as of September 30, 1997, by and
among the Obligors and Wilmington Trust Company, as trustee, pursuant to which
the Notes are being issued, as amended or supplemented from time to time in
accordance with the terms thereof.
INITIAL PURCHASERS: See the introductory paragraph to this
Agreement.
INITIAL SHELF REGISTRATION: See Section 3(a).
INSPECTORS: See Section 5(o).
ISSUE DATE: The date on which the original Notes are sold to the
Initial Purchasers pursuant to the Purchase Agreement.
LIEN: See the Indenture.
NASD: See Section 5(t).
2
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NOTES: See the introductory paragraphs to this Agreement.
PARTICIPANT: See Section 7(a).
PARTICIPATING BROKER-DEALER: See Section 2(b).
PERSON: An individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust, unincorporated
organization or government (including any agency or political subdivision
thereof).
PRIVATE EXCHANGE: See Section 2(b).
PRIVATE EXCHANGE NOTES: See Section 2(b).
PROSPECTUS: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Notes covered by such Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
PURCHASE AGREEMENT: See the introductory paragraphs to this
Agreement.
RECORDS: See Section 5(o).
REGISTRABLE NOTES: The Notes upon original issuance of the Notes and
at all times subsequent thereto and, if issued, the Private Exchange Notes,
until in the case of any such Notes or any such Private Exchange Notes, as the
case may be, (i) a Registration Statement covering such Notes or such Private
Exchange Notes has been declared effective by the SEC and such Notes or such
Private Exchange Notes, as the case may be, have been disposed of in accordance
with such effective Registration Statement, (ii) such Notes or such Private
Exchange Notes, as the case may be, are sold in compliance with Rule 144, (iii)
in the case of any Note, the Exchange Offer has been consummated, (iv) such
Notes or such Private Exchange Notes, as the case may be, cease to be
outstanding or (v) two years have passed from the Issue Date.
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REGISTRATION DEFAULT: See Section 4(a).
REGISTRATION STATEMENT: Any registration statement of the
Issuers, including, but not limited to, the Exchange Registration Statement,
which covers any of the Registrable Notes pursuant to the provisions of this
Agreement, including the
Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
RULE 144: Rule 144 promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
RULE 144A: Rule 144A promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC.
RULE 415: Rule 415 promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
SECURITIES: See the introductory paragraphs to this Agreement.
SECURITIES ACT: The Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
SHELF NOTICE: See Section 2(c).
SHELF REGISTRATION: See Section 3(b).
SUBSEQUENT SHELF REGISTRATION: See Section 3(b).
TIA: The Trust Indenture Act of 1939, as amended.
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TRUSTEE: The trustee under the Indenture and, if existent, the
trustee under any indenture governing the Exchange Notes and Private Exchange
Notes (if any).
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration
in which securities of the Obligors are sold to an underwriter(s) for reoffering
to the public.
2. EXCHANGE OFFER
(a) The Obligors agree to use their best efforts to file with the SEC as
soon as practicable after the Closing, but in no event later than the Filing
Date, an offer to exchange (the "EXCHANGE OFFER") any and all of the Notes for a
like aggregate principal amount at maturity of debt securities of the Obligors
which are identical to the Notes (the "EXCHANGE NOTES") (and which are entitled
to the benefits of the Indenture or a trust indenture which is substantially
identical to the Indenture (other than such changes to the Indenture or any such
identical trust indenture as are necessary to comply with any requirements of
the SEC to effect or maintain the qualification thereof under the TIA) and
which, in either case, has been qualified under the TIA), except that the
Exchange Notes shall have been registered pursuant to an effective Registration
Statement under the Securities Act. The Exchange Offer will be registered under
the Securities Act on an appropriate form (the "EXCHANGE REGISTRATION
STATEMENT") and will comply with all applicable tender offer rules and
regulations under the Exchange Act. The Obligors agree to use their best efforts
to (x) cause the Exchange Registration Statement to become effective under the
Securities Act on or before the Effectiveness Date; (y) keep the Exchange Offer
open for at least 30 days (or longer if required by applicable law) after the
date that notice of the Exchange Offer is mailed to Holders; and (z) consummate
the Exchange Offer on or prior to the 180th day following the Issue Date. Each
Holder who participates in the Exchange Offer will be required to represent that
any Exchange Notes received by it will be acquired in the ordinary course of its
business, that at the time of the consummation of the Exchange Offer such Holder
will have no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, and that such Holder is not an affiliate of
the Obligors within the meaning of Rule 405 promulgated under the Securities Act
or if it is such an affiliate, that it will comply with the registration and
prospectus delivery requirements of the Securities Act, to the extent
applicable. Upon consummation of the Exchange Offer in accordance with this
Section 2, the provisions of this Agreement shall continue to ap-
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ply, MUTATIS MUTANDIS, solely with respect to Registrable Notes that are Private
Exchange Notes and Exchange Notes held by Participating Broker-Dealers (as
defined below), and the Obligors shall have no further obligation to register
Registrable Notes (other than Private Exchange Notes and Exchange Notes held by
Participating Broker-Dealers) pursuant to Section 3 of this Agreement.
(b) The Obligors shall include within the Prospectus contained in the
Exchange Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchasers, which shall contain a summary
statement of the positions taken or policies made by the staff of the SEC with
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 promulgated under the Exchange Act)
of Exchange Notes received by such broker-dealer in the Exchange Offer (a
"PARTICIPATING BROKER-DEALER"), whether such positions or policies have been
publicly disseminated by the staff of the SEC or such positions or policies, in
the reasonable judgment of the Initial Purchasers, represent the prevailing
views of the staff of the SEC. Such "Plan of Distribution" section shall also
allow the use of the Prospectus by all persons subject to the prospectus
delivery requirements of the Securities Act, including all Participating
Broker-Dealers, and include a statement describing the means by which
Participating Broker-Dealers may resell the Exchange Notes.
The Obligors shall use their best efforts to keep the Exchange
Registration Statement effective and to amend and supplement the Prospectus
contained therein, in order to permit such Prospectus to be lawfully delivered
by all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Notes, PROVIDED that such period shall not
exceed 180 days (or such longer period if extended pursuant to the last
paragraph of Section 5) after the date of the consummation of the Exchange Offer
(the "APPLICABLE PERIOD").
If, prior to consummation of the Exchange Offer, either of the
Initial Purchasers holds any Notes acquired by it and having, or which are
reasonably likely to be determined to have, the status of an unsold allotment in
the initial distribution, the Obligors upon the request of such Initial
Purchaser shall, simultaneously with the delivery of the Exchange Notes in the
Exchange Offer, issue and deliver to such Initial Purchaser, in exchange (the
"PRIVATE EXCHANGE") for the Notes held
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by such Initial Purchaser, a like principal amount at maturity of debt
securities of the Obligors that are identical in all material respects to the
Exchange Notes (the "PRIVATE EXCHANGE NOTES") (and which are issued pursuant to
the same indenture as the Exchange Notes). The Private Exchange Notes shall bear
the same CUSIP number as the Exchange Notes. The Exchange Notes and any Private
Exchange Notes will be exchanged at the Accreted Value of the Notes existing on
the date the exchange is effected; and, if cash interest has begun to accrue on
the Notes, interest on the Exchange Notes and any Private Exchange Notes will
accrue from the later of (i) the last interest payment date on which interest
was paid on the Notes surrendered in exchange therefor or (ii) if the Notes are
surrendered for exchange on a date in a period which includes the record date
for an interest payment date to occur on or after the date of such exchange and
as to which interest will be paid, the date of such interest payment date.
In connection with the Exchange Offer, the Obligors shall:
(i) mail to each Holder a copy of the Prospectus forming part of
the Exchange Registration Statement, together with an appropriate
letter of transmittal and related documents;
(ii) utilize the services of a depository for the Exchange Offer
with an address in New York, New York; and
(iii) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last business day on which
the Exchange Offer shall remain open.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Obligors shall:
(i) accept for exchange all Notes tendered and not validly
withdrawn pursuant to the Exchange Offer or the Private Exchange;
(ii) deliver to the Trustee for cancellation all Notes so
accepted for exchange; and
(iii) cause the Trustee to authenticate and deliver promptly to each
Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may
be, equal in princi-
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<PAGE>
pal amount at maturity to the Notes of such Holder so accepted for exchange.
The Exchange Notes and the Private Exchange Notes may be issued
under (i) the Indenture or (ii) an indenture substantially identical to the
Indenture, which in either event will provide that the Exchange Notes will not
be subject to the transfer restrictions set forth in the Indenture and that the
Exchange Notes, the Private Exchange Notes and the Notes will vote and consent
together, to the extent provided by the Indenture, on all matters as one class
and that neither the Exchange Notes, the Private Exchange Notes nor the Notes
will have the right to vote or consent as a separate class on any matter.
(c) If (1) prior to the consummation of the Exchange Offer, the
Obligors or Holders of at least a majority in aggregate principal amount at
maturity of the Registrable Notes reasonably determine in good faith that (i)
the Exchange Notes would not, upon receipt, be tradable by such Holders which
are not affiliates (within the meaning of the Securities Act) of the Obligors
without restriction under the Securities Act and without restrictions under
applicable state securities laws or (ii) after conferring with counsel, the SEC
is unlikely to permit the consummation of the Exchange Offer prior to 180 days
after the Issue Date, (2) subsequent to the consummation of the Private
Exchange, any holder of the Private Exchange Notes so requests, or (3) the
Exchange Offer is commenced and not consummated within 180 days of the Issue
Date, then the Obligors shall promptly deliver to the Holders and the Trustee
written notice thereof (the "SHELF NOTICE") and shall file an Initial Shelf
Registration pursuant to Section 3.
3. SHELF REGISTRATION
If a Shelf Notice is delivered as contemplated by Section 2(c),
then:
(a) INITIAL SHELF REGISTRATION. The Obligors shall prepare and file
with the SEC a Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415 covering all of the Registrable Notes (the "INITIAL
SHELF REGISTRATION"). The Obligors shall use their best efforts to file with the
SEC the Initial Shelf Registration within 30 days of the delivery of the Shelf
Notice. The Initial Shelf Registration shall be on Form S-1 or another
appropriate form permitting registration of such Registrable Notes for resale by
such Holders in the manner or manners designated by them (including, without
limitation, one or more underwritten offerings). The
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<PAGE>
Obligors shall not permit any securities other than the Registrable Notes to be
included in the Initial Shelf Registration or any Subsequent Shelf Registration
(as defined below). The Obligors shall use their best efforts to cause the
Initial Shelf Registration to be declared effective under the Securities Act on
or prior to the Effectiveness Date and to keep the Initial Shelf Registration
continuously effective under the Securities Act until two years from the Issue
Date (the "EFFECTIVENESS Period"), or such shorter period ending when (i) all
Registrable Notes covered by the Initial Shelf Registration have been sold in
the manner set forth and as contemplated in the Initial Shelf Registration or
(ii) a Subsequent Shelf Registration covering all of the Registrable Notes has
been declared effective under the Securities Act.
(b) SUBSEQUENT SHELF REGISTRATIONS. If the Initial Shelf Registration
or any Subsequent Shelf Registration ceases to be effective for any reason at
any time during the Effectiveness Period (prior to the sale of all of the
securities registered thereunder), the Obligors shall use their best efforts to
obtain the prompt withdrawal of any order suspending the effectiveness thereof,
and in any event shall within 45 days of such cessation of effectiveness amend
the Shelf Registration in a manner reasonably expected to obtain the withdrawal
of the order suspending the effectiveness thereof, or file an additional "shelf"
Registration Statement pursuant to Rule 415 covering all of the Registrable
Notes (a "SUBSEQUENT SHELF REGISTRATION"). In the event that the Obligors become
eligible to use any form other than form S-1 for a Subsequent Shelf
Registration, if permitted under applicable law, the Obligors shall be entitled
to cause a Subsequent Shelf Registration to be substituted for the Initial Shelf
Registration. If a Subsequent Shelf Registration is filed, the Obligors shall
use their best efforts to cause the Subsequent Shelf Registration to be declared
effective as soon as practicable after such filing and to keep such Registration
Statement continuously effective during the Effectiveness Period. As used herein
the term "SHELF REGISTRATION" means the Initial Shelf Registration and any
Subsequent Shelf Registration.
(c) SUPPLEMENTS AND AMENDMENTS. The Obligors shall promptly
supplement and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount at maturity
of the Registrable Notes covered by such Registration Statement or by any
underwriter(s) of such Registrable Notes.
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<PAGE>
4. ADDITIONAL INTEREST
(a) The Obligors and the Initial Purchasers agree that the Holders
of Registrable Notes will suffer damages if the Obligors fail to fulfill their
obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the Obligors agree to pay liquidated damage payments on the Notes ("DAMAGE
AMOUNTS") under the circumstances set forth below:
(i) if the Exchange Registration Statement has not been filed on or
prior to the Filing Date or the Initial Shelf Registration has not been
filed within 30 days following the delivery of a Shelf Notice prior to the
filing date;
(ii) if neither the Exchange Registration Statement nor the Initial
Shelf Registration has been declared effective on or prior to the
Effectiveness Date; and/or
(iii) if either (A), if applicable, the Obligors have not exchanged
the Exchange Notes for all Notes validly tendered in accordance with the
terms of the Exchange Offer on or prior to the 180th day following the
Issue Date or (B) , if applicable, the Exchange Registration Statement
ceases to be effective at any time prior to the time that the Exchange
Offer is consummated or (C) if applicable, the Shelf Registration has been
declared effective and such Shelf Registration ceases to be effective at
any time prior to the earlier of the date on which all Registrable Notes
covered by the Shelf Registration have been sold in the manner set forth
and as contemplated in the Shelf Registration or the second anniversary of
the Issue Date;
(each such event referred to in clauses (i) through (iii) above is a
"REGISTRATION DEFAULT"), the sole remedy available to holders of the Notes will
be the accrual and cash payment of Damage Amounts as follows: upon the
occurrence of one or more Registration Defaults, Damage Amounts shall begin to
accrue at a rate equal to 0.5% per annum of the average Accreted Value (as
defined in the Indenture) of the Notes for the first 90 days during which any
such Registration Default exists; and the per annum Damage Amount
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accrual rate will increase by an additional 0.25% per annum of the average
Accreted Value of the Notes for each subsequent 90-day period during which any
Registration Default remains uncured, up to a maximum Damage Amount accrual rate
of 2.0% per annum of the average Accreted Value of the Notes for all
Registration Defaults, PROVIDED, HOWEVER, that (1) upon the filing of the
Exchange Registration Statement or the Initial Shelf Registration (in the case
of (i) above), (2) upon the effectiveness of the Exchange Registration Statement
or a Shelf Registration (in the case of (ii) above) or (3) upon the exchange of
Exchange Notes for all Notes tendered (in the case of (iii)(A) above), or upon
the effectiveness of the Exchange Registration Statement which had ceased to
remain effective (in the case of (iii)(B) above), or upon the effectiveness of
the Shelf Registration which had ceased to remain effective (in the case of
(iii)(C) above), Damage Amounts on the Notes as a result of such clause (i),
(ii) or (iii) (or the relevant subclause thereof), as the case may be, shall
cease to accrue, and PROVIDED, FURTHER, that in the case of a Registration
Default under (iii)(C) above, will only be payable with respect to Notes so long
as they are Registrable Notes.
(b) The Obligors shall notify the Trustee within one business day
after each and every date on which an event occurs in respect of which Damage
Amounts are required to be paid (an "EVENT DATE"). Any Damage Amounts due
pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be payable in
cash semi-annually on each March 31 and September 30 (to the Holders of record
on the March 15 and September 15 immediately preceding such dates), commencing
with the first such date occurring after any such Damage Amounts commence to
accrue. The Damage Amounts with respect to each Note will be determined by
multiplying the applicable Damage Amounts accrual rate by the Average Accreted
Value of such Note during the applicable period, multiplied by a fraction, the
numerator of which is the number of days such Damage Amounts accrual rate were
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months), and the denominator of which is 360.
5. Registration Procedures
In connection with the registration of any Registrable Notes or
Private Exchange Notes pursuant to Section 2 or 3 hereof, the Obligors shall
effect such registrations to permit the sale of such Registrable Notes or
Private Exchange Notes in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Obligors shall:
(a) Prepare and file with the SEC, prior to the Filing Date, a
Registration Statement or Registration Statements as prescribed by Section
2 or 3, and shall use their
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best efforts to cause each such Registration Statement to become effective and
remain effective as provided herein, PROVIDED that, if (1) such filing is
pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, before filing any Registration Statement or
Prospectus or any amendments or supplements thereto, the Obligors shall, if
requested by any Holders of Registrable Notes, furnish to and afford such
Holders of the Registrable Notes and each such Participating Broker-Dealer, as
the case may be, covered by such Registration Statement, their counsel and the
managing underwriter(s), if any, a reasonable opportunity to review copies of
all such documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed (at least 5
business days prior to such filing). The Obligors shall not file any
Registration Statement or Prospectus or any amendments or supplements thereto in
respect of which the Holders must be afforded an opportunity to review prior to
the filing of such document, if the Holders of a majority in aggregate principal
amount at maturity of the Registrable Notes covered by such Registration
Statement, or such Participating Broker-Dealer, as the case may be, their
counsel, or the managing underwriter(s), if any, shall reasonably object;
PROVIDED, HOWEVER, during any delay in meeting the time frames contemplated by
Section 4 hereof as a result of actions of any Holder (other than by reason of a
reasonable objection of such Holder as provided above) of Registrable Notes, no
Damage Amounts shall accrue or be payable to such Holder.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration or Exchange Registration Statement,
as the case may be, as may be necessary to keep such Registration
Statement continuously effective for the Effectiveness Period or the
Applicable Period, as the case may be; cause the related Prospectus to be
supplemented by any prospectus supplement required by applicable law, and
as so supplemented to be filed pursuant to Rule 424 (or any similar
provisions then in force) under the Securities Act; and comply with the
provisions of the Securities Act, the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to them with
respect to the disposition of all securities covered by such Registration
Statement as so
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amended or in such Prospectus as so supplemented and with respect to the
subsequent resale of any securities being sold by a Participating
Broker-Dealer covered by any such Prospectus; the Obligors shall be deemed
not to have used their best efforts to keep a Registration Statement
effective during the Applicable Period if either Issuer voluntarily takes
any action that would result in selling Holders of the Registrable Notes
covered thereby or Participating Broker-Dealers seeking to sell Exchange
Notes not being able to sell such Registrable Notes or such Exchange Notes
during that period unless such action is required by applicable law or
unless the Obligors comply with this Agreement, including without
limitation, the provisions of clause 5(c)(v) below.
(c) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, notify the selling Holders of Registrable Notes, or
each such Participating Broker-Dealer, as the case may be, their counsel
and the managing underwriter(s), if any, promptly (but in any event within
two business days), and confirm such notice in writing, (i) when a
Prospectus or any prospectus supplement or post-effective amendment
thereto has been filed, and, with respect to a Registration Statement or
any post-effective amendment thereto, when the same has become effective
(including in such notice a written statement that any Holder may, upon
request, obtain, without charge, one conformed copy of such Registration
Statement or post-effective amendment thereto including financial
statements and schedules, documents incorporated or deemed to be
incorporated by reference and exhibits), (ii) of the issuance by the SEC
of any stop order suspending the effectiveness of a Registration Statement
or of any order preventing or suspending the use of any preliminary
Prospectus or the initiation of any proceedings for that purpose, (iii) if
at any time when a Prospectus is required by the Securities Act to be
delivered in connection with sales of the Registrable Notes the
representations and warranties of the Obligors contained in any agreement
(including any underwriting agreement) contemplated by Section 5(n) below
cease to be true and correct, (iv) of the receipt by the Obligors of any
notification with respect to the suspension of the qualification or
exemption from qualification of a Registration Statement or
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any of the Registrable Notes or the Exchange Notes to be sold by any
Participating Broker-Dealer for offer or sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose, (v) of the
happening of any event or any information becoming known to the Obligors
that makes any statement made in such Registration Statement or related
Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the
making of any changes in, or amendments or supplements to, such
Registration Statement, Prospectus or documents so that, in the case of
the Registration Statement, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and
that in the case of the Prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, and
(vi) the Obligors' reasonable determination that a post-effective
amendment to a Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, use their best efforts to prevent the issuance of
any order suspending the effectiveness of a Registration Statement or of
any order preventing or suspending the use of a Prospectus or suspending
the qualification (or exemption from qualification) of any of the
Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer, for sale in any jurisdiction, and, if any such order is
issued, to use their best efforts to obtain the withdrawal of any such
order at the earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
reasonably requested by the managing underwriter(s), if any, or the
Holders of a majority in aggregate principal amount at maturity of the
Registrable Notes being sold in connection with an underwritten offering,
(i) promptly incorporate in a Prospectus supplement or post-effective
amendment thereto such information as the managing underwriter(s), if any,
or such Holders rea-
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sonably request to be included therein, (ii) make all required filings of
such Prospectus supplement or such post-effective amendment thereto as
soon as practicable after the Obligors have received notification of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment thereto and (iii), if applicable, supplement or make amendments
to such Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, furnish to each selling Holder of Registrable Notes
and to each such Participating Broker-Dealer who so requests and to
counsel and the managing underwriter(s), if any, without charge, one
conformed copy of the Registration Statement or Registration Statements
and each post-effective amendment thereto, including financial statements
and schedules, and, if requested, all documents incorporated or deemed to
be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, deliver to each selling Holder of Registrable
Notes, or each such Participating Broker-Dealer, as the case may be, their
counsel, and the managing underwriter or underwriters, if any, without
charge, as many copies of the Prospectus or Prospectuses (including each
form of preliminary Prospectus) and each amendment or supplement thereto
and any documents incorporated by reference therein as such Persons may
reasonably request; and, subject to the last paragraph of this Section 5,
the Obligors hereby consent to the use of such Prospectus and each
amendment or supplement thereto by each of the selling Holders of
Registrable Notes or each such Participating Broker-Dealer, as the case
may be, and the managing underwriter or underwriters or agents, if any,
and dealers (if any), in connection with the offering and sale of the
Registrable Notes covered by or the sale by Participating Broker-Dealers
of the Exchange Notes pursuant to such Prospectus and any amendment or
supplement thereto.
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(h) Prior to any public offering of Registrable Notes or any
delivery of a Prospectus contained in the Exchange Registration Statement
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, to use their best efforts to register or qualify,
and to cooperate with the selling Holders of Registrable Notes or each
such Participating Broker-Dealer, as the case may be, the managing
underwriter or underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Notes or Exchange Notes
for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any selling Holder,
Participating Broker-Dealer, or the managing underwriter or underwriters,
if any, reasonably request in writing, PROVIDED that where Exchange Notes
held by Participating Broker-Dealers or Registrable Notes are offered
other than through an underwritten offering, the Obligors agree to cause
their counsel to perform Blue Sky investigations and file registrations
and qualifications required to be filed pursuant to this Section 5(h);
keep each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is required to be
kept effective and do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions of
the Exchange Notes held by Participating Broker-Dealers or the Registrable
Notes covered by the applicable Registration Statement; PROVIDED that the
Obligors shall not be required to (A) qualify generally to do business in
any jurisdiction where it is not then so qualified, (B) take any action
that would subject it to general service of process in any such
jurisdiction where it is not then so subject or (C) subject itself to
taxation in excess of a nominal dollar amount in any such jurisdiction.
(i) If a Shelf Registration is filed pursuant to Section 3,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Notes to be sold,
which certificates shall not bear any restrictive legends and shall be in
a form eligible for deposit with The Depository Trust Company; and enable
such Registrable Notes to be in such denominations and registered in such
names as the managing underwriter or underwriters, if any, or Holders may
reasonably request and which are consistent
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with the terms of the indenture under which the Registrable Notes are
issued.
(j) Use their best efforts to cause the Registrable Notes covered by
the Registration Statement to be registered with or approved by such other
United States governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof or the managing underwriter or
underwriters, if any, to consummate the disposition of such Registrable
Notes, except as may be required solely as a consequence of the nature of
such selling Holder's business, in which case the Obligors will cooperate
in all reasonable respects with the filing of such Registration Statement
and the granting of such approvals at such sellers' cost and expense.
(k) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, upon the occurrence of any event contemplated by
paragraph 5(c)(v) or 5(c)(vi) above, as promptly as reasonably practicable
prepare and (subject to Section 5(a) above) file with the SEC, at the
expense of the Obligors, a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference,
or file any other required document so that, as thereafter delivered to
the purchasers of the Registrable Notes being sold thereunder or to the
purchasers of the Exchange Notes to whom such Prospectus will be delivered
by a Participating Broker-Dealer during the Applicable Period, any such
Prospectus will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(l) Use their best efforts to cause the Registrable Notes covered by
a Registration Statement or the Exchange Notes sold by a Participating
Broker-Dealer during the Applicable Period, as the case may be, to be
rated with the appropriate rating agencies, if so requested by the Holders
of a majority in aggregate principal amount of Registrable Notes covered
by such Registration Statement or the managing underwriter or
underwriters, if any.
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(m) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with printed
certificates for the Registrable Notes in a form eligible for deposit with
The Depository Trust Company and (ii) provide a CUSIP number for the
Registrable Notes.
(n) In connection with an underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as
is customary in underwritten offerings of debt securities similar to the
Notes and take all such other actions as are reasonably requested by the
managing underwriter(s), if any, in order to expedite or facilitate the
registration or the disposition of such Registrable Notes, and in such
connection, (i) make such reasonable representations and warranties to the
managing underwriter or underwriters on behalf of any underwriters, with
respect to the business of the Obligors and their subsidiaries and the
Registration Statement, Prospectus and documents, if any, incorporated or
deemed to be incorporated by reference therein, in each case, as are
customarily made by Obligors to underwriters in underwritten offerings of
debt securities, and confirm the same if and when requested; (ii) obtain
opinions of counsel to the Obligors and updates thereof in form and
substance reasonably satisfactory to the managing underwriter or
underwriters, addressed to the managing underwriter or underwriters
covering the matters customarily covered in opinions requested in
underwritten offerings of debt securities and such other matters as may be
reasonably requested by underwriters; (iii) obtain "cold comfort" letters
and updates thereof in form and substance reasonably satisfactory to the
managing underwriter or underwriters from the independent certified public
accountants of the Obligors (and, if necessary, any other independent
certified public accountants of any subsidiary of the Obligors or of any
business acquired by the Obligors for which financial statements and
financial data are, or are required to be, included in the Registration
Statement), addressed to the managing underwriter or underwriters on
behalf of any underwriters, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort" letters
in connection with underwritten offerings of debt securities and such
other matters as reasonably requested by the managing underwriter or
underwriters; and (iv) if an underwriting agreement is entered into, the
same shall contain indemnification provisions and procedures no less
favorable than those set forth in Section 7
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hereof (or such other provisions and procedures acceptable to Holders of a
majority in aggregate principal amount at maturity of Registrable Notes
covered by such Registration Statement and the managing underwriter or
underwriters or agents) with respect to all parties to be indemnified
pursuant to said Section. The above shall be done at each closing under
such underwriting agreement, or as and to the extent required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, make available for inspection by any selling Holder
of such Registrable Notes being sold who holds at least $2.0 million in
aggregate principal amount of Registrable Notes, or each such
Participating Broker-Dealer, as the case may be, the managing underwriter
or underwriters participating in any such disposition of Registrable
Notes, if any, and any attorney, accountant or other agent retained by any
such selling Holder or each such Participating Broker-Dealer, as the case
may be (collectively, the "INSPECTORS"), at the offices where normally
kept, during reasonable business hours, all financial and other records,
pertinent corporate documents and properties of the Obligors and their
subsidiaries (collectively, the "RECORDS") as shall be reasonably
necessary to enable them to exercise any applicable due diligence
responsibilities, and cause the officers, directors and employees of the
Obligors and their subsidiaries to supply all information in each case
reasonably requested by any such Inspector in connection with such
Registration Statement. Records which the Obligors determine, in good
faith, to be confidential and any Records which they notify the Inspectors
are confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a material
misstatement or material omission in such Registration Statement and the
Obligors fail to promptly correct such material misstatement or omission
after notice thereof, (ii) the release of such Records is ordered pursuant
to a subpoena or other order from a court of competent jurisdiction or
(iii) the information in such Records has been made generally available to
the public other than through the Inspectors' breach of any
confidentiality agreement. Each selling Holder of such Registrable Notes
and each such Participating Broker-Dealer or underwriter
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will be required to agree that information obtained by it as a result of
such inspections shall be deemed confidential and shall not be used by it
for any purpose other than discharging due diligence responsibilities. In
addition, such information shall not be used as the basis for any market
transactions in the securities of the Obligors unless and until such is
made generally available to the public. Each selling Holder of such
Registrable Notes and each such Participating Broker-Dealer will be
required to further agree that it will, upon learning that disclosure of
such Records is sought in a court of competent jurisdiction, give notice
to the Obligors and allow the Obligors to undertake appropriate action to
prevent disclosure of the Records deemed confidential at their expense.
(p) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a), as the case may be, to be
qualified under the TIA not later than the effective date of the Exchange
Offer Registration Statement or the first Registration Statement relating
to the Registrable Notes; and in connection therewith, cooperate with the
trustee under any such indenture and the Holders of the Registrable Notes,
to effect such changes to such indenture as may be required for such
indenture to be so qualified in accordance with the terms of the TIA; and
execute, and use their best efforts to cause such trustee to execute, all
documents as may be required to effect such changes, and all other forms
and documents required to be filed with the SEC to enable such indenture
to be so qualified in a timely manner.
(q) Comply with all applicable rules and regulations of the SEC and
make generally available to their securityholders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any similar rule promulgated under the Securities Act)
no later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Notes are
sold to underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Obligors
after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.
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(r) Upon consummation of an Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Obligors, in a form customary for
underwritten offerings of debt securities similar to the Notes, addressed
to the Trustee for the benefit of all Holders of Registrable Notes
participating in the Exchange Offer or the Private Exchange, as the case
may be, and which includes an opinion that (i) the Obligors have duly
authorized, executed and delivered the Exchange Notes and Private Exchange
Notes and the related indenture and (ii) each of the Exchange Notes or the
Private Exchange Notes, as the case may be, and related indenture
constitute a legal, valid and binding obligation of the Obligors,
enforceable against the Obligors in accordance with its respective terms
(with customary exceptions).
(s) If an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Obligors (or to
such other Person as directed by the Obligors) in exchange for the
Exchange Notes or the Private Exchange Notes, as the case may be, the
Obligors shall mark, or cause to be marked, on such Registrable Notes that
such Registrable Notes are being canceled in exchange for the Exchange
Notes or the Private Exchange Notes, as the case may be; and, in no event
shall such Registrable Notes be marked as paid or otherwise satisfied.
(t) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and the managing underwriter(s), if any,
participating in the disposition of such Registrable Notes and their
respective counsel in connection with any filings required to be made with
the National Association of Securities Dealers, Inc. (the "NASD").
(u) Use their reasonable best efforts to take all other steps
necessary to effect the registration of the Registrable Notes covered by a
Registration Statement contemplated hereby.
The Obligors may require each seller of Registrable Notes or
Participating Broker-Dealer as to which any registration is being effected to
furnish to the Obligors such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable Notes or Exchange Notes
to be sold by such Participating Broker-Dealer, as the case may be, as the
Obligors may, from time to time, reasonably request.
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The Obligors may exclude from such registration the Registrable Notes of any
seller or Participating Broker-Dealer who fails to furnish such information
within a reasonable time after receiving such request, and during any delay in
meeting the time frames contemplated by Section 4 hereof as a result of a delay
in receiving any such information, no Additional Interest shall accrue or be
payable.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by
such Participating Broker-Dealer, as the case may be, that, upon receipt of any
notice from the Obligors of the happening of any event of the kind described in
Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi), such Holder will forthwith
discontinue disposition of such Registrable Notes covered by such Registration
Statement or Prospectus or Exchange Notes to be sold by such Holder or
Participating Broker-Dealer, as the case may be, until such Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section
5(k), or until it is advised in writing (the "ADVICE") by the Obligors that the
use of the applicable Prospectus may be resumed, and has received copies of any
amendments or supplements thereto. In the event the Obligors shall give any such
notice, the Applicable Period shall be extended by the number of days during
such period from and including the date of the giving of such notice to and
including the date when each seller of Exchange Notes to be sold by such
Participating Broker-Dealer, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) or (y) the
Advice.
6. REGISTRATION EXPENSES
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Obligors shall be borne by the Obligors
whether or not the Exchange Offer or a Shelf Registration is filed or becomes
effective, including, without limitation, (i) all registration and filing fees
(including, without limitation, (A) fees with respect to filings required to be
made with the NASD in connection with one underwritten offering and (B) fees and
expenses of compliance with state securities or Blue Sky laws (including,
without limitation, reasonable fees and disbursements of counsel in connection
with Blue Sky qualifications of the Registrable Notes or Exchange Notes and
determination of the eligibility of the Registrable Notes or Exchange Notes for
investment under the laws of such jurisdictions (x) where the Holders of
Registrable Notes are located, in the case of the Exchange Notes, or
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(y) as provided in Section 5(h), in the case of Registrable Notes or Exchange
Notes to be sold by a Participating Broker-Dealer during the Applicable
Period)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Notes or Exchange Notes in a form eligible
for deposit with The Depository Trust Company and of printing Prospectuses if
the printing of Prospectuses is reasonably requested by the managing underwriter
or underwriters, if any, or, in respect of Registrable Notes or Exchange Notes
to be sold by any Participating Broker-Dealer during the Applicable Period, by
the Holders of a majority in aggregate principal amount of the Registrable Notes
included in any Registration Statement or of such Exchange Notes, as the case
may be), (iii) reasonable messenger, telephone and delivery expenses, (iv) fees
and disbursements of counsel for the Obligors and fees and disbursements of
special counsel for the sellers of Registrable Notes (subject to the provisions
of Section 6(b)), (v) fees and disbursements of all independent certified public
accountants referred to in Section 5(n)(iii) (including, without limitation, the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance), (vi) rating agency fees, (vii) Securities Act liability
insurance, if the Obligors desire such insurance, (viii) fees and expenses of
the Trustee (including, without limitation, fees and disbursements of counsel),
(ix) fees and expenses of all other Persons retained by the Obligors, (x)
internal expenses of the Obligors (including, without limitation, all salaries
and expenses of officers and employees of the Obligors performing legal or
accounting duties), (xi) the expense of any annual audit, (xii) the reasonable
fees and expenses incurred in connection with any listing of the securities to
be registered on any securities exchange if the Obligors elect to list any such
securities and (xiii) the expenses incurred by the Obligors relating to
printing, word processing and distributing all Registration Statements,
underwriting agreements, securities sales agreements, indentures and any other
documents necessary in order to comply with this Agreement.
(b) In connection with any Shelf Registration hereunder, the
Obligors shall reimburse the Holders of the Registrable Notes being registered
in such registration for the actual reasonable fees and disbursements of not
more than one counsel (in addition to appropriate local counsel) chosen by the
Holders of a majority in aggregate principal amount at maturity of the
Registrable Notes to be included in such Registration Statement and other
reasonable out-of-pocket expenses of the Holders of Registrable Notes incurred
in connection with the registration of the Registrable Notes. Notwithstanding
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anything to the contrary contained herein, the Obligors shall not have any
obligation to pay any underwriting fees, discounts or commissions attributable
to the sale of Registrable Notes.
7. INDEMNIFICATION
(a) The Obligors agree to indemnify and hold harmless each Holder of
Registrable Notes and each Participating Broker-Dealer selling Exchange Notes
during the Applicable Period, the officers and directors of each such person,
and each person, if any, who controls any such person within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act (each,
a "PARTICIPANT"), from and against any and all losses, claims, damages and
liabilities (including, without limitation, the reasonable legal fees and other
expenses incurred in connection with any suit, action or proceeding or any claim
asserted) caused by, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus (as amended or supplemented if the Obligors shall have
furnished any amendments or supplements thereto) or any preliminary Prospectus,
or caused by, arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, except, with respect to any Participant, insofar as such
losses, claims, damages or liabilities are caused by any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to such Participant or underwriter
furnished to the Obligors in writing by such Participant or underwriter
expressly for use therein; PROVIDED that the foregoing indemnity with respect to
any preliminary Prospectus shall not inure to the benefit of any Participant or
underwriter (or to the benefit of any person controlling such Participant or
underwriter) from whom the person asserting any such losses, claims, damages or
liabilities purchased Registrable Notes or Exchange Notes if such untrue
statement or omission or alleged untrue statement or omission made in such
preliminary Prospectus is eliminated or remedied in the related Prospectus (as
amended or supplemented if the Obligors shall have furnished any amendments or
supplements thereto) and a copy of the related Prospectus (as so amended or
supplemented) shall have been furnished to such Participant or underwriter at or
prior to the sale of such Registrable Notes or Exchange Notes, as the case may
be, and such Participant or underwriter shall have failed to deliver a copy of
the Prospectus to such person at or prior to the confirmation of the applicable
sale
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or at a time the Obligors had notified persons under the last paragraph of
Section 5 hereof to cease using such Registration Statement or Prospectus.
(b) Each Participant will be required to agree, severally and not
jointly, to indemnify and hold harmless each of the Obligors, their respective
directors and officers and each person who controls any such person within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Obligors to each
Participant, but only with reference to information relating to such Participant
furnished to the Obligors in writing by such Participant expressly for use in
any Registration Statement or Prospectus, any amendment or supplement thereto,
or any preliminary Prospectus. The liability of any Participant under this
paragraph (b) shall in no event exceed the proceeds received by such Participant
from sales of Registrable Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either
paragraph (a) or (b) of this Section 7, such person (the "INDEMNIFIED PERSON")
shall promptly notify the person against whom such indemnity may be sought (the
"INDEMNIFYING PERSON") in writing, and the Indemnifying Person, upon request of
the Indemnified Person, shall retain one counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses incurred by such counsel related to such
proceeding. In any such proceeding, any Indemnified Person shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person unless (i) the Indemnifying Person and
the Indemnified Person shall have mutually agreed in writing to the contrary,
(ii) the Indemnifying Person has failed within a reasonable time to retain
counsel reasonably satisfactory to the Indemnified Person or (iii) the named
parties in any such proceeding (including any impleaded parties) include both
the Indemnifying Person and the Indemnified Person and representations of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the Indemnifying Person
shall not, in connection with any proceeding or related proceeding in the same
jurisdiction, be liable for the fees and expenses of more than one separate law
firm (in addition to any local counsel) for all Indemnified Persons,
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and that all such fees and expenses shall be reimbursed as they are incurred.
Any such separate firm for the Participants and such control persons of
Participants shall be designated in writing by Participants who sold a majority
in interest of Registrable Notes sold by all such Participants and any such
separate firm for the Obligors, their directors, their officers and such control
persons of the Obligors shall be designated in writing by the Company. The
Indemnifying Person shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the Indemnifying Person agrees to
indemnify any Indemnified Person from and against any loss or liability by
reason of such settlement or judgment. Notwithstanding the foregoing sentence,
the Indemnifying Person agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such Indemnifying Person of a
request for fees and expenses of counsel retained by the Indemnified Person
pursuant to this paragraph and (ii) such Indemnifying Person shall not have
reimbursed the Indemnified Person in accordance with such request prior to the
date of such settlement; PROVIDED, HOWEVER, that the Indemnifying Person shall
not be liable for any settlement effected without its consent pursuant to this
sentence if the Indemnifying Person is contesting, in good faith, the request
for reimbursement. No Indemnifying Person shall, without the prior written
consent of the Indemnified Person, effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party, unless such settlement includes an unconditional release of
such Indemnified Person from all liability on claims that are the subject matter
of such proceeding.
If the indemnification provided for in paragraphs (a) and (b) of
this Section 7 is unavailable to an Indemnified Person in respect of any losses,
claims, damages or liabilities referred to therein, then each Indemnifying
Person under such paragraphs, in lieu of indemnifying such Indemnified Person
thereunder, shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of the Obligors on
the one hand and the Participants on the other in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative fault of the
Obligors on the one hand and the Participants on the other shall be determined
by reference to, among other things, whether the untrue or alleged untrue
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statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Obligors or by the
Participants and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The parties shall agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by PRO RATA allocation
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes exceeds the amount of any damages that such Participant has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section
7 will be in addition to any liability which the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
8. RULES 144 AND 144A
Each of the Obligors agrees that it will file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the SEC thereunder in a timely manner and, if at any
time the Obligors are not required to file such reports, they will, upon the
request of any Holder of Registrable Notes, make publicly available other
information of a like nature until no longer necessary to permit sales pursuant
to Rule 144 or Rule 144A. The Obligors further covenant that so long as any
Registrable Notes remain outstanding to make available to any Holder of
Registrable Notes in connection with any sale thereof, the in-
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formation required by Rule 144A(d)(4) under the Securities Act in order to
permit resales of such Registrable Notes pursuant to (a) such Rule 144A, or (b)
any similar rule or regulation hereafter adopted by the SEC, unless at such time
the Registrable Notes are fully salable under Rule 144 or any successor
provision.
9. UNDERWRITTEN REGISTRATIONS
If any of the Registrable Notes covered by any Shelf Registration
are to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount at maturity of such
Registrable Notes included in such offering and shall be reasonably acceptable
to the Obligors.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
10. MISCELLANEOUS
(a) REMEDIES. In the event of a breach by the Obligors of any of
their obligations under this Agreement, other than the occurrence of an event
which requires payment of Damage Amounts, each Holder of Registrable Notes, in
addition to being entitled to exercise all rights provided herein, in the
Indenture or, in the case of the Initial Purchasers, in the Purchase Agreement
or granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. In the event of a breach by the
Obligors of any of their obligations under this Agreement, other than the
occurrence of an event which required payment of Damage Amounts, the Obligors
agree that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of any of the provisions of this Agreement
and hereby further agrees that, in the event of any action for specific
performance in respect of such breach, it shall waive the defense that a remedy
at law would be adequate.
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(b) ENFORCEMENT. The Trustee shall be authorized to enforce the
provisions of this Agreement for the ratable benefit of the Holders.
(c) NO INCONSISTENT AGREEMENTS. The Obligors do not have, as of the
date hereof, and the Obligors shall not, after the date of this Agreement, enter
into any agreement with respect to any of their securities that is inconsistent
with the rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The Obligors have not entered
and will not enter into any agreement with respect to any of their securities
which will grant to any Person piggy-back rights with respect to a Registration
Statement.
(d) ADJUSTMENTS AFFECTING REGISTRABLE NOTES. The Obligors shall not,
directly or indirectly, take any action with respect to the Registrable Notes as
a class that would adversely affect the ability of the Holders of Registrable
Notes to include such Registrable Notes in a registration undertaken pursuant to
this Agreement.
(e) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Obligors have obtained the written consent of
Holders of at least a majority of the then outstanding aggregate principal
amount at maturity of Registrable Notes. Notwithstanding the foregoing, a waiver
or consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders of Registrable Notes whose
securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise the rights of other
Holders of Registrable Notes may be given by Holders of at least a majority in
aggregate principal amount at maturity of the Registrable Notes being sold by
such Holders pursuant to such Registration Statement, PROVIDED that the
provisions of this sentence may not be amended, modified or supplemented except
in accordance with the provisions of the immediately preceding sentence.
(f) NOTICES. All notices and other communications (including without
limitation any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or telecopier:
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(i) if to a Holder of Registrable Notes, at the most current
address given by the Trustee to the Obligors; and
(ii) if to the Obligors:
ACME Television LLC
West Oak Street
Burbank, CA 91505
Attention: President
Tel: (818) 977-6640
Fax: (818) 977-6808
with a copy to:
Dickstein Shapiro
2101 L Street, NW
Washington, DC 20037-1526
Attention: Emmanuel Faust, Esq.
Tel: (202) 828-2265
Fax: (202) 887-0689
All such notices and communications shall be deemed to have been
duly given: (i) when delivered by hand, if personally delivered; (ii) three
business days after being deposited in the mail, postage prepaid, if mailed;
(iii) one business day after being timely delivered to a next-day air courier;
and (iv) when receipt is acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Registrable Notes.
(h) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
30
<PAGE>
(i) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(k) SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use commercially reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction.
(l) ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement and the Indenture, is intended by the parties as a final expression of
their agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein.
m) JOINT AND SEVERAL OBLIGATIONS. Unless otherwise stated
herein, each of the obligations of the Obligors under this Agreement shall be
the an obligation of each of the Issuers and each of the several Guarantors
on a joint and several basis.
(n) NOTES HELD BY THE COMPANY OR THEIR AFFILIATES. Whenever the
consent or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Obligors or their affiliates
(as such term is defined in Rule 405 under the Securities Act) shall not be
deemed outstanding for such purpose and shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
31
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Notes Registration
Rights Agreement as of the date first written above.
ACME TELEVISION, LLC
By: ACME International Holdings, LLC
its majority member
By: ACME Television Holdings, LLC
its majority member
By: /s/Thomas Allen
-------------------------------
Name: Thomas Allen
Title: Chief Financial Officer
ACME FINANCE CORPORATION
By: /s/Thomas Allen
-------------------------------
Name: Thomas Allen
Title: Chief Financial Officer
ACME TELEVISION LICENSES OF
MISSOURI, INC.
By: /s/Thomas Allen
-------------------------------
Name: Thomas Allen
Title: Chief Financial Officer
32
<PAGE>
ACME TELEVISION HOLDINGS OF
OREGON, LLC
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By: /s/Thomas Allen
-------------------------------
Name: Thomas Allen
Title: Chief Financial Officer
ACME TELEVISION HOLDINGS OF
TENNESEE, LLC
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By: /s/Thomas Allen
-------------------------------
Name: Thomas Allen
Title: Chief Financial Officer
ACME TELEVISION HOLDINGS OF UTAH, LLC
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By: /s/Thomas Allen
-------------------------------
Name: Thomas Allen
Title: Chief Financial Officer
33
<PAGE>
ACME TELEVISION HOLDINGS OF
NEW MEXICO, LLC
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By: /s/Thomas Allen
-------------------------------
Name: Thomas Allen
Title: Chief Financial Officer
ACME TELEVISION LICENSES OF
OREGON, LLC
By: ACME Television Holdings of
Oregon, LLC
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By: /s/Thomas Allen
-------------------------------
Name: Thomas Allen
Title: Chief Financial Officer
34
<PAGE>
ACME TELEVISION LICENSES OF
TENNESEE, LLC
By: ACME Television Holdings of
Tennessee, LLC,
its majority member
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By: /s/Thomas Allen
-------------------------------
Name: Thomas Allen
Title: Chief Financial Officer
ACME TELEVISION LICENSES OF
NEW MEXICO, LLC
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By: /s/Thomas Allen
-------------------------------
Name: Thomas Allen
Title: Chief Financial Officer
35
<PAGE>
ACME TELEVISION OF OREGON, LLC
By: ACME Television Holdings of
Oregon, LLC,
its majority member
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By: /s/Thomas Allen
-------------------------------
Name: Thomas Allen
Title: Chief Financial Officer
ACME TELEVISION OF TENNESEE, LLC
By: ACME Television Holdings of
Tennessee, LLC,
its majority member
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By: /s/Thomas Allen
-------------------------------
Name: Thomas Allen
Title: Chief Financial Officer
<PAGE>
ACME SUBSIDIARY HOLDINGS III, LLC
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By: /s/Thomas Allen
-------------------------------
Name: Thomas Allen
Title: Chief Financial Officer
CIBC WOOD GUNDY SECURITIES CORP.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
By: CIBC WOOD GUNDY SECURITIES CORP.
By: /s/Andrew R. Meyer
-------------------------------
Name: Andrew Meyer
Title: Managing Director
ACME TELEVISION HOLDINGS, LLC
a Delaware limited liability company
LIMITED LIABILITY COMPANY AGREEMENT
Dated June 17, 1997
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - DEFINED TERMS 1
ARTICLE II - ORGANIZATION AND POWERS 8
2.01 Organization 8
2.02 Purposes and Powers 8
2.03 Principal Place of Business 9
2.04 Qualification in Other Jurisdictions 9
2.05 Fiscal Year 9
ARTICLE III - MEMBERS 10
3.01 Membership Units 10
3.02 Issuance of Membership Units; Admission of New Members 11
3.03 Voting Rights 12
3.04 Restrictions 13
3.05 Limitation on Liability of Members 14
3.06 Authority 15
3.07 Withdrawal; Termination 15
3.08 Rights to Information/Access to Management 16
3.09 No Appraisal Rights 16
3.10 No Employment 16
3.11 Compliance with Securities Laws and Other Laws and
Obligations 16
ARTICLE IV - MANAGEMENT 16
4.01 Board of Advisors 16
4.02 Reliance by Third Parties 17
4.03 Meetings and Action of Board of Advisors 17
4.04 Compensation of Members of the Board of Advisors
and Committees 18
4.05 Limitation of Liability of Members of the Board of
Advisors 18
4.06 Officers 18
4.07 Investor Committee 19
4.08 Compensation Committee 19
4.09 Vesting, Repurchase and Forfeiture of
Management Units 20
4.10 Information Rights of Seller Members and Class A
Founder Members 24
ARTICLE V - CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS AND ALLOCATIONS
AND DISTRIBUTIONS 25
5.01 Capital Contributions 25
5.02 Capital Accounts and Allocations 25
5.03 Distributions 27
5.04 Distributions Upon Dissolution 29
(i)
<PAGE>
5.05 Distribution Upon Withdrawal 30
5.06 Tax Matters Partner 30
ARTICLE VI - TRANSFERS OF INTERESTS 31
6.01 Restrictions on Transfers 31
6.02 Substitute Members 32
6.03 Allocation of Distributions Between Assignor and Assignee 32
6.04 Permitted Transfers 32
6.05 Right of First Offer 34
6.06 Co-Sale Option 34
6.07 Drag-Along Obligations 36
ARTICLE VII - CONVERSION, EXCHANGE AND REDEMPTION OF MEMBERSHIP UNITS 37
7.01 Conversion Upon Initial Public Offering 37
7.02 Redemption of Membership Units 37
ARTICLE VIII - INDEMNIFICATION 38
8.01 Right to Indemnification 38
8.02 Award of Indemnification 38
8.03 Successful Defense 39
8.04 Advance Payments 39
8.05 Insurance 39
8.06 Heirs and Personal Representatives 39
8.07 Non-Exclusivity 39
8.08 Amendment 39
ARTICLE IX - CONFLICTS OF INTEREST 40
9.01 Transactions with Interested Persons; Conflicts 40
9.02 Non-Competition; Business Opportunities 40
ARTICLE X - DISSOLUTION, LIQUIDATION, AND TERMINATION 42
10.01 No Dissolution 42
10.02 Events Causing Dissolution 43
10.03 Notice of Dissolution 43
10.04 Liquidation 43
10.05 Certificate of Cancellation 43
ARTICLE XI - GENERAL PROVISIONS 43
11.01 Offset 43
11.02 Notices 44
11.03 Entire Agreement 44
11.04 Limitation of Litigation; Dispute Resolution 44
(ii)
<PAGE>
11.05 Amendment or Modification; Terms 45
11.06 Binding Effect 45
11.07 Governing Law; Severability 45
11.08 Further Assurances 45
11.09 Waiver of Certain Rights 45
11.10 Third-Party Beneficiaries 46
11.11 Failure to Pursue Remedies 46
11.12 Cumulative Remedies 46
11.13 Notice to Members of Provisions of this Agreement 46
11.14 Interpretation 46
11.15 Counterparts 46
Schedule A - Membership Units
Exhibit A - Distribution Examples
(iii)
<PAGE>
ACME Television Holdings, LLC
LIMITED LIABILITY COMPANY AGREEMENT
This Limited Liability Company Agreement is made as of June ___, 1997 by
and between ACME Television Holdings, LLC (the "Company"), the Management
Members, the Seller Member, the Class A Founder Member, the Class B Founder
Members and the Investor Members, each as listed on SCHEDULE A hereto, and those
Persons who become Members of the Company in accordance with the provisions
hereof and whose names are set forth as such in the record books of the Company.
WHEREAS, the Company has been formed as a limited liability company
under the Delaware Limited Liability Company Act, 6 Del. C. Section 18-101, ET
SEQ. (as amended from time to time, the "Act"), by filing a Certificate of
Formation of the Company with the office of the Secretary of State of the State
of Delaware on April 24, 1997;
WHEREAS, pursuant to a certain Investment Agreement (the "Investment
Agreement") dated as of the date hereof, certain Members have purchased their
Membership Units in the Company and certain other investors (the "Lenders") have
purchased junior subordinated convertible debt instruments (the "Convertible
Debt") of the Company that are convertible into Membership Units in the Company
upon the terms and conditions set forth herein; and
WHEREAS, the Members desire to set out fully their respective rights,
obligations and duties regarding the Company and its assets and liabilities.
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Members hereby
agree as follows:
ARTICLE I - DEFINED TERMS
Unless the context otherwise requires, the terms defined in this Article
I shall, for the purposes of this Agreement, have the meanings herein specified
(each such meaning to be equally applicable to both the singular and plural
forms of the respective terms so defined). Defined terms which are not defined
in this Article I or elsewhere in this Agreement shall have the meaning ascribed
to them in the Investment Agreement.
"Affiliate" shall mean, with respect to a specified Person, any Person
that directly or indirectly controls, is controlled by or is under common
control with, the specified Person. As used in this definition, the term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through ownership of voting securities, by contract or otherwise.
<PAGE>
"Agreement" shall mean this Limited Liability Company Agreement, as
amended, modified, supplemented or restated from time to time.
"Bankruptcy" means, with respect to a Person, that either (i) an
involuntary petition under any bankruptcy or insolvency or other debtor relief
law or under the reorganization provisions of any such law has been filed with
respect to such Person or a receiver of or for the property of such Person has
been appointed without the acquiescence of such Person, which petition or
appointment remains undischarged or unstayed for an aggregate period of sixty
(60) days (whether or not consecutive) or (ii) a voluntary petition under any
bankruptcy or insolvency or other debtor relief law or under the reorganization
provisions of any such law has been filed by such Person, a voluntary assignment
of such Person's property for the benefit of creditors has been made, a written
admission by such Person of its inability to pay its debts as they mature has
been made, a receiver of or for the property of such Person has been appointed
with the acquiescence of such Person or such Person has done any similar act of
like import.
"Board of Advisors" shall mean the Company's Board of Advisors, as
described in Section 4.01 hereof.
"Capital Contribution" shall mean any cash or property which a Person
contributes to the capital of the Company in his/her capacity as a Member
thereof.
"Carry Distribution Percentage" shall mean a percentage determined for
each holder of Management Carry Units by dividing the number of Management Carry
Units held by such Management Member by 100.
"Cause" shall be determined by the Board of Advisors or Class B Founder
Members holding at least 60% in interest of the Class B Founder Units and shall
mean: (i) the conviction of an Officer of, or a plea of guilty or NOLO
CONTENDERE entered by or on behalf of an Officer with respect to, a felony or
crime, where such felony or crime involves moral turpitude or where such
conviction or plea is likely to have a material adverse effect on the Company or
upon the Officer's ability to perform his duties as an Officer of the Company;
(ii) fraud, embezzlement or other act of dishonesty by an Officer with respect
to the Company; (iii) the continued willful refusal or neglect of an Officer to
perform or discharge any substantial portion of his duties and responsibilities
for a period in excess of thirty (30) days, which willful refusal or neglect
continues for an additional thirty (30) days after written notice to the Officer
from the Company with regard thereto; (iv) intentional and willful violation by
an Officer of any rule, regulation or policy of the FCC that could reasonably be
expected to (x) result in a material loss to the Company, (y) result in the
termination, cancellation or suspension of any of the Company's material FCC
Licenses or permits, or (z) otherwise have a material adverse effect on the
Company's business or financial condition; or (v) the material breach (after
expiration of any notice and cure period) of an Officer's employment agreement,
including the non-competition covenants thereunder.
2
<PAGE>
"Certificate" shall mean the Certificate of Formation and any and all
amendments thereto and restatements thereof filed on behalf of the Company with
the Secretary of State of the State of Delaware pursuant to the Act.
"Class A Founder Members" shall mean those persons listed on SCHEDULE A
hereto as Class A Founder Members.
"Class A Founder Units" shall mean those Membership Units designated as
Class A Founder Units, as described in Section 3.01 hereof.
"Class B Founder Members" shall mean those persons listed on SCHEDULE A
hereto as Class B Founder Members.
"Class B Founder Units" shall mean those Membership Units designated as
Class B Founder Units, as described in Section 3.01 hereof.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any corresponding federal tax statute enacted after the date of this
Agreement. A reference to a specific section of the Code refers not only to such
specific section but also to any corresponding provision of any federal tax
statute enacted after the date of this Agreement, as such specific section or
corresponding provision is in effect on the date of application of the
provisions of this Agreement containing such reference.
"Compensation Committee" shall mean the Company's Compensation
Committee, as described in Section 4.08 hereof.
"Disability" shall mean, with respect to any Officer or employee of the
Company, that such person has been substantially unable, by reason of injury,
illness or similar cause (physical or mental), to have performed his or her
duties and responsibilities for a period of one hundred and eighty (180)
consecutive days and such person is not anticipated to recover the ability to
perform such duties and responsibilities within the foreseeable future.
"FCC" means the Federal Communications Commission.
"Founder Units" shall mean those Membership Units designated as Class A
Founder Units and Class B Founder Units, as described in Section 3.01 hereof.
"Indebtedness" shall have the meaning ascribed to it in the Investment
Agreement.
"Indemnified Parties" shall mean the members of the Board of Advisors,
any Affiliate of the members of the Board of Advisors and each Person serving as
an Officer, employee or other agent of the Company (including Persons who serve
at the Company's request as directors, managers, officers, employees, agents or
trustees of another organization in which
3
<PAGE>
the Company has any interest as a shareholder, creditor or otherwise) and their
respective successors and assigns.
"Initial Capital Contribution" shall mean cash or property which a
Person initially contributes to the capital of the Company in his/her capacity
as a Member thereof.
"Initial Members" shall mean those Persons listed on SCHEDULE A hereto
as Initial Members as of the date hereof.
"Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time, together with any successor statute, and the rules
and regulations promulgated thereunder.
"Investor Committee" shall mean the Company's Investor Committee, as
described in Section 4.07 hereof.
"Investor Members" shall mean those persons listed on SCHEDULE A hereto
as Investor Members.
"Investor Units" shall mean those Membership Units designated as
Investor Units, as described in Section 3.01 hereof.
"Losses" shall mean all liabilities, judgments, obligations, losses,
damages, taxes and interest and penalties thereon (other than (i) income taxes
due on income allocated to Membership Units; and (ii) taxes based on fees,
compensation or commissions received by an Indemnified Party in connection with
the administration of the Company or the Company's property), claims, actions,
suits or other proceedings (whether civil or criminal, pending or threatened,
before any court or administrative or legislative body, and as the same are
accrued, in which an Indemnified Party may be or may have been involved as a
party or otherwise or with which he or she may be or may have been threatened,
while in office or thereafter), costs, expenses and disbursements (including,
without limitation, legal and accounting fees and expenses) of any kind and
nature whatsoever.
"Management Capital Units" shall mean those Membership Units designated
as Management Capital Units, as described in Section 3.01 hereof.
"Management Carry Units" shall mean those Membership Units designated as
Management Carry Units, as described in Section 3.01 hereof.
"Management Members" shall mean those persons listed on SCHEDULE A
hereto as Management Members.
"Member" shall mean the Initial Members and any Person admitted as a
Member in accordance with the terms of this Agreement and named as a Member in
the record books of
4
<PAGE>
the Company, and includes any Person admitted pursuant to the provisions of this
Agreement when acting in his, her or its capacity as a Member of the Company,
and "Members" shall mean two (2) or more of such Persons when acting in their
capacities as Members of the Company.
"New Member" shall mean any Member who is not an Initial Member.
"Non-Carry Distribution Percentage" shall mean a percentage determined
for each holder of Non-Carry Units by dividing the Preferential Return Amount
such holder is entitled to in respect of all of its Non-Carry Units by the
aggregate Preferential Return Amounts all holders of Non-Carry Units are
entitled to at the time of such determination.
"Non-Carry Units" shall mean collectively the Investor Units, Management
Capital Units, Founder Units and Seller Units.
"Person" shall mean an individual, corporation, association, partnership
(general or limited), joint venture, trust, unincorporated organization, limited
liability company, any other entity or organization of any kind or a government
or any department, agency, authority, instrumentality or political subdivision
thereof.
"Preferential Return Amount" shall, for each applicable class of
Membership Units, be the amount set forth in Section 3.01 for such class, which
amount represents the Capital Contributions made by the Members holding each
applicable class of Membership Units (including Membership Units issued upon
conversion of Convertible Debt) as adjusted to include agreed upon "promotes"
granted to certain classes of Membership Units.
"Repurchase Note" shall mean a promissory note duly authorized, executed
and issued by the Company in consideration for the repurchase of Management
Capital Units as provided herein, which (i) is secured solely by the Management
Capital Units so repurchased and except as so secured is non-recourse to the
Company; (ii) bears interest at a rate of 10% per annum from the date of
issuance; and (iii) is due and payable (A) in full upon the earlier to occur of
completion of an underwritten initial public offering by the Company consummated
in accordance with Section 7.01 hereof, any dissolution or sale of all or
substantially all of the assets or Membership Units of the Company or (B)
concurrently and pro rata with the Priority Capital Distribution under Section
5.03(b) hereof as and to the extent the Management Capital Units securing such
note would have been entitled to share in such distributions.
"Sales Event" shall have the meaning set forth in the Investment
Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time, together with any successor statute, and the rules and regulations
promulgated thereunder.
"Seller Members" shall mean those persons listed on SCHEDULE A hereto as
Seller Members.
5
<PAGE>
"Station Acquisition" shall have the meaning set forth in the Investment
Agreement.
"Seller Units" shall mean those Membership Units designated as Seller
Units, as described in Section 3.01 hereof.
"Subscription Agreement" shall mean a subscription agreement for the
purchase of a Membership Unit in the Company, in a form acceptable to the Board
of Advisors.
"Tax Rate" means, for any taxable year of a Member, the sum of the
Federal Rate and the State Rate, with (a) the "Federal Rate" defined to mean the
highest effective federal income tax rate applicable to any individual for such
year and (b) the "State Rate" defined as the product of (i) the highest
effective state income tax rate applicable to an individual Member for such year
multiplied by (ii) a percentage equal to the difference between one hundred
percent (100%) and the Federal Rate.
"Taxable Income" and "Taxable Loss" mean, for any taxable year, the
taxable income or loss attributable to such Member's distributive share of
taxable income or loss of the Company, as determined for federal income tax
purposes; PROVIDED that in making such determination all separately stated items
of income, gain, loss and deduction (other than tax-exempt income) shall be
included; and PROVIDED FURTHER, that in calculating Taxable Income and Taxable
Loss, items of income, gain, loss and deduction attributable to the sale or
exchange of all or substantially all of the assets of the Company shall be
excluded from such calculation.
"Terminated Management Units" shall mean those Membership Units
designated as Terminated Management Units, as described in Section 3.01 hereof.
"Transfer" shall mean any sale, assignment, transfer, exchange, charge,
pledge, gift, hypothecation, conveyance or encumbrance (such meaning to be
equally applicable to verb forms of such term).
"Treasury Regulations" means the income tax regulations, including
temporary regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
"Vested Carry Units" shall mean those Membership Units designated as
Vested Carry Units, as described in Section 4.09 hereof.
"Voting Event" shall mean any of the following: (i) June 30, 2002; (ii)
the thirtieth (30th) day after Jamie Kellner shall have ceased to act as the
Chairman and Chief Executive Officer of the Company; (iii) the earlier of (A)
the one-hundred and twentieth (120th) day after a clear and unequivocal
announcement by Time Warner or the WB Network (as defined in the Investment
Agreement) of the cessation of operation of the WB Network or (B) the thirtieth
(30th) day after the cessation of operation of the WB Network; (iv) the
thirtieth (30th) day
6
<PAGE>
after Jamie Kellner ceases to be employed by the WB Network in a senior
management capacity; or (v) the thirtieth (30th) day following the date Time
Warner ceases to own at least thirty-five percent (35%) of the outstanding
equity interests of the WB Network (determined utilizing the treasury stock
method); or (vi) any Sales Event.
The following terms shall have the meanings set forth in the indicated Sections
hereof:
DEFINED TERM SECTION NUMBER
"Act" Preamble
"Agent" 6.07
"BancBoston" 6.04
"Buyer" 6.07
"Capital Account" 5.02
"Co-Sale Option" 6.06
"Common Stock" 7.01
"Company" Preamble
"Competitive Enterprise" 9.02
"Convertible Debt" Preamble
"Consolidated Group Securities" 3.04(a)
"DMA" 9.02
"Employment Agreements" 4.04
"Endispute" 11.04
"Executive" 4.09
"Fair Market Value" 4.09
"Financing Transactions" 4.09
"Forfeited Carry Units" 4.09
"Independent Appraiser" 4.09
"Investment Agreement" Preamble
"Lenders" Preamble
"Liquidating Trustee" 10.03
"Membership Unit" 3.01
"Offer Notice" 6.05
"Officer" 4.06
"Other WB Buyer" 9.02
"Outside Advisors" 3.03
"Percentage Determination Process" 4.09
"Priority Capital Distribution" 5.03
"Proposed Transferee" 6.05
"Regulatory Problem" 6.04
"Sale" 6.07
"SBA" 6.04
"SBIC Regulations" 6.04
"Selling Member" 6.06
7
<PAGE>
"Senior Executive Offices" 4.06
"Successor" 7.01
"Tax Distribution" 5.03
"Tax Matters Partner" 5.06
"Television Station Opportunities" 9.02
"Terminated Management Percentage" 5.03
"Third-Party Offer" 6.05
"Third-Party-Offeror" 6.05
"Transferring Member" 6.05
"Vested Carry Equity Value" 4.09
ARTICLE II - ORGANIZATION AND POWERS
2.01 ORGANIZATION. The name of the Company is ACME Television Holdings,
LLC. The Company has been formed by the filing of its Certificate with the
Delaware Secretary of State pursuant to the Act. The Certificate may be restated
or amended by the Board of Advisors from time to time in accordance with the Act
and subject to the terms of this Agreement. The Board of Advisors shall deliver
a copy of the Certificate and any amendment thereto to any Member who so
requests.
2.02 PURPOSES AND POWERS. The principal business activity and purposes
of the Company shall initially be to acquire, develop, own and operate
television broadcast stations and to conduct any business related thereto or
useful in connection therewith. However, the business and purposes of the
Company shall not be limited to its initial principal business activity, and the
Company shall, subject to the terms of this Agreement and the Investment
Agreement, have authority to engage in any other lawful business, purpose or
activity permitted by the Act. Except as otherwise provided in this Agreement,
the Company, and the Board of Advisors on behalf of the Company, shall possess
and may exercise all of the powers and privileges granted by the Act or which
may be exercised by any Person, together with any powers incidental thereto, so
far as such powers or privileges are necessary, appropriate, proper, advisable,
incidental or convenient to the conduct, promotion or attainment of the business
purposes or activities of the Company, including without limitation the
following powers:
(a) to conduct its business and operations in any state,
territory or possession of the United States or in any foreign country or
jurisdiction;
(b) to purchase, receive, take, lease or otherwise acquire, own,
hold, improve, maintain, use or otherwise deal in and with, sell, convey, lease,
exchange, transfer or otherwise dispose of, mortgage, pledge, encumber or create
a security interest in all or any of its real or personal property, or any
interest therein, wherever situated;
8
<PAGE>
(c) to borrow or lend money or obtain or extend credit and other
financial accommodations, to invest and reinvest its funds in any type of
security or obligation of or interest in any public, private or governmental
entity, and to give and receive interests in real and personal property as
security for the payment of funds so borrowed, loaned or invested;
(d) to make and modify contracts, including contracts of
insurance, incur liabilities and give guaranties, whether or not such guaranties
are in furtherance of the business and purposes of the Company, including
without limitation, guaranties of obligations of other Persons who are
interested in the Company or in whom the Company has an interest;
(e) to employ and terminate Officers, employees, agents and other
Persons, to organize committees of the Company, to delegate to such Persons
and/or committees such power and authority, the performance of such duties and
the execution of such instruments in the name of the Company, to fix the
compensation and define the duties and obligations of such personnel, to
establish and carry out retirement, incentive and benefit plans for such
personnel, and to indemnify such personnel to the extent permitted by this
Agreement and the Act;
(f) to form and maintain subsidiaries and to merge with, or
consolidate into, another Delaware limited liability company or other business
entity (as defined in Section 18-209 of the Act); and
(g) to institute, prosecute, and defend any legal action or
arbitration proceeding involving the Company, and to pay, adjust, compromise,
settle, or refer to arbitration any claim by or against the Company or any of
its assets.
2.03 PRINCIPAL PLACE OF BUSINESS. The principal office and place of
business of the Company shall initially be 7125 Bluffstream Court, Columbus,
Ohio 43235. After giving notice to the Members, the Board of Advisors may change
the principal office or place of business of the Company at any time and may
cause the Company to establish other offices or places of business in various
jurisdictions and appoint agents for service of process in such jurisdictions.
2.04 QUALIFICATION IN OTHER JURISDICTIONS. The Board of Advisors shall
cause the Company to be qualified or registered under applicable laws of any
jurisdiction in which the Company transacts business and shall be authorized to
execute, deliver and file any certificates and documents necessary to effect
such qualification or registration.
2.05 FISCAL YEAR. The fiscal year of the Company shall end on December
31 of each year.
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ARTICLE III - MEMBERS
3.01 MEMBERSHIP UNITS. The Members shall have no rights or powers in
respect of the Company (including, without limitation, any rights in respect of
allocations of profit and loss or distributions) other than the rights conferred
by this Agreement represented by issued and outstanding units of membership
interest (the "Membership Units"), which shall be deemed to be personal property
giving only the rights provided in this Agreement and which are divided into
classes, with each class having the restrictions, vesting provisions, rights and
privileges, including voting rights, if any, as expressly set forth in this
Agreement. Every Member by virtue of having become a Member shall be held to
have expressly assented and agreed to the terms hereof and to have become a
party hereto. Ownership of a Membership Unit shall not entitle a Member to any
title in or to the whole or any part of the property of the Company or right to
call for a partition or division of the same or for an accounting. The Initial
Members of the Company, their addresses, and the respective classes and
denominations of Membership Units held by them shall be as set forth on SCHEDULE
A hereto, and said schedule shall be amended from time to time by the Board of
Advisors in accordance with the terms hereof to reflect the withdrawal of
Members or the admission of additional Members pursuant to this Agreement. The
relative rights and obligations of each class of Membership Unit are as set
forth below:
(a) INVESTOR UNITS. The Company hereby authorizes for issuance 50,000
Investor Units, each of which shall represent a Capital Contribution of
$1,000 and have a Preferential Return Amount of $1,000. As of the date
hereof, the Company shall have issued 5,866.67 Investor Units to the
Investor Members, as set forth on SCHEDULE A hereto, and reserved
14,733.33 Investor Units for issuance upon conversion of the Convertible
Debt outstanding as of the date hereof. Twenty-Nine Thousand Four
Hundred (29,400) Investor Units are reserved for issuance to the
Investor Members and the Lenders and additional investors in accordance
with the terms of the Investment Agreement. Except for the Investor
Units issued on the date hereof and those issued upon conversion of the
Convertible Debt issued on the date hereof, none of the Investor Units
may be issued by the Company without the prior written consent of a
majority in interest of the Class B Founder Members.
(b) SELLER UNITS. The Company hereby authorizes for issuance 20,000 Seller
Units, each of which shall represent a deemed Capital Contribution of
$1,000 and have a Preferential Return Amount of $1,000. As of the date
hereof, the Company shall have issued 4,400 Seller Units and shall have
reserved the remaining Seller Units for issuance from time to time in
connection with Station Acquisitions (as defined in the Investment
Agreement) occurring after the date hereof and which have been approved
in accordance with the terms hereof.
(c) MANAGEMENT CAPITAL UNITS. The Company hereby authorizes for issuance 600
Management Capital Units, each of which shall represent a Capital
Contribution
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of $1,000 and have a Preferential Return Amount of $2,000. As of the
date hereof, the Company shall have issued all of the Management Capital
Units to the Management Members, as set forth on SCHEDULE A hereto.
(d) FOUNDER UNITS. The Company hereby authorizes for issuance 1,342.5
Founder Units, each of which shall represent a Capital Contribution of
$1,000 and have a Preferential Return Amount of $1,500. 942.5 of such
Founder Units shall be designated Class A Founder Units and 400 of such
Founder Units shall be designated Class B Founder Units. As of the date
hereof, the Company shall have issued all of the Class A Founder Units
to the Class A Founder Members, as set forth on SCHEDULE A hereto, and
all of the Class B Founder Units to the Class B Founder Members, as set
forth on SCHEDULE A hereto. Except for the voting and consensual rights
applicable to the Class B Founder Units as expressly provided herein,
the holders of each class of Founder Units shall have the identical
rights and preferences under this Agreement.
(e) MANAGEMENT CARRY UNITS. The Company hereby authorizes for issuance 100
Management Carry Units, each of which shall represent an Initial Capital
Contribution of $1.00. As of the date hereof, the Company shall have
issued all of the Management Carry Units to the Management Members, as
set forth on SCHEDULE A hereto. All such Management Carry Units shall be
subject to the provisions of Section 4.09 hereof and shall, upon any
cancellation or repurchase, only be reissued in accordance with the
terms hereof.
(f) TERMINATED MANAGEMENT UNITS. The Company hereby authorizes for issuance
100 Terminated Management Units, none of which shall be issued as of the
date hereof and all of which shall be reserved for issuance in exchange
for Management Carry Units as provided in Section 4.09 hereof. The
Terminated Management Units shall have no voting, advisory,
informational or other rights hereunder other than the right to receive
distributions under Sections 5.03 and 5.04 hereof.
3.02 ISSUANCE OF MEMBERSHIP UNITS; ADMISSION OF NEW MEMBERS.
(a) The Company is not authorized to offer and sell, or cause to
be offered and sold, additional Membership Units or to admit additional Persons
as Members except as specifically provided herein or in the Investment Agreement
or with the approval of the Board of Advisors and Class B Founder Members
holding at least 60% in interest of the Class B Founder Units. In addition, the
Company may reissue Management Carry Units forfeited or repurchased from a
terminated Officer or employee of the Company, with the terms of such
reissuance, including vesting provisions, determined by the Compensation
Committee. Neither this Section 3.02 nor any other provisions of this Agreement
shall limit or prohibit the right of certain Persons to purchase Additional
Securities (as defined in the Investment Agreement)
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which are authorized and issued in accordance with the terms of this Agreement
and the Investment Agreement.
(b) The Board of Advisors may establish eligibility requirements
for admission of a subscriber as a New Member after the date hereof and may
refuse to admit any subscriber that fails to satisfy such eligibility
requirements. The Board of Advisors shall have the responsibility for
determining whether a person or entity is eligible for admission as a New
Member, subject to the restrictive covenants on issuances set forth in Section
4.5 of the Investment Agreement. Each Person who first subscribes for a
Membership Unit in the Company after the date hereof shall be admitted as a New
Member of the Company at the time (i) such Person executes a Subscription
Agreement agreeing to be bound by the provisions hereof, (ii) the Board of
Advisors, in its sole discretion, accepts such Subscription Agreement on behalf
of the Company and (iii) the subscriber makes the Capital Contribution(s)
required pursuant to the terms of this Agreement and its Subscription Agreement.
Except for the purchase rights under Section 1.4 of the Investment Agreement,
none of the existing Members shall have any preemptive or similar right to
subscribe to the issuance of new Membership Units in the Company, and each of
the Members acknowledges that its membership interest is subject to adjustment
(downward and upward) in the event of the admission of New Members to the
Company pursuant hereto or the withdrawal of any Member from the Company.
3.03 VOTING RIGHTS.
(a) Except as otherwise provided in this Agreement, no Member or
Membership Unit shall have the right to amend or terminate this Agreement or to
appoint, select, vote for or remove the Board of Advisors or its agents or to
exercise voting or other consensual rights or to otherwise control or
participate in any manner in the management or business of the Company or
otherwise in connection with the property of the Company.
(b) So long as no Voting Event has occurred that has not been
waived in writing, the holders of the Management Carry Units shall have the sole
right to elect and remove the members of the Board of Advisors and the size of
the Board of Advisors shall initially be set at three (3) members who shall be
Jamie Kellner, Tom Allen and Doug Gealy; PROVIDED, HOWEVER, that no later than
six (6) months after the date hereof, the size of the Board of Advisors shall be
increased to five (5) and two additional individuals (the "Outside Advisors")
shall be elected by the holders of the Management Carry Units to the Board of
Advisors who are unaffiliated with the Management Members and who are reasonably
acceptable to both (i) the holders of a majority in interest of the Management
Carry Units and (ii) the holders of at least 60% in interest of the Class B
Founder Units.
(c) So long as the Company has not consummated an initial public
offering in accordance with Section 7.01 hereof, upon the occurrence of a Voting
Event and subject to the receipt of any necessary FCC approvals, the holders of
a majority in interest of the Class B Founder Units shall be entitled to remove
all members of the existing Board of Advisors and to elect six members of a
reconstituted Board of Advisors made up of seven (7) members; and the
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holders of a majority in interest of the Management Capital Units shall be
entitled to elect the remaining member of the reconstituted Board of Advisors.
Upon the occurrence of a Voting Event, the Company shall make all filings and
take all actions as are necessary, desirable or appropriate so as to allow the
holders of Class B Founder Units to exercise their voting rights hereunder,
including without limitation (i) making any filings or applications with the FCC
or as may be required under the Hart-Scott-Rodino Anti-Trust Improvements Act of
1976, as amended, or the SBIC Regulations and (ii) obtaining any necessary
governmental or other third party approvals or consents. Upon exercise of their
voting rights under this Section 3.03(c), the holders of a majority in interest
of the Class B Founder Units may cause the Board of Advisors to take, or cause
to be taken, any action whatsoever (subject to the express terms of this
Agreement and applicable law) including, without limitation, the sale of all or
substantially all of the assets of the Company regardless of whether a Sales
Event has occurred under the Investment Agreement and/or the filing with the FCC
of an application to transfer control of each FCC license held by the Company.
(d) Members of the Board of Advisors shall remain members of the
Board of Advisors until their resignation, removal or death. Any member of the
Board of Advisors may resign by delivering his or her written resignation to the
Board of Advisors. Any member of the Board of Advisors who is an Officer of the
Company shall be removed from the Board of Advisors automatically upon the
termination of such member's Officer status pursuant to Section 4.06 below.
Except as provided in this Section 3.03, neither the Board of Advisors nor the
Members shall be entitled to increase or decrease the size of the Board of
Advisors.
3.04 RESTRICTIONS. Notwithstanding anything in this Agreement to the
contrary, so long as the Company has not consummated an initial public offering
in accordance with Section 7.01 hereof, the Company and its Subsidiaries shall
comply with the covenants set forth in Sections 4 and 5 of the Investment
Agreement and the following matters shall require the prior written consent of
holders of at least 60% in interest of the Class B Founder Units:
(a) the redemption, purchase or other acquisition for value (or
payment into or set aside for a sinking fund for such purpose) of any Membership
Unit (except in accordance with Sections 4.09 and 7.02 hereof), or other type of
equity interest of the Company or any of its Subsidiaries, or security
convertible into or exchangeable or exercisable for such Membership Units or
equity interests (which are hereinafter referred to as "Consolidated Group
Securities");
(b) the authorization or issuance (or the incurrence of any
obligation to authorize or issue) of any additional Membership Units or other
Consolidated Group Securities;
(c) the increase or decrease of the total number of authorized
Membership Units or other Consolidated Group Securities;
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(d) the payment or declaration of any dividend or distribution
(other than Tax Distributions pursuant to Section 5.03) with respect to any
Membership Units or other Consolidated Group Securities;
(e) the authorization of any merger or consolidation of the
Company or any of its Subsidiaries with or into any other entity (except for
mergers among wholly-owned Subsidiaries);
(f) the authorization of the reorganization or sale of the
Company or any of its Subsidiaries or the sale of any material assets of the
Company or any of its Subsidiaries (other than in connection with a Sales Event
or a Sale);
(g) the authorization of any reclassification or recapitalization
of the outstanding Membership Units of the Company or any other Consolidated
Group Securities;
(h) engagement by the Company or any of its Subsidiaries in any
business other than the business now conducted or contemplated by the Company or
a business or businesses similar thereto or reasonably compatible therewith;
(i) the alteration, modification or amendment of this Agreement
or the Investment Agreement; (which such alteration, modification or amendment
shall also require the prior written consent of all of the Investor Members and
the Lenders in accordance with the terms of Section 4.10 of the Investment
Agreement); or
(j) the application by the Company for or consent by it to the
appointment of a receiver, trustee, custodian or liquidator of it or any of its
property, (ii) the admission in writing by the Company of its inability to pay
its debts as they mature, (iii) the making by the Company of a general
assignment for the benefit of creditors, or (iv) the filing by the Company of a
voluntary petition in bankruptcy, or a petition or an answer seeking
reorganization or an arrangement with creditors, or any other action by the
Company to take advantage of any bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation laws or statutes, or an answer
from the Company admitting the material allegations of a petition filed against
it in any proceeding under any such law; PROVIDED, HOWEVER, that any of the
foregoing actions shall also require the prior written consent of members
holding all of the Class B Founder Units and a majority in interest of each
class of the Class A Founder Units and the Management Capital Units, voting
separately.
3.05 LIMITATION ON LIABILITY OF MEMBERS. Except as otherwise provided in
the Act, no Member of the Company shall be obligated personally for any debt,
obligation or liability of the Company or of any other Member or otherwise have
any personal recourse hereunder, whether arising in contract, tort or otherwise,
solely by reason of being a Member. Except as expressly set forth in this
Agreement, no Member shall have any fiduciary or other duty to another Member
with respect to the business and affairs of the Company, and no Member shall be
liable to the Company or any other Member for acting in good faith reliance upon
the
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provisions of this Agreement. No Member shall have any responsibility to restore
any negative balance in its Capital Account or to contribute to or in respect of
the liabilities or obligations of the Company or return distributions made by
the Company except as required by this Agreement, the Act or other applicable
law; PROVIDED, HOWEVER, that Members are responsible for their failure to make
required Capital Contributions in accordance with Section 5.01.
3.06 AUTHORITY. Except as otherwise provided in this Agreement, none of
the Membership Units shall confer any rights on the Members to participate in
the control and management of the business of the Company, which conduct shall
be vested exclusively in the Board of Advisors and its duly authorized Officers
and agents. Except as otherwise expressly provided herein, in all matters
relating to or arising out of the conduct or the operation of the Company, the
decision of the Board of Advisors shall be the decision of the Company. No
Member who is not also an Officer or employee of the Company or a member of the
Board of Advisors (and acting in his capacity as such) shall take any part in
the control or management of the operation or business of the Company in his
capacity as a Member, nor shall any Member who is not also an Officer or
employee of the Company or a member of the Board of Advisors (and acting in his
capacity as such) have any authority or power to act for or on behalf of the
Company in his capacity as a Member in any respect. Except as otherwise provided
in this Agreement, the foregoing restrictions shall preclude Members (other than
members of the Board of Advisors, Officers and employees) from (i) acting as
employees of the Company to the extent the employee's functions directly or
indirectly relate to the business of the Company; (ii) serving in any material
capacity as an independent contractor or agent with respect to the business of
the Company; (iii) communicating with the Board of Advisors, Officers or other
Company personnel on matters pertaining to the day-to-day operations of the
business of the Company; (iv) performing any services for the Company materially
relating to its activities, except that a Member may make loans to and act as
surety for the Company; and (v) becoming actively involved in the management or
operation of the business of the Company. Notwithstanding the foregoing, the
Company may employ one or more Members from time to time, and such Members, in
their capacity as Officers or employees of the Company, may take part in the
control and management of the business of the Company to the extent such
authority and power to act for or on behalf of the Company has been delegated to
them by the Board of Advisors.
3.07 WITHDRAWAL; TERMINATION. No Member shall have any right to resign
or withdraw from the Company without the consent of the Board of Advisors or to
receive any distribution on its Membership Units or the repayment of its Capital
Contributions except as provided in Section 4.09 and Article V hereof. If a
permitted withdrawal would leave the Company with less than two Members, an
additional Member shall be admitted before the withdrawal is effective, so that
there shall always be at least two Members of the Company.
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3.08 RIGHTS TO INFORMATION/ACCESS TO MANAGEMENT. In addition to the
informational rights of the Investor Members and the Lenders under the
Investment Agreement (which rights are expressly limited to such Investor
Members and Lenders), all of the Members shall have the right to receive from
the Board of Advisors a copy of the Certificate and of this Agreement, as
amended from time to time and, upon reasonable demand for any purpose reasonably
related to the Member's interest as a Member of the Company, such other
information regarding the Company as is required by the Act or as is made
available to the Seller Members pursuant to Section 4.10 hereof, subject to
reasonable conditions and standards established by the Board of Advisors from
time to time, which may include, without limitation, withholding or restrictions
on the use of confidential information.
3.09 NO APPRAISAL RIGHTS. No Member shall have any right to have its
interest in the Company appraised and paid out under the circumstances provided
in Section 18-210 of the Act or any other circumstances.
3.10 NO EMPLOYMENT. This Agreement does not, and is not intended to,
confer upon any Member or member of the Board of Advisors any rights with
respect to continuance of employment by the Company, and nothing herein should
be construed to have created any employment agreement with any Member or member
of the Board of Advisors.
3.11 COMPLIANCE WITH SECURITIES LAWS AND OTHER LAWS AND OBLIGATIONS.
Each Member hereby represents and warrants to the Company and acknowledges that
(a) it has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of an investment in the Company
and making an informed investment decision with respect thereto, (b) it is able
to bear the economic and financial risk of an investment in the Company for an
indefinite period of time and understands that it has no right to withdraw and
have its interest repurchased by the Company, (c) it is acquiring an interest in
the Company for investment only and not with a view to, or for resale in
connection with, any distribution to the public or public offering thereof, and
(d) it understands that the interests in the Company have not been registered
under the securities laws of any jurisdiction and cannot be disposed of unless
they are subsequently registered and/or qualified under applicable securities
laws or pursuant to valid exemptions from such registration/qualification
requirements and the provisions of this Agreement have been complied with.
ARTICLE IV - MANAGEMENT
4.01 BOARD OF ADVISORS.
(a) The Company shall have a Board of Advisors, the size and
composition of which shall be as set forth in Section 3.03 hereof. Subject to
the restrictions contained in Section 3.04 above or in the Investment Agreement,
and except with respect to those matters requiring the approval of the Class B
Founder Members, as set forth in this Agreement, the management and control of
the business of the Company shall be vested exclusively in the
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Board of Advisors, and the Board of Advisors shall have exclusive power and
authority, in the name of and on behalf of the Company, to perform all acts and
do all things which, in its sole discretion, it deems necessary or desirable to
conduct the business of the Company.
(b) The Board of Advisors shall, subject to all applicable
provisions of this Agreement, be authorized in the name and on behalf of the
Company: (i) to enter into, execute, amend, supplement, acknowledge and deliver
any and all contracts, agreements, leases or other instruments for the operation
of the Company's business; and (ii) in general to do all things and execute all
documents determined by it to be necessary or appropriate to conduct the
business of the Company as more fully set forth in Section 2.02 hereof or as
provided by law, or to protect and preserve the Company's assets. The Board of
Advisors may delegate any or all of the foregoing powers. The Board of Advisors
is an agent of the Company for the purpose of the Company's business. Any action
taken by the Board of Advisors, and the signature of any member of the Board of
Advisors on any agreement, contract, instrument or other document on behalf of
the Company, shall be sufficient to bind the Company and shall conclusively
evidence the authority of the Board of Advisors and the Company with respect
thereto.
(c) Members of the Board of Advisors may, but are not required
to, be Members, and shall hold office until their resignation, removal or death
in accordance with the provisions hereof. The Board of Advisors is the "manager"
(within the meaning of the Act) of the Company. Members of the Board of Advisors
shall devote such time to the business and affairs of the Company as is
reasonably necessary for the performance of their duties, but shall not be
required to devote full time to the performance of such duties and may delegate
their responsibilities as provided in this Agreement.
4.02 RELIANCE BY THIRD PARTIES. Any person dealing with the Company, the
Board of Advisors or any Member may rely upon a certificate signed by any member
of the Board of Advisors as to (i) the identity of any member of the Board of
Advisors or Member; (ii) any factual matters relevant to the affairs of the
Company; (iii) the persons who are authorized to execute and deliver any
document on behalf of the Company; or (iv) any action taken or omitted by the
Company, the Board of Advisors or any Member.
4.03 MEETINGS AND ACTION OF BOARD OF ADVISORS. All actions to be taken
by the Board of Advisors of the Company shall be taken by vote or written
consent of a majority in number of the members of the Board of Advisors then in
office. There is no requirement that the Board of Advisors hold a meeting in
order to take action on any matter. Meetings of the Board of Advisors may be
called by any two (2) members of the Board of Advisors, but in any case shall be
held at least two times each year. If no meeting of the Board of Advisors has
been called to act on a particular matter, and action is taken on such matter
without a meeting by less than all of the members of the Board of Advisors,
prompt notice thereof shall be given to any member of the Board of Advisors who
did not participate in taking such action. If action is to be taken at a meeting
of the Board of Advisors, notice of the time, date and place of the meeting
shall be given to each member of the Board of Advisors by an officer or the
member
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of the Board of Advisors calling the meeting by personal delivery, telephone or
fax sent to the business or home address of each member of the Board of Advisors
at least 24 hours in advance of the meeting, or by written notice mailed to each
member of the Board of Advisors at either such address at least 72 hours in
advance of the meeting; however, no notice need be given to a member of the
Board of Advisors who waives notice before or after the meeting, or who attends
the meeting without protesting at or before its commencement the inadequacy of
notice to him or her. Members of the Board of Advisors may attend a meeting in
person or by proxy, and they may also participate in a meeting by means of
conference telephone or similar communications equipment that permits all
members of the Board of Advisors to hear each other. A chairman selected by the
Board of Advisors shall preside at all meetings of the Board of Advisors. The
chairman shall determine the order of business and the procedures to be followed
at each meeting of the Board of Advisors.
4.04 COMPENSATION OF MEMBERS OF THE BOARD OF ADVISORS AND COMMITTEES.
The initial members of the Board of Advisors as of the date hereof who are also
Officers of the Company have entered into employment agreements (the "Employment
Agreements") with the Company pursuant to which, in their capacity as Officers
of the Company (and not as Members or Advisors), they may be entitled to
compensation from the Company. Other than as set forth in the Employment
Agreements, no initial member of the Board of Advisors shall be entitled to be
compensated by the Company, although the Compensation Committee, with the
approval of holders of a majority in interest of the Class B Founder Units, may
provide compensation for subsequent members of the Board of Advisors where
appropriate. Notwithstanding the foregoing, members of each of the Board of
Advisors, the Investor Committee, the Compensation Committee and, unless
otherwise provided, any other committees formed by the Company in the future,
shall be entitled to reimbursement for out-of-pocket expenses incurred in
managing and conducting the business and affairs of the Company.
4.05 LIMITATION OF LIABILITY OF MEMBERS OF THE BOARD OF ADVISORS. No
member of the Board of Advisors shall be obligated personally for any debt,
obligation or liability of the Company or of any Member, whether arising in
contract, tort or otherwise, solely by reason of being or acting as a member of
the Board of Advisors of the Company. No member of the Board of Advisors shall
be personally liable to the Company or to its Members for breach of any
fiduciary or other duty that does not involve: (i) a breach of the duty of
loyalty to the Company or its Members; (ii) an act or omission not in good faith
or which involves intentional misconduct or a knowing violation of law; or (iii)
a transaction from which the member of the Board of Advisors derived an improper
personal benefit.
4.06 OFFICERS. The Board of Advisors may designate employees of the
Company as officers of the Company (the "Officers") as it deems necessary or
desirable to carry on the business of the Company and the Board of Advisors may
delegate to such Officers such power and authority as the Board of Advisors
deems advisable. Any Officer may hold two or more offices of the Company. The
initial Officers of the Company shall be Jamie Kellner (Chairman and Chief
Executive Officer), Doug Gealy (President and Chief Operating Officer) and Tom
Allen (Executive Vice President and Chief Financial Officer). New offices may be
created and
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filled by the Board of Advisors. Each Officer shall hold office until his or her
successor is designated by the Board of Advisors or until his or her earlier
death, resignation or removal. Any Officer may resign at any time upon written
notice to the Board of Advisors. Any Officer may be removed by the Board of
Advisors (acting by majority vote of all members of the Board of Advisors other
than the Officer being considered for removal, if applicable) with or without
Cause at any time. A vacancy in any office occurring because of death,
resignation, removal or otherwise, may, but need not, be filled by the Board of
Advisors, subject, in the case of a vacancy occurring in the office of Chairman
and Chief Executive Officer, President and Chief Operating Officer or Executive
Vice President and Chief Financial Officer, or any combination of such offices
(collectively, the "Senior Executive Offices"), to the approval of holders of at
least 60% in interest of the Class B Founder Units. The Officers are not
"managers" (within the meaning of the Act) of the Company.
4.07 INVESTOR COMMITTEE. The Company shall have an Investor Committee
initially comprised of one (1) member appointed by each Class B Founder Member
and one (1) member designated by Members holding a majority in interest of the
Class A Founder Units. Each Investor Member admitted as a New Member subsequent
to the date hereof who makes a Capital Contribution to the Company equal to or
exceeding $5,000,000 shall be entitled to designate one (1) additional Member to
the Investor Committee. The Investor Committee shall be entitled to consult with
and offer advice to the management of the Company. Meetings of the Investor
Committee shall be held in person on a quarterly basis and monthly
teleconferences shall also be held in each month during which a quarterly in
person meeting is not being held; PROVIDED, HOWEVER, that the requirement to
hold monthly teleconferences may be terminated if holders of at least 60% in
interest of the Class B Founder Units shall determine that such monthly
teleconferences are no longer necessary. Quarterly meetings of the Investor
Committee shall include a presentation from the Officers of the Company, which
shall include a review of the Company's operating plans and forecasts and such
other matters as shall be reasonably specified in advance by a majority of the
members of the Investor Committee.
4.08 COMPENSATION COMMITTEE. So long as the Company has not consummated
an initial public offering in accordance with Section 7.01 hereof, the Company
shall have a Compensation Committee consisting of five (5) members, three (3) of
which shall be appointed by holders of a majority in interest of the Class B
Founder Units, one (1) of which shall be, so long as he is an Officer of the
Company, Jamie Kellner, and one (1) of which shall be an Outside Advisor. Any
actions by the Compensation Committee shall require the affirmative vote of
three (3) of the five (5) members of the Compensation Committee. The
Compensation Committee is hereby given the exclusive power and authority to
determine annually the appropriate annual compensation for each of the Officers
holding Senior Executive Offices of the Company (subject to the terms of the
Employment Agreements) and the terms upon which any Management Carry Units
repurchased under Section 4.09 are reissued and, in connection with any such
reissuance, the Compensation Committee will consider whether to reissue all or a
portion of such Management Carry Units to an Officer replacing a terminated
Officer who held a Senior Executive Office, or, if such a replacement Officer
has not been hired after a six-
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month period following the termination of the Officer from whom Management Carry
Units were repurchased, whether to reissue all or a portion of such Management
Carry Units to one or more existing Management Members taking into account
existing facts and circumstances, although the Compensation Committee shall be
under no obligation to do so. The power and authority of the Compensation
Committee shall include, without limitation, the right to reduce the annual
compensation and/or operating responsibilities for each of the Officers of the
Company holding a Senior Executive Office so that for the twelve month period
commencing on June 30, 1998 and each twelve consecutive month period thereafter,
the Company's corporate overhead does not exceed $375,000 if the Company has not
acquired at least two (2) or more television broadcast stations; PROVIDED,
HOWEVER, that, as a condition of each of the next two television station
acquisitions after the date hereof, the Compensation Committee and the
Management Members shall agree upon an increased corporate overhead limit; AND
PROVIDED, FURTHER, that if from the date hereof the Company has acquired and/or
has applications pending which are substantially complete and do not request
material waivers of any FCC rule, regulation or policy, before the FCC with
respect to an aggregate of at least four (4) television stations by June 30,
1998 there shall not be any corporate overhead limitation hereunder. Each of the
Management Members acknowledges and agrees that the foregoing provisions
supersede any terms of their Employment Agreements or Consulting Agreement to
the contrary. The Compensation Committee shall also consider the implementation
of, and have the sole authority to implement, long-term incentive compensation
plans for the Company's general managers and other employees. Notwithstanding
the foregoing, all cash compensation decisions with respect to general managers
and all other staff who are not Management Members shall be made by the Officers
holding Senior Executive Offices from time to time.
4.09 VESTING, REPURCHASE AND FORFEITURE OF MANAGEMENT UNITS.
(a) VESTING OF MANAGEMENT CARRY UNITS. For purposes of this Section
4.09, none of the Management Carry Units issued on the date hereof shall be
vested for purposes of determining Vested Carry Equity (as defined below) and
10% of such Units shall vest for such purpose on December 31, 1997, and on each
June 30th and December 31st thereafter so long as the holder of such Management
Carry Units continues to hold a Senior Executive Office of the Company on such
date; PROVIDED, HOWEVER, that in the event of (i) a sale of all or substantially
all of the assets or Membership Units of the Company, (ii) a merger or
consolidation of the Company with or into another entity where the equity
holders of the Company immediately prior to such consolidation or merger
(determined on an as converted basis) would not, immediately after the
consolidation or merger, own (A) forty percent (40%) or more of the equity of
the surviving entity (determined on an as converted basis), or (B) fifty percent
(50%) or more of the equity of the surviving entity (determined on an as
converted basis) and, in connection with such merger or consolidation described
in this sub-clause (B), the holders of Investor Units and Debentures convertible
into Investor Units receive cash proceeds equal to or in excess of the sum of
unpaid Priority Capital Distribution then due on the Investor Units they hold or
are entitled to acquire, through the date of such merger or consolidation, or
(iii) an initial public offering of the Common Stock of the Company in
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accordance with Section 7.01 below, all of the unvested Management Carry Units
shall accelerate and be fully vested; and, PROVIDED, FURTHER, that if an
Executive's employment is terminated because of his death or disability or by
the Company without Cause prior to the full vesting of his Management Carry
Units, then such Executive's Management Carry Units shall vest ratably to the
date of such termination over the five year vesting period on a per diem basis.
The vesting schedule for any Management Carry Units issued to an Officer or
agent of the Company subsequent to the date hereof shall be determined by the
Compensation Committee. A holder's vested Management Carry Units are hereinafter
referred to as "Vested Carry Units."
(b) REPURCHASE AND FORFEITURE OF MANAGEMENT UNITS. In the event
that the employment of any holder of Management Carry Units (an "Executive") is
terminated for any of the following reasons, such Executive's Management Capital
Units and Management Carry Units shall be subject to the following applicable
provisions:
(i) if the Executive's employment is terminated because of
his death or Disability, then (x) the Company shall purchase all of the
Management Capital Units held by such Executive for a purchase price,
payable in cash or by a Repurchase Note in principal amount equal to the
Fair Market Value of such Management Capital Units, and (y) the Company
shall repurchase all of the Management Carry Units held by such
Executive in exchange for Terminated Management Units having a then
current value, determined using the Percentage Determination Process,
equal to the value of such Executive's Vested Carry Units (the "Vested
Carry Equity Value");
(ii) if the Executive's employment is terminated by the
Company at a time when a Sales Event has occurred and is continuing,
then (x) the Company shall have the option, but not the obligation, to
purchase all of the Management Capital Units held by such Executive for
a purchase price, payable in cash or by a Repurchase Note in principal
amount equal to the lesser of (1) the Fair Market Value of such
Management Capital Units and (2) the Capital Contributions in respect of
such Management Capital Units together with a ten percent (10%) per
annum return thereon, and (y) the Company shall repurchase all of the
Management Carry Units held by such Executive in exchange for Terminated
Management Units having a then current value, determined using the
Percentage Determination Process, equal to such Executive's Vested Carry
Equity Value;
(iii) if the Executive's employment is terminated by the
Company for Cause, then (x) the Company shall have the option , but not
the obligation, to purchase all of the Management Capital Units held by
such Executive for a purchase price, payable in cash or by a Repurchase
Note in principal amount, equal to the lesser of (1) the Fair Market
Value of such Management Capital Units and (2) the Capital Contributions
in respect of such Management Capital Units, and (y) such Executive
shall forfeit all of his Management Carry Units (whether vested or
unvested) without the payment of any consideration or the taking of any
further action by the Company;
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(iv) if the Executive's employment is terminated by his
resignation prior to July 1, 2000 and at a time when no Sales Event has
occurred and is continuing, then (x) the Company shall have the option,
but not the obligation, to repurchase all of the Management Capital
Units held by such Executive for a purchase price, payable in cash or by
a Repurchase Note in principal amount equal to the lesser of (1) the
Fair Market Value of such Management Capital Units and (2) the Capital
Contributions in respect of such Management Capital Units together with
a ten percent (10%) per annum return thereon, and (y) such Executive
shall forfeit all of his Management Carry Units (whether vested or
unvested) without the payment of any consideration or the taking of any
further action by the Company;
(v) if the Executive's employment is terminated by his
resignation after July 1, 2000 at a time when no Sales Event has
occurred and is continuing, then (x) the Executive shall be entitled to
retain all of his Management Capital Units, and (y) the Company shall
repurchase all of the Management Carry Units held by such Executive in
exchange for Terminated Management Units having a then current value,
determined using the Percentage Determination Process, equal to such
Executive's Vested Carry Equity Value; PROVIDED, HOWEVER, that the
Vested Carry Units shall be deemed to represent 50% of such Executive's
Management Carry Units for a resignation after June 30, 2001 but before
June 30, 2002 and 100% of such Executive's Management Carry Units for a
resignation after June 30, 2002; and
(vi) if the Executive's employment is terminated by the
Company without Cause and prior to the holders of the Class B Founder
Units having exercised control over the Board of Advisors pursuant to
Section 3.03(c) hereof, then (x) the Executive shall be entitled to
retain all of his Management Capital Units, and (y) the Company shall
repurchase all of the Management Carry Units held by such Executive in
exchange for Terminated Management Units having a then current value,
determined using the Percentage Determination Process, equal to the
value of such Executive's Vested Carry Equity Value.
(c) VALUATION PROCESS. In connection with the repurchase of
Management Capital Units or Management Carry Units hereunder, the Company and
the terminated Executive shall in good faith seek to reach agreement as to the
fair market value of the Company (the "Fair Market Value") and any such agreed
upon value shall be the Fair Market Value of the Company for purposes of this
Section 4.09. If the terminated Executive and the Company are unable to reach
agreement within a fifteen (15) day period, the Fair Market Value of the Company
shall be determined by an appraisal process and the Company and the terminated
Executive shall, within three (3) business days after the expiration of such
15-day period, each select an independent, non-affiliated investment banking or
brokerage firm of recognized national standing and having not less than five (5)
years of experience in business appraisals and valuations in the television
broadcasting industry (each an "Independent Appraiser"). Within twenty (20) days
after selection, each Independent Appraiser shall prepare and deliver to the
Company and the terminated Executive an appraisal of the Fair
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Market Value of the Company in accordance with the terms set forth below and, in
the absence of manifest error or fraud and so long as the lower appraisal is no
less than 90% of the higher appraisal, the two appraisals shall be averaged and
the result of such appraisal shall be the Fair Market Value of the Company. If
the lower appraisal is less than 90% of the higher appraisal, the Independent
Appraisers shall, within three (3) business days thereafter choose a third
Independent Appraiser who shall deliver its own appraisal of the Fair Market
Value of the Company, within twenty (20) days thereafter. The two appraisals
that are closest in value shall then be averaged and the result shall, in the
absence of manifest error or fraud, be the Fair Market Value of the Company
(unless the third appraisal is equal to the average of the first two appraisals,
in which case it shall be the Fair Market Value of the Company). All appraisals
hereunder will appraise the Fair Market Value of the Company (i) as a going
concern and without regard to the lack of marketability or illiquidity of the
Company's securities or other considerations relating to the nonpublic status of
the Company's securities, (ii) on the basis of what a willing buyer, with
recourse to any necessary financing, would pay to a willing seller who is under
no compunction to sell, (iii) assuming a form of transaction which will maximize
such value and (iv) taking into account the current and anticipated developments
in the regulatory environment. The Company and the terminated Executive shall
bear all costs of their respectively chosen Independent Appraisers and, in the
event a third appraisal is conducted in accordance with the terms of this
Section 4.09, the costs of such third appraisal shall be shared equally by the
Company and the terminated Executive. Once the Fair Market Value of the Company
has been established in the foregoing process, the Chief Financial Officer for
the Company or its independent public accountants shall determine the amounts
that would be payable on the Management Capital Units and/or the Management
Carry Units being repurchased if the Company were to be liquidated in a
hypothetical liquidation resulting in net proceeds equal to the Fair Market
Value of the Company and such proceeds were used to satisfy any Indebtedness and
other liabilities and obligations of the Company and applied as set forth in the
distribution provisions under Section 5.04. The amounts that would be so payable
in respect of any Management Capital Units and/or Management Carry Units shall
be the "Fair Market Value" of the Management Capital Units and the "Vested Carry
Equity Value" of the Vested Carry Units, respectively.
(d) PERCENTAGE DETERMINATION PROCESS. In order to determine the
number of Terminated Management Units issued and exchanged for any Management
Carry Units repurchased hereunder, the Company shall use the following
percentage determination process (the "Percentage Determination Process"). The
Vested Carry Equity Value of the Management Carry Units to be repurchased shall
be divided by the Fair Market Value of the Company as determined above. Using
the resultant quotient (expressed as a percentage), the Company shall issue
Terminated Management Units equal to such percentage expressed as a whole
number. For example, if the Vested Carry Equity Value is $1.8 million and the
Fair Market Value of the Company is $100 million, the resultant quotient is 1.8%
and the Company shall issue 1.8 Terminated Management Units.
(e) REPURCHASE CLOSINGS. Within the later to occur of (i) 60 days
after the termination of an Executive's employment or (ii) the determination of
the Fair Market Value or
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Terminated Management Units to be paid in consideration for the Management
Capital Units and/or Management Carry Units being repurchased, the Company shall
hold a closing for such repurchase at its offices. At such closing, the Company
shall pay the applicable consideration as set forth in this Section 4.09 and the
Executive shall deliver any certificates or other evidence of the Membership
Units being repurchased together with written representation that he is the sole
record and beneficial owner of such Membership Units, free and clear of any
liens, claims, encumbrances, restrictions or other adverse claims. Upon
consummation of such closing, or, if the Executive does not comply with his
obligations hereunder and at the option of the Company, upon tender by the
Company of the consideration payable by it hereunder, the Executive shall cease
to have any rights as a Member with respect to the Membership Units subject to
repurchase. Any Management Carry Units either repurchased by the Company or
forfeited by an Executive pursuant to this Section 4.09 shall hereinafter be
referred to as the "Forfeited Carry Units."
(f) REPURCHASE ACKNOWLEDGMENTS. Each Management Member hereby
acknowledges that the Company is a privately-held entity and that from time to
time the Company may receive indications of interest from third parties
regarding possible acquisitions, joint ventures or additional types of
financing, including a possible initial public offering, for the Company
("Financing Transactions"). Each Management Member further acknowledges that (x)
the Company may internally consider Financing Transactions on an ongoing basis
as part of its strategic planning process; and (y) the Company, subsequent to
any repurchase, may enter into one or more Financing Transactions which could
result in a valuation of the Management Capital Units and/or Management Carry
Units repurchased from a terminated Executive which is higher or lower than the
repurchase price paid by the Company for such Membership Units and that such
terminated Executive will not participate in any such Financing Transaction
(unless he holds other Membership Units at such time, in which case the terms of
his participation will be as set forth in this Agreement), although there is no
assurance that any such Financing Transaction will occur. Additionally, each
Management Member acknowledges and agrees that (i) except for information
necessary to conduct the appraisal process in accordance with Section 4.09(c)
above which shall be provided by the Company, none of the other Members are
under any obligation to provide him with any information regarding the Company,
the then current or potential value of the Company's Membership Units or any
possible Financing Transaction in connection with any repurchase of his
Management Capital Units pursuant to this Section 4.09 and (ii) neither the
existence or possibility of a Financing Transaction shall preclude the Company
from exercising its rights under this Section 4.09 or give rise to any claim by
the Management Member against the Company or any other Member as a result of
such exercise.
4.10 INFORMATION RIGHTS OF SELLER MEMBERS AND CLASS A FOUNDER MEMBERS.
The Board of Advisors shall invite a representative of each Seller Member who
has made Capital Contributions to the Company in excess of $4,000,000 and each
Class A Founder Member to attend all meetings of the Board of Advisors, in a
nonvoting observer capacity, and shall give such representatives copies of all
notices, minutes, consents and other materials provided to the members of the
Board of Advisors. Seller Members and Class A Founder Members entitled to
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information pursuant to this Section 4.10 may examine the books and records of
the Company for a proper purpose in accordance with the Act and inspect its
facilities and request information at reasonable times and intervals concerning
the general status of the financial condition of the Company; PROVIDED, HOWEVER,
that the Company need not provide Seller Members or Class A Founder Members with
access to confidential proprietary information. The Seller Members and Class A
Founder Members agree to keep confidential all financial, marketing and other
information with respect to the Company.
ARTICLE V - CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS AND
ALLOCATIONS AND DISTRIBUTIONS
5.01 CAPITAL CONTRIBUTIONS. Each Initial Member has made as of the date
hereof the Capital Contribution to the Company specified on SCHEDULE A attached
hereto. Each New Member shall make the Capital Contribution to the Company
specified in such Member's Subscription Agreement as of the date of admission of
such New Member as a Member of the Company. The Capital Contribution
attributable to any Investor Units issued upon conversion of the Convertible
Debt shall be the amount specified in the Investment Agreement. Except for
Capital Contributions relating to Seller Units or as agreed to by the Board of
Advisors with the prior written consent of holders of a majority in interest of
the Class B Founder Units, all Capital Contributions shall be paid in cash, and
unpaid Capital Contributions may not be compromised. Except as set forth herein,
on SCHEDULE A or in a Member's Subscription Agreement, no Member or member of
the Board of Advisors shall be entitled or required to make any Capital
Contribution or loan or advance to the Company; PROVIDED, HOWEVER, that the
Company may, subject to the other terms of this Agreement and the Investment
Agreement, borrow from its Members as well as from banks or other lending
institutions to finance its working capital or the acquisition of assets upon
such terms and conditions as shall be approved by the Board of Advisors, and any
such loans by Members shall not be considered Capital Contributions or reflected
in their Capital Accounts. The agreed value of all non-cash Capital
Contributions made by Members shall be set forth on SCHEDULE A or in such
Member's Subscription Agreement. No Member shall be entitled to any interest or
compensation with respect to its Capital Contributions or any services rendered
on behalf of the Company except as specifically provided in this Agreement or
the Employment Agreements. No Member shall have any liability for the repayment
of the Capital Contributions of any other Member and shall look only to the
assets to the Company for return of its Capital Contributions.
5.02 CAPITAL ACCOUNTS AND ALLOCATIONS.
(a) CAPITAL ACCOUNTS. A separate capital account (a "Capital
Account") shall be established and maintained for each Member, which shall
initially be equal to the Capital Contribution of such Member as set forth on
SCHEDULE A hereto. Such Capital Accounts shall be maintained in accordance with
Section 1.704-1(b)(2)(iv) of the Treasury Regulations, and this Section 5.02
shall be interpreted and applied in a manner consistent with said Section of the
Treasury Regulations. The Capital Accounts shall be maintained for the sole
purpose of
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allocating items of income, gain, loss and deduction among the Members and shall
have no effect on the amount of any distributions to any Members in liquidation
or otherwise. The amount of all distributions to Members shall be determined
pursuant to Sections 5.03, 5.04 and 5.05.
(b) ALLOCATION OF PROFITS AND LOSSES. All items of income, gain,
loss and deduction as determined for book purposes shall be allocated among the
Members and credited or debited to their respective Capital Accounts in
accordance with Treasury Regulations Section 1.704-1(b)(2)(iv), so as to ensure
to the maximum extent possible (i) that such allocations satisfy the economic
effect equivalence test of Treasury Regulations Section 1.704-1(b)(2)(ii)(i) (as
provided hereinafter) and (ii) that all allocations of items that cannot have
economic effect (including credits and nonrecourse deductions) are allocated to
the Members in proportion to their membership interests unless otherwise
required by Code Section 704(b) and the Treasury Regulations promulgated
thereunder. To the extent possible, items that can have economic effect shall be
allocated in such a manner that the balance of each Member's Capital Account at
the end of any fiscal year (increased by such Member's "share of partnership
minimum gain" as defined in Treasury Regulations Section 1.704-2) would be
positive to the extent of the amount of cash that such Member would receive (or
would be negative to the extent of the amount of cash that such Member should be
required to contribute to the Company) if the Company sold all of its property
for an amount of cash equal to the book value (as determined pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv)) of such property (reduced, but
not below zero, by the amount of nonrecourse debt to which such property is
subject) and all of the cash of the Company remaining after payment of all
liabilities (other than nonrecourse liabilities) of the Company were distributed
in liquidation immediately following the end of such fiscal year in accordance
with Section 5.03. Except to the extent otherwise required by the Code, the
"traditional method" provided for in Treasury Regulations Section 1.704-3(b)
shall apply to all tax allocations governed by Code Section 704(c) and all
"reverse Section 704(c) allocations."
(c) OTHER ALLOCATIONS. The Board of Advisors may adjust the
Capital Accounts of its Members to reflect revaluations of the Company property
whenever the adjustment would be permitted under Treasury Regulations Section
1.704-1(b)(2)(iv)(f). In the event that the Capital Accounts of the Members are
so adjusted, (i) the Capital Accounts of the Members shall be adjusted in
accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(g) for
allocations of depreciation, depletion, amortization and gain or loss, as
computed for book purposes, with respect to such property and (ii) the Members'
distributive shares of depreciation, depletion, amortization and gain or loss,
as computed for tax purposes, with respect to such property shall be determined
so as to take account of the variation between the adjusted tax basis and book
value of such property in the same manner as under Section 704(c) of the Code.
In the event that Code Section 704(c) applies to Company property, the Capital
Accounts of the Members shall be adjusted in accordance with Treasury
Regulations Section 1.704-1(b)(2)(iv)(g) for allocations of depreciation,
depletion, amortization and gain and loss, as computed for book purposes, with
respect to such property. In applying clause (ii)
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of the second preceding sentence and all of the preceding sentence, the
provisions of Code Section 704(b) shall apply.
5.03 DISTRIBUTIONS. Subject to (i) the terms of the Act, (ii) any
agreements the Company has with respect to Indebtedness for money borrowed, and
(iii) except in the case of distributions pursuant to subsection (a) below, the
prior written consent of holders of a majority in interest of the Class B
Founder Units, all funds of the Company which are available for distribution (as
determined by the Board of Advisors in its discretion) shall be distributed as
follows:
(a) FIRST, there shall be distributed to each Member an amount
(the "Tax Distributions") equal to the sum of (A) the product of (i) the Tax
Rate and (ii) the difference between (x) the amount of such Member's Taxable
Income with respect to such taxable year and (y) the cumulative amount of such
Member's Taxable Loss, if any, from all prior taxable years, but only to the
extent such Taxable Loss on a cumulative basis exceeds Taxable Income for all
prior taxable years on a cumulative basis, within one hundred and twenty (120)
days after the end of each taxable year, and (B) all taxes, interest and
penalties thereon resulting from any audit of such Member (or the Company) with
respect to a prior taxable year and paid or payable by such Member during the
most recent taxable year, as and to the extent that such amounts are
attributable to the Member being allocated more Taxable Income than was
previously reported to such Member by the Company as a result of any position
taken by the Company in determining and reporting its Taxable Income for the
year in question, within thirty (30) days of the final determination of any such
audit, PROVIDED, HOWEVER, that any Tax Distribution distributed to a Member
(other than distributions made with respect to interest or penalties as a result
of an audit as referred to above) shall reduce the distributions that such
Member would otherwise be entitled to under Sections 5.03(b)-(h); and PROVIDED
FURTHER that the Company shall not be obligated to make distributions under
clause (B) above on account of any audit of a Member unless the Tax Matters
Partner shall have been allowed to participate in such audit (solely with
respect to reporting made by the Company) and no settlement is entered into
which would result in the Company being determined to have a greater amount of
Taxable Income than it previously reported without the prior written consent of
the Tax Matters Partner.
(b) SECOND, pro rata to all Members in accordance with their
respective Capital Contributions, until the aggregate distributions under this
clause (b) equal the total Capital Contributions of all Members plus an amount
sufficient to provide a per annum return thereon, compounded annually, of ten
percent (10%) or, with respect to any Investor Units issued upon conversion of
any Convertible Debt, the excess of nine percent (9%) during the period from the
issuance of such Convertible Debt through the conversion thereof less any
interest actually paid on the Debentures and ten percent (10%) thereafter (the
"Priority Capital Distribution");
(c) THIRD, if there are any Terminated Management Units, an
amount shall be distributed, pro rata among the holders of Terminated Management
Units, which is equal to
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the product of (i) a fraction, the numerator of which shall be the aggregate
number of Terminated Management Units and the denominator of which shall be 100
less the aggregate number of Terminated Management Units (the "Terminated
Management Percentage") and (ii) the aggregate Priority Capital Distribution;
(d) FOURTH, amounts shall be distributed (i) ninety percent (90%)
pro rata among the holders of Non-Carry Units in accordance with their
respective Non-Carry Distribution Percentage and (ii) ten percent (10%) pro rata
among the holders of Management Carry Units up to their aggregate Carry
Distribution Percentage of such amount and the remainder of such amount, if any,
to be distributed as provided in the last paragraph of this Section 5.03 below,
until the aggregate distributions received by the holders of Investor Units
(other than distributions reallocated to such holders under the last paragraph
of this Section 5.03) equals twice the amount of their aggregate Capital
Contributions;
(e) FIFTH, amounts shall be distributed (i) eighty-five percent
(85%) pro rata among the holders of the Non-Carry Units in accordance with their
respective Non-Carry Distribution Percentage and (ii) fifteen percent (15%) pro
rata among holders of Management Carry Units up to their aggregate Carry
Distribution Percentage of such amount and the remainder of such amount, if any,
to be distributed as provided in the last paragraph of this Section 5.03 below,
until the aggregate distributions received by the holders of Investor Units
(other than distributions reallocated to such holders under the last paragraph
of this Section 5.03) equals 2.75 times the amount of their aggregate Capital
Contributions;
(f) SIXTH, amounts shall be distributed (i) eighty percent (80%)
pro rata among the holders of the Non-Carry Units in accordance with their
respective Non-Carry Distribution Percentage and (ii) twenty percent (20%) pro
rata among the holders of Management Carry Units up to their aggregate Carry
Distribution Percentage of such amount and the remainder of such amount, if any,
to be distributed as provided in the last paragraph of this Section 5.03 below,
until the aggregate distributions received by the holders of Investor Units
(other than distributions reallocated to such holders under the last paragraph
of this Section 5.03) equals 3.5 times the amount of their aggregate Capital
Contributions;
(g) SEVENTH, amounts shall be distributed (i) seventy percent
(70%) pro rata among the holders of the Non-Carry Units in accordance with their
respective Non-Carry Distribution Percentage and (ii) thirty percent (30%) pro
rata among the holders of Management Carry Units up to their aggregate Carry
Distribution Percentage of such amount and the remainder of such amount, if any,
to be distributed as provided in the last paragraph of this Section 5.03 below,
until the aggregate distributions received by the holders of Investor Units
(other than distributions reallocated to such holders under the last paragraph
of this Section 5.03) equals 6.0 times the amount of their aggregate Capital
Contributions; PROVIDED, HOWEVER, that if the Company has achieved one hundred
and sixteen and sixty-seven one hundredths percent (116.67%) of the EBITDA
levels for calendar year 2001 set forth in the Investment Agreement at that
time, then distributions shall be made in accordance with the percentages set
forth in this clause (g) only until the aggregate distributions received by the
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holders of Investor Units (other than Tax Distributions and distributions
reallocated to such holders under the last paragraph of this Section 5.03)
equals 5.5 times the amount of their aggregate Capital Contributions; and
(h) THEREAFTER, amounts shall be distributed (i) fifty percent
(50%) pro rata among the holders of the Non-Carry Units in accordance with their
respective Non-Carry Distribution Percentage and (ii) fifty percent (50%) pro
rata among the holders of Management Carry Units up to their aggregate Carry
Distribution Percentage of such amount and the remainder of such amount, if any,
to be distributed as provided in the last paragraph of this Section 5.03 below.
Notwithstanding anything in the foregoing, if there are any Terminated
Management Units outstanding: (x) a portion of all distributions which would
otherwise be made under each of clauses (d) through (h) equal to the Terminated
Management Percentage shall be distributed pro rata to the holders of Terminated
Management Units and the percentages of the other distributions to be made under
such clauses to the holders of the Non-Carry Units and the Management Carry
Units shall be proportionally reduced; and (y) the amounts that were otherwise
distributable to the Forfeited Carry Units (to the extent not reissued) and
unvested Management Carry Units shall be allocated to the holders of Non-Carry
Units pro rata in accordance with their respective Non-Carry Distribution
Percentage. In addition, and notwithstanding anything in the foregoing, if the
Company has repurchased any Management Capital Units, any amounts distributable
to the holders of Management Capital Units under clause (b) or clauses (d)
through (h) above shall, to the extent not used to satisfy obligations of any
outstanding Repurchase Notes, be allocated to the other holders of Non-Carry
Units entitled to receive distributions under such clause in proportion to their
respective Non-Carry Distribution Percentage. [See EXHIBIT A hereto for examples
of the operation of these provisions.]
5.04 DISTRIBUTIONS UPON DISSOLUTION. Proceeds from a sale of all or
substantially all of the assets of the Company and amounts available upon
dissolution, after payment of, or adequate provision for, the debts and
obligations of the Company, including the expenses of its liquidation and
dissolution, shall be distributed and applied in the following priorities:
(a) FIRST, to fund reserves as deemed reasonably necessary by the
Board of Advisors or the Liquidating Trustee for any contingent, conditional or
unmatured liabilities or other obligations of the Company, which such reserves
(i) may be paid to a bank (or other third party), to be held in escrow for the
purpose of paying any such contingent, conditional or unmatured liabilities or
other obligations, and (ii) shall at the expiration of such period(s) as the
Board of Advisors or Liquidating Trustee may reasonably deem advisable, shall be
distributed to the Members in accordance with Section 5.03; and
(b) SECOND, in accordance with Section 5.03.
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If any assets of the Company are to be distributed in kind in connection
with such liquidation, such assets shall be distributed on the basis of their
fair market value net of any liabilities encumbering such assets and, to the
greatest extent possible, shall be distributed pro-rata in accordance with the
total amounts to be distributed to each Member. Solely for purposes of Section
5.02 and immediately prior to the effectiveness of any such
distribution-in-kind, each item of gain and loss that would have been recognized
by the Company had the property being distributed been sold at fair market value
shall be determined and allocated to those persons who were Members immediately
prior to the effectiveness of such distribution in accordance with Section 5.02.
5.05 DISTRIBUTION UPON WITHDRAWAL. No Member shall be entitled to any
distribution or payment with respect to its Membership Units upon the
resignation or withdrawal of such Member.
5.06 TAX MATTERS PARTNER. The Board of Advisors, with the prior written
consent of holders of a majority in interest of the Class B Founder Units, may
designate any Member, including any member of the Board of Advisors or an
Affiliate of any member of the Board of Advisors, as the initial "Tax Matters
Partner" of the Company for purposes of Section 6231(a)(7) of the Code, and such
Tax Matters Partner shall have the power to manage and control, on behalf of the
Company, any administrative proceeding at the Company level with the Internal
Revenue Service relating to the determination of any item of Company income,
gain, loss, deduction or credit for federal income tax purposes. The Board of
Advisors, with the prior written consent of holders of a majority in interest of
the Class B Founder Units, may at any time hereafter designate a new Tax Matters
Partner; PROVIDED, HOWEVER, that only a Member may be designated as the Tax
Matters Partner of the Company.
(a) PARTNERSHIP STATUS. The Company will elect to be treated as a
partnership for purposes of federal and state income tax, and each Member
covenants that it will make no election, declaration or statement on or in any
tax return, tax filing, or any book or record maintained by it which is
inconsistent with or detrimental to the Company's ongoing maintenance of
partnership tax status.
(b) INCOME TAX COMPLIANCE. The Tax Matters Partner shall prepare
or cause to be prepared and filed on behalf of the Company, when and as required
by applicable law, all federal, state and local income tax information returns
or requests for extensions thereof. Not less than thirty (30) days prior to the
due date (including extensions) for any return (but not later than August 15 of
each year), the Tax Matters Partner shall submit to each Member a copy of the
return as proposed for review and a schedule showing the Member's allocable
share of the Company's tax attributes ("Tax Attributes") sufficient to allow
such Member to include such Tax Attributes in its federal income tax return.
Each Member shall provide to the Tax Matters Partner, when and as requested, all
information concerning the affairs of such Member as may be reasonably required
to permit the filing of such returns.
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(c) TAX ELECTIONS. The Tax Matters Partner shall make the
following tax elections on behalf of the Company:
(i) Unless required to adopt a different taxable year
pursuant to section 706(b) of the Code, adopt the calendar year as the annual
accounting period;
(ii) Adopt the accrual method of accounting;
(iii) Deduct interest expense and taxes attributable to
the construction or installation of real and personal property improvements to
the fullest extent permitted by the Code;
(iv) Compute the allowance for depreciation under the most
accelerated tax depreciation method and using the shortest life and lowest
salvage value authorized by applicable law, consistent with the election
provided for in the following clause, with respect to all depreciable assets;
(v) If allowed by the Code, and to the maximum extent
allowable, elect to take available investment tax credit on the full basis of
each asset; and
(vi) Make such other elections as the Tax Matters
Partner shall have been directed in writing by the Board of Advisors to make.
The requirement to make any of the elections set forth above is predicated upon
the assumption that current federal income tax law will continue in force.
If any legislative change is made in the Code or any other tax statutes or by
the IRS in regulations and other pronouncements or by the courts in case law
affecting any of such elections so as to materially alter the economic result
of the required election, the Tax Matters Partner shall make such election
in respect of the item so affected as directed by the Board; PROVIDED, HOWEVER,
that such election shall be made in a manner consistent with the best interests
of the Members as a group.
(d) CODE SECTION 754 ELECTION. In connection with any transfer or
assignment of any Membership Units, or any distribution with respect to which a
Member recognizes gain under Code section 731(a), the Board of Advisors shall,
upon the written request of any Member, cause the Company to file an election
under Code section 754 and the Treasury Regulations thereunder to adjust the
basis of the Company assets under Code section 734(b) or 743(b) and a
corresponding election under the applicable sections of state and local law.
ARTICLE VI - TRANSFERS OF INTERESTS
6.01 RESTRICTIONS ON TRANSFERS. No Membership Units of the Company may
be Transferred, nor may any Member offer to Transfer, and no Transfer by a
Member shall be binding upon the Company or any Member unless such Transfer
complies with the provisions
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of this Article VI and the Company receives an executed copy of the documents
effecting such Transfer.
(a) GENERAL RESTRICTION. No Transfer shall be permitted if such
Transfer would (i) violate the registration provisions of the Securities Act or
the securities laws of any applicable jurisdiction, (ii) cause the Company to
become subject to regulation as an "investment company" under the Investment
Company Act, and the rules and regulations promulgated thereunder, (iii) result
in the termination of any material contract to which the Company is a party and
which is material, or (iv) result in the treatment of the Company as an
association taxable as a corporation or as a "publicly traded partnership" for
federal income tax purposes. The Board of Advisors may require reasonable
evidence as to the foregoing, including, without limitation, a favorable opinion
of counsel.
(b) ADDITIONAL RESTRICTIONS. In addition to the foregoing, except
as provided in Section 6.04(c) below, Management Carry Units and Terminated
Management Units may not be Transferred, and Transfers of Investor Units,
Management Capital Units, Seller Units and Founder Units may only be effected in
accordance with Sections 6.04, 6.05 and 6.06 below.
6.02 SUBSTITUTE MEMBERS. If a Transferee of Membership Units does not
become (and until any such Transferee becomes) a substitute Member in accordance
with the provisions of Section 6.01 hereof, such Person shall not be entitled to
exercise or receive any of the rights, powers or benefits of a Member other than
the right to receive distributions which the assigning Member has Transferred to
such Person. The Company may admit as a substitute Member any Person that
acquires Membership Units by Transfer from any Member pursuant to Section 6.01
hereof, but only upon the receipt of an executed instrument satisfactory to the
Board of Advisors whereby such assignee becomes a party to this Agreement as a
Member.
6.03 ALLOCATION OF DISTRIBUTIONS BETWEEN ASSIGNOR AND ASSIGNEE. Upon the
Transfer of Membership Units pursuant to this Article and unless the assignor
and assignee otherwise agree and so direct the Company in a written statement
signed by both the assignor and assignee (a) distributions pursuant to Article V
shall be made to the Person owning such Membership Units at the date of
distribution and (b) the assignee shall succeed to a pro-rata (based on the
percentage of such assignor's Membership Units Transferred) portion of the
assignor's Capital Account with respect to such Membership Units.
6.04 PERMITTED TRANSFERS. Subject to the provisions of Sections 6.01(a)
and 6.02:
(a) TRANSFERS TO RELATED PERSONS. Holders of Management
Capital Units, Seller Units and Founder Units may Transfer such Membership
Units: (i) to such Member's spouse, parents, brothers, sisters, children
(natural or adopted), stepchildren or grandchildren or to any trust of which he
is the settlor or a trustee for the exclusive benefit of any of them; or
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(ii) upon such Member's death to such Member's estate, executors, administrators
and personal representatives and then to such Member's heirs, legatees or
distributees.
(b) TRANSFERS TO AFFILIATES. Holders of Investor Units, Seller
Units and Class B Founder Units may Transfer such Investor Units and Class B
Founder Units to any other Investor Member, Seller Member or Class B Founder
Member or to a partner or Affiliate of such Investor Member, Seller Member or
Class B Founder Member or to any other investment fund or other entity for which
such Investor Member and/or one or more partners or Affiliates thereof, directly
or indirectly through one or more intermediaries, serve as general partner or
manager or in a like capacity.
(c) TRANSFERS DUE TO REGULATORY PROBLEMS. In the event that
BancBoston Ventures Inc. ("BancBoston") reasonably determines that it has a
Regulatory Problem (as defined below), BancBoston shall have the right to (i)
Transfer its Investor Units and Class B Founder Units to a non-Affiliate of the
Company and the other Investor Members, or (ii) exchange its Investor Units and
Class B Founder Units for non-voting membership interests in the Company with
the same economic rights, and the Company shall take all such actions as are
reasonably requested by BancBoston in order to (A) effectuate and facilitate any
such Transfer or (B) permit BancBoston to exchange all or any portion of its
Investor Units and Class B Founder Units on a unit-for-unit basis for non-voting
membership interests of the Company, which non-voting membership interests shall
be identical in all respects to the Investor Units and Class B Founder Units
exchanged for it, except that such exchanged membership interests shall be
non-voting and shall be convertible into voting membership interests on such
terms as are reasonably requested by BancBoston, in light of regulatory
considerations then prevailing and such terms that do not alter the economic
interests of the parties hereto. For purposes of this Agreement, a "Regulatory
Problem" means any set of facts or circumstances wherein it has been asserted by
any governmental authority, including by the United States Small Business
Administration (the "SBA"), and any successor agency satisfactory to the Company
performing the functions thereof (or, based on written advice of counsel
satisfactory to the Company, BancBoston reasonably believes that there is a
substantial risk of such assertion), that, pursuant to the Small Business Act of
1958, as amended, and the regulations issued by the SBA thereunder, codified at
Title 13 of the Code of Federal Regulations, Parts 107 and 121 (the "SBIC
Regulations"), or pursuant to the Bank Holding Company Act, as amended, and the
regulations issued thereunder, BancBoston is not entitled to hold all or a
portion of the Investor Units or Class B Founder Units held by it.
(d) GENERAL. Any Membership Units Transferred under this Section
6.04 shall remain subject to the provisions of this Agreement and the transferee
shall have entered into an enforceable written agreement providing that all
Membership Units so Transferred shall continue to be subject to all provisions
of this Agreement as if such Membership Units were still held by the
transferring Member, and PROVIDED FURTHER that such permitted transferee shall
not be permitted to make any further Transfer without complying with the
provisions of this Agreement. Anything to the contrary in this Agreement
notwithstanding, transferees permitted by this Section 6.04 shall take any
Membership Units so Transferred subject to all obligations
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under this Agreement as if such Membership Units were still held by the
transferring Member whether or not they so expressly agree.
6.05 RIGHT OF FIRST OFFER.
(a) Except as provided in Section 6.04 above, Non-Carry Units may
only be Transferred by the holder thereof (the "Transferring Member") if such
Transferring Member first offers the right to purchase such Membership Units to
the other Members and the Lenders; PROVIDED, HOWEVER, that Investor Units may be
Transferred by Investor Members without compliance with this Section 6.05 so
long as such Transfers are consummated in accordance with the terms of the
Investment Agreement and Section 6.06 below. The Transferring Member shall give
written notice to the other Members and the Lenders stating its intent to
Transfer such Transferring Member's Membership Units (the "Offer Notice"). Any
Member or Lender desiring to purchase such Membership Units (a "Proposed
Transferee") shall give written notice, within thirty (30) calendar days from
the date the Offer Notice was sent to such Proposed Transferee, to the
Transferring Member stating the price and terms of the Proposed Transferee's
offer and any other relevant material information regarding the proposed
Transfer. The Members and/or Lenders may purchase any or all of the offered
Membership Units. The Members and/or Lenders electing to purchase shall have the
right to purchase in proportion to their relative Capital Contributions
(determined for the Lenders on an as converted basis of its Convertible Debt),
or in such other manner as they may agree to. The closing of the purchase of the
Membership Units pursuant hereto shall take place on a date not less than ten
(10) days nor more than thirty (30) days after expiration of the thirty-day
period following the Offer Notice.
(b) If the Transferring Member can obtain more favorable terms
and conditions for the sale of its Membership Units, the Transferring Member may
sell such Membership Units upon such more favorable terms and conditions,
provided that such sale is concluded within 120 days after the date of the Offer
Notice and the transferee complies with all of the provisions of this Article
VI, including Section 6.06 below.
6.06 CO-SALE OPTION. In the event (i) that the Right of First Offer set
forth in Section 6.05 above is not exercised or is not accepted with respect to
all of the Membership Units proposed to be sold pursuant to the Offer Notice,
and the Transferring Member receives a bona fide third party offer from a
third-party offeror or (ii) that a Right of First Offer set forth in Section
12.2(b) of the Investment Agreement is not exercised or is not accepted with
respect to all of the Offered Securities (as defined in the Investment
Agreement) proposed to be sold pursuant to the Offer Notice (as defined in the
Investment Agreement) and the Transferor (as defined in the Investment
Agreement) receives a bona fide offer from an unaffiliated third party that is
an institutional investor reasonably acceptable to the Board of Advisors (each a
"Third Party Offer" with the third party offeror(s) referred to as the "Third
Party Offeror"), such Transferring Member or Investors and Lenders (the
"Transferors") may Transfer such Membership Units only pursuant to and in
accordance with the following provisions of this Section 6.06.
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(a) The Members (other than the Transferors) and the Lenders
shall have the right to participate in the Third-Party Offer on the terms and
conditions herein stated (the "Co-Sale Option"), except that such Members and
the Lenders may sell their respective Membership Units (assuming the Lenders
convert their Convertible Debt into Investor Units immediately prior to
consummation of the sale hereunder) to the Third-Party Offeror instead of the
type of Membership Units being purchased from the Transferors, if different, and
such Third Party-Offeror shall be obligated to purchase such respective
Membership Units with appropriate adjustments to the purchase price to reflect
the difference in the distribution rights attributable to such Membership Units
being transferred. The Co-Sale Option shall be exercisable upon written notice
to the Transferors sent within ten (10) days after delivery to the Members and
the Lenders of notice of the Third-Party Offer.
(b) Each of the Members (other than the Transferors) and the
Lenders (each a "Selling Member") shall have the right to sell a portion of its
respective Membership Units (assuming the Lenders convert their Convertible Debt
into Investor Units immediately prior to consummation of the sale hereunder)
pursuant to the Third-Party Offer which is equal to or less than the number of
Membership Units determined by multiplying (i) the total number of Membership
Units subject to the Third-Party Offer by (ii) a fraction, the numerator of
which is the total amount of such Selling Member's Capital Contribution to the
Company on the date of the Third-Party Offer and the denominator of which is the
total amount of all Capital Contributions to the Company on the date of the
Third-Party Offer. To the extent one or more Members or Lenders elect not to
sell, or fail to exercise their right to sell, the full number of such
Membership Units which they are entitled to sell pursuant to this Section 6.06,
the other Members' and Lenders' rights to sell Membership Units shall be
increased proportionately and the other Members and Lenders shall have an
additional five (5) days from the date upon which they are notified of such
election or failure to exercise in which to increase the number of Membership
Units to be sold by them hereunder.
(c) Within ten (10) days after the date by which the Members and
Lenders were first required to notify the Transferors of their intent to
exercise the Co-Sale Option, the Transferors shall notify each Selling Member of
the number of Membership Units held by such Selling Member that will be included
in the sale and the date on which the Third-Party Offer will be consummated,
which shall be no later than the later of (i) thirty (30) days after the date by
which the Selling Members were required to notify the Transferors of their
intent to participate and (ii) the satisfaction of any governmental approval or
filing requirements, if any.
(d) Each of the Selling Members may effect its participation in
any Third- Party Offer hereunder by delivery to the Third-Party Offeror, or to
the Transferors for delivery to the Third-Party Offeror, of one or more
instruments or certificates, properly endorsed for transfer, representing the
Membership Units it elects to sell therein. At the time of consummation of the
Third-Party Offer, the Third-Party Offeror shall remit directly to each Selling
Member that portion of the sale proceeds to which each Selling Member is
entitled by reason of its participation therein.
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(e) In the event that the Third-Party Offer is not consummated
within the period required by subsection (c) hereof or the Third-Party Offeror
fails to timely remit to each Selling Member its portion of the sale proceeds,
the Third-Party Offer shall be deemed to lapse, and any Transfers of Membership
Units pursuant to such Third-Party Offer shall be deemed to be in violation of
the provisions of this Agreement unless the Transferors once again complies with
the provisions of Section 6.05 and this Section 6.06 with respect to such
Third-Party Offer.
6.07 DRAG-ALONG OBLIGATIONS.
(a) Notwithstanding the foregoing, in the event that all or
substantially all of the Membership Units or assets of the Company are being
sold (in accordance with Section 3.03(c)) to a third-party (in each case, the
"Buyer") in a bona fide negotiated transaction (a "Sale"), each of the Members
shall be obligated to: (x) Transfer or cause to be Transferred to the Buyer, a
proportionate percentage of such Member's Membership Units on substantially the
same terms applicable to all of the Members and the Lenders, with each Member
receiving an amount equal to the distribution it would be entitled to upon a
dissolution of the Company; and/or (y) execute and deliver such instruments of
conveyance and transfer and take such other action, including voting in favor of
any Sale proposed by the Investor Members and the Lenders and executing any
purchase agreements, indemnity agreements, escrow agreements or related
documents, as the Investor Members and the Lenders or the Buyer may reasonably
require in order to carry out the terms and provisions of this Section 6.07.
(b) Not less than thirty (30) days prior to the date
proposed for the closing of any Sale, the Company shall give written notice to
each of the Members and the Lenders, setting forth in reasonable detail the name
or names of the Buyer, the terms and conditions of the Sale, including the
purchase price, the percentage of Membership Units or Convertible Debt held by
the Members and Lenders (determined on an as converted basis) proposed to be
sold and the proposed closing date. In furtherance of the provisions of this
Section 6.07, each of the Members hereby (i) irrevocably appoints each of the
Investor Members and the Lenders as its agents and attorney-in-fact (each, an
"Agent") (each with full power of substitution) to execute all agreements,
instruments and certificates and take all actions necessary or desirable to
effectuate any Sale hereunder; and (ii) grants to the Agent a proxy (which shall
be deemed to be coupled with an interest and to be irrevocable) to vote the
Membership Units held by such Member and exercise any consent rights applicable
thereto in favor of any Sale hereunder; PROVIDED, HOWEVER, that the Agent shall
not exercise such powers-of-attorney or proxies with respect to any Member
unless such Member is in breach of its obligations under this Section 6.07.
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ARTICLE VII - CONVERSION, EXCHANGE AND REDEMPTION OF
MEMBERSHIP UNITS
7.01 CONVERSION UPON INITIAL PUBLIC OFFERING. Upon the reorganization of
the Company into a corporation (the "Successor") in connection with an
underwritten initial public offering of the common stock (the "Common Stock") of
such Successor, the terms of which have been otherwise consented to by holders
of 60% in interest of the Class B Founder Units, the Successor shall be
organized with only one (1) class of Common Stock, which shall be voting stock
holding all of the voting power for such Successor and the shares of such Common
Stock shall be allocated among the Members (including holders of Terminated
Management Units) and Lenders in exchange for their respective Membership Units
and Convertible Debt (on an as converted basis) such that each Member or Lender,
as the case may be, shall receive the number of shares of Common Stock
determined by the following formula:
N = T x D
---
V
where "N" represents the number of shares of Common Stock to be issued to such
Member or Lender; "T" represents the total number of shares of Common Stock to
be issued to all Members and Lenders; "D" represents the dollar value of the
distributions such Member or Lender would receive pursuant to Section 5.04 if
the Company were liquidated immediately prior to the initial public offering and
aggregate net proceeds equal to the pre-money equity valuation of the Company or
the Successor established in the final prospectus for such initial public
offering, which shall be the net price per share to the public after deducting
any underwriting discounts or commissions multiplied by the aggregate number of
shares that will be outstanding prior to the issuance to the public (determined
on an as converted basis), were to be distributed to the Members and the Lenders
after satisfaction of any Indebtedness and other liabilities and obligations of
the Company; and "V" represents the pre-money equity valuation of the Company or
the Successor established in the final prospectus for such initial public
offering.
7.02 REDEMPTION OF MEMBERSHIP UNITS. The Investor Units shall be subject
to redemption, in whole but not in part, by the Company at the option of the
holders of a majority in interest of the Investor Units at any time (i) after
June 30, 2008 or (ii) upon any acceleration or pre-payment of all of the
outstanding Convertible Debt. Each of the classes of Seller Units, Management
Capital Units, Class A Founder Units and Class B Founder Units shall be subject
to redemption, in whole but not in part, by the Company at the option of the
holders of a majority in interest of the applicable class of Membership Units at
any time upon the acceleration or pre-payment of the Convertible Debt. In the
event of any partial payment of the Convertible Debt, the redemption right of
the Members hereunder shall be limited to a similar percentage of the applicable
Membership Units. The redemption price shall be equal to the greater of: (x) the
respective Capital Contributions on the respective Membership Units then being
redeemed, plus a ten percent (10%) per annum return thereon, compounded
annually, and (y) the amount the respective Membership Unit would be entitled to
receive in
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connection with a hypothetical liquidation or dissolution of the Company in
accordance with Section 5.04 hereof at that time and shall be payable in full in
cash.
ARTICLE VIII - INDEMNIFICATION
8.01 RIGHT TO INDEMNIFICATION. Except as limited by law and subject to
the provisions of this Article, the Company shall indemnify each Indemnified
Party from and against any and all Losses in any way related to or arising out
of this Agreement, the business of the Company or the action or inaction of such
Person hereunder (including, without limitation, the actions or inactions of the
members of the Board of Advisors and the other Indemnified Parties pursuant to
Article X hereof upon dissolution of the Company), which may be imposed on,
incurred by or asserted at any time against any such Indemnified Party, except
that no indemnification shall be provided for any Indemnified Party regarding
any matter as to which it shall be finally determined that such Indemnified
Party did not act in good faith and in the reasonable belief that its action was
in the best interests of the Company, or with respect to a criminal matter, that
it had reasonable cause to believe that its conduct was unlawful. Subject to the
foregoing limitations, such indemnification may be provided by the Company with
respect to Losses in connection with which it is claimed that such Indemnified
Party received an improper personal benefit by reason of its position,
regardless of whether the claim arises out of the Indemnified Party's service in
such capacity, except for matters as to which it is finally determined that an
improper personal benefit was received by such Indemnified Party. The
indemnification contained in this Article VIII shall survive termination of this
Agreement.
8.02 AWARD OF INDEMNIFICATION. The determination of whether the Company
is authorized to indemnify any Indemnified Party hereunder and any award of
indemnification shall be made in each instance by the Board of Advisors;
PROVIDED, HOWEVER, that as to any matter disposed of by a compromise payment,
pursuant to a consent decree or otherwise, no indemnification, either for said
payment or for any other Losses, shall be provided unless there has been
obtained an opinion in writing of legal counsel to the effect that the Person
subject to indemnification hereunder appears to have acted in good faith and
that such indemnification would not protect such Person against any liability to
the Company or the Members to which he, she or it would otherwise be subject by
reason of gross negligence, willful malfeasance or fraud in the conduct of his,
her or its office or actions not taken in good faith by such Person. The Company
shall be obliged to pay indemnification applied for by any Indemnified Party
unless there is an adverse determination (as provided above) within 45 days
after the application. If indemnification is denied, the applicant may seek an
independent determination of its right to indemnification by a court, and in
such event, the Company shall have the burden of proving that the applicant was
ineligible for indemnification under this Article. Notwithstanding the
foregoing, in the case of a proceeding by or in the right of the Company in
which an Indemnified Party is adjudged liable to the Company, indemnification
hereunder shall be provided only upon a determination by a court having
jurisdiction that in view of all the circumstances of the case, the Indemnified
Party is fairly and reasonably entitled to indemnification for such Losses as
the court shall deem proper.
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8.03 SUCCESSFUL DEFENSE. Notwithstanding any contrary provisions of this
Article, if any Indemnified Party has been wholly successful on the merits in
the defense of any action, suit or proceeding in which it was involved by reason
of its position with the Company or as a result of serving in such capacity
(including termination of investigative or other proceedings without a finding
of fault on the part of such Indemnified Party), such Indemnified Party shall be
indemnified by the Company against all Losses incurred by such Indemnified Party
in connection therewith.
8.04 ADVANCE PAYMENTS. Except as limited by law, Losses incurred by an
Indemnified Party in defending any action, suit or proceeding, including a
proceeding by or in the right of the Company, shall be paid by the Company to
such Indemnified Party in advance of final disposition of the proceeding upon
receipt of its written undertaking to repay such amount if such Indemnified
Party is determined pursuant to this Article VIII or adjudicated to be
ineligible for indemnification, which undertaking shall be an unlimited general
obligation but need not be secured and may be accepted without regard to the
financial ability of such Indemnified Party to make repayment; PROVIDED,
HOWEVER, that no such advance payment of Losses shall be made if it is
determined pursuant to Section 8.02 of this Article on the basis of the
circumstances known at the time (without further investigation) that such
Indemnified Party is ineligible for indemnification.
8.05 INSURANCE. The Company shall have power to purchase and maintain
insurance on behalf of any Indemnified Party against any liability or cost
incurred by such Person in any such capacity or arising out of its status as
such, whether or not the Company would have power to indemnify against such
liability or cost.
8.06 HEIRS AND PERSONAL REPRESENTATIVES. The indemnification provided by
this Article shall inure to the benefit of the heirs and personal
representatives of the Indemnified Parties.
8.07 NON-EXCLUSIVITY. The provisions of this Article shall not be
construed to limit the power of the Company to indemnify the members of the
Board of Advisors, Members, Officers, employees or agents to the fullest extent
permitted by law or to enter into specific agreements, commitments or
arrangements for indemnification permitted by law. The absence of any express
provision for indemnification herein shall not limit any right of
indemnification existing independently of this Article.
8.08 AMENDMENT. The provisions of this Article may be amended or
repealed in accordance with Section 11.05; PROVIDED, HOWEVER, that no amendment
or repeal of such provisions that adversely affects the rights of the members of
the Board of Advisors under this Article with respect to its acts or omissions
at any time prior to such amendment or repeal, shall apply to any member of the
Board of Advisors without his consent.
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ARTICLE IX - CONFLICTS OF INTEREST
9.01 TRANSACTIONS WITH INTERESTED PERSONS; CONFLICTS.
(a) Unless entered into in bad faith, and subject to Section 3.04
and the terms of the Investment Agreement, no contract or transaction between
the Company and one or more of its Members, the members of the Board of Advisors
or any other Indemnified Party, or between the Company and any other Person in
which one or more of its Members, the members of the Board of Advisors or any
other Indemnified Party has a financial interest or is a director, manager or
officer, shall be voidable solely for this reason if such contract or
transaction is fair and reasonable to the Company; and no Member, member of the
Board of Advisors or other Indemnified Party interested in such contract or
transaction, because of such interest, shall be liable to the Company or to any
other Person or organization for any loss or expense incurred by reason of such
contract or transaction or shall be accountable for any gain or profit realized
from such contract or transaction. As a condition to any transaction between the
Company and a Member (other than the purchase of Membership Units or Convertible
Debt), such Member shall disclose to the Company any interest of any other
Member in such transaction.
(b) Unless otherwise expressly provided herein, (i) whenever a
conflict of interest exists or arises between the Company, its Members, the
members of the Board of Advisors and/or the other Indemnified Parties or (ii)
whenever this Agreement or the Investment Agreement provides that any such
Person shall act in a manner that is, or provide terms that are, fair and
reasonable to the Company or any Member, such Person shall resolve such conflict
of interest, taking such action or providing such terms, considering in each
case the relative interest of each party (including its own interest) to such
conflict, agreement, transaction or situation and the benefits and burdens
relating to such interests, any customary or acceptable industry practices, and
any applicable generally acceptable accounting practices or principles. In the
absence of bad faith by the Member, the member of the Board of Advisors or other
Indemnified Party, as the case may be, the resolution, action or term so made,
taken or provided by such Person shall not constitute a breach of this Agreement
or any other agreement contemplated herein or of any duty or obligation of such
Person at law or in equity or otherwise.
9.02 NON-COMPETITION; BUSINESS OPPORTUNITIES.
(a) While employed by the Company as an Officer or employee, and
for a period of twelve (12) months after termination of Officer or employee
status for any reason, no Member shall, without the express written consent of
the Board of Advisors, directly or indirectly, engage in any activity which is,
or participate or invest in or assist (whether as owner, part-owner,
stockholder, partner, director, officer, trustee, employee, agent, independent
contractor or consultant, or in any other capacity) a Competitive Enterprise. As
used herein, the term "Competitive Enterprise" shall mean any entity which
operates television stations, cable distribution systems or other video
broadcast or distribution enterprises
40
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exclusively in a Designated Market Area ("DMA") where the Company or any
Affiliate of the Company owns and/or operates stations.
(b) In the event that a Member who was formerly an Officer or
employee of the Company shall, directly or indirectly, engage in any activity
which is, or participate or invest in or assist (whether as owner, part-owner,
stockholder, partner, director, officer, trustee, employee, agent, independent
contractor or consultant, or in any other capacity) a Competitive Enterprise
during the period commencing on the first anniversary of the termination of the
Officer or employee status of such Member and ending on the second anniversary
of such termination, such Member shall, if applicable, forfeit 100% of all
Vested Carry Units held by such Member.
(c) In the event that a Member who was formerly an Officer or
employee of the Company shall, directly or indirectly, engage in any activity
which is, or participate or invest in or assist (whether as owner, part-owner,
stockholder, partner, director, officer, trustee, employee, agent, independent
contractor or consultant, or in any other capacity) a Competitive Enterprise
during the period commencing on the second anniversary of the termination of the
Officer or employee status of such Member and ending on the third anniversary of
such termination, such Member shall, if applicable, forfeit 50% of all Vested
Carry Units held by such Member.
(d) Notwithstanding the foregoing, nothing in this Section 9.02
shall prohibit a Member who was also an Officer or employee, after termination
of such Member's Officer or employee status, from engaging in any activity on
behalf of, or being employed in any capacity by, a group television station
operator so long as no more than 5% of such operator's revenues result from a
Competitive Enterprise, and the engagement or employment of such Member in any
such capacity shall not result in the forfeiture of any Vested Carry Units.
(e) No Member who was formerly an Officer or employee of the
Company shall, for the period commencing on the date of termination of such
Member's Officer or employee status and ending on the second anniversary
thereof, whether on behalf of a Competitive Enterprise or otherwise, hire or
attempt to hire any Officer or other senior employee of the Company or any
Affiliate of the Company or encourage any Officer or other senior employee of
the Company or any Affiliate of the Company to terminate his or her relationship
with the Company or any Affiliate of the Company.
(f) No Member who is also an Officer or employee shall, from the
date hereof until the earliest of (i) the sixth anniversary of the date hereof
or (ii) the first anniversary of the initial public offering of the Company's
common stock in accordance with Section 7.01 hereof, if the holders of Investor
Units and Debentures convertible into Investor Units receive aggregate cash
proceeds in such initial public offering equal to or in excess of the sum of the
unpaid Priority Capital Distributions then due on the Investor Units they held
or are entitled to acquire at such time (in either case irrespective of any
termination of Officer or employee status), own any equity interests in any
privately-held television enterprise or more
41
<PAGE>
than 5% of the equity interests in any publicly-held television enterprise if,
in either case, such enterprise is engaged in a Competitive Enterprise.
(g) Each Member agrees, while serving as an Officer or employee
of the Company, to offer or otherwise make known or available to the Company
without compensation or consideration, any business prospects, contracts or
other business opportunities that such Member may discover, find, develop or
otherwise have available to acquire, own or manage any television stations,
cable distribution systems or other video broadcast or distribution enterprises
that could deliver WB Network programming for DMA markets 20 to 100, excluding
any Web Network opportunities controlled by WB Networks and/or Time Warner
(which such prospects, contracts or opportunities are herein referred to as
"Television Station Opportunities"), and further agrees that any such Television
Station Opportunities shall be the property of the Company; PROVIDED, HOWEVER,
that, with respect to Jamie Kellner, the following shall be excluded from
Television Station Opportunities: (A) the ownership and development of certain
construction permits resulting from the applications for spectrum allocation
requests identified on SCHEDULE 9.02(G) hereto; (B) opportunities presented by
Kellner to unaffiliated third party entities in which Kellner does not then
have, and does not during the term of this Agreement acquire, any equity
interest or other investment or any type of incentive, phantom equity or other
compensation arrangement; and (C) opportunities first proposed to be acquired,
owned or managed on or after January 1, 1997 by an entity in which Kellner has,
or may in the future acquire, any equity interest or investment or any type of
incentive, phantom equity or other compensation arrangement (each, a "Kellner
Affiliate") provided that, for any opportunity described in this clause (C): (i)
Kellner has previously presented a Television Station Opportunity to the Company
in writing at a time when the Company's EBITDA for the last twelve month
trailing period (or such shorter period as the Company shall have been in
operation are equal to or greater than 90% of the projections for such period
delivered and approved under the Investment Agreement (the "90% Compliance
Test"), which the Company declined to pursue and which was acquired by an
unaffiliated third party at a purchase price no more favorable to such third
party than those that were offered to the Company within six months of the date
the Company declined such Television Station Opportunity; and (ii) prior to the
acquisition, ownership or management of any other opportunities by a Kellner
Affiliate, (x) such opportunity is first offered to the Company in writing at a
time when the Company satisfies the 90% Compliance Test and the Company declines
to pursue such opportunity, (y) the opportunity is acquired by the Kellner
Affiliate on price terms no more favorable than those offered to the Company;
and (z) the Class B Founder Members are given the opportunity to acquire up to
thirty percent (30%) of Kellner's interests in such Kellner Affiliate on
substantially the same terms offered to Kellner.
ARTICLE X - DISSOLUTION, LIQUIDATION, AND TERMINATION
10.01 NO DISSOLUTION. The Company shall not be dissolved by the
admission of additional Members, the withdrawal of a Member or the written
consent of all Members, but shall continue to exist in perpetuity, except in
accordance with the terms of this Agreement.
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Upon the death, retirement, resignation, expulsion, Bankruptcy or dissolution of
any Member (other than the Bankruptcy, death, resignation or dissolution of all
members of the Board of Advisors as set forth in Section 10.02(a) below), the
Company shall not dissolve and its affairs shall not be wound up.
10.02 EVENTS CAUSING DISSOLUTION. The Company shall be dissolved and its
affairs wound up upon the occurrence of any of the following events:
(a) the Bankruptcy, death or resignation of all members of the
Board of Advisors; unless the Company is continued upon the written consent of
the Members, such consent to be given within ninety (90) days following the
occurrence of such event;
(b) the resignation of the members of the Board of Advisors,
unless such dissolution is waived in accordance with the terms hereof; or
(c) the entry of a decree of judicial dissolution under
Section 18-802 of the Act.
10.03 NOTICE OF DISSOLUTION. Upon the dissolution of the Company, the
Board of Advisors or the other Person or Persons (the "Liquidating Trustee")
appointed by the Board of Advisors to carry out the winding up of the Company,
shall promptly notify the Members of such dissolution.
10.04 LIQUIDATION. Upon dissolution of the Company, the Liquidating
Trustee shall proceed diligently to liquidate the Company and wind up its
affairs and to make final distributions as provided in Section 5.04 hereof and
in the Act. The costs of dissolution and liquidation shall be borne as an
expense of the Company. Until final distribution, the Liquidating Trustee shall
continue to operate the Company properties with all of the power and authority
of the Board of Advisors. As promptly as possible after dissolution and again
after final liquidation, the Liquidating Trustee shall cause an accounting to be
made by a firm of independent public accountants of the Company's assets,
liabilities and operations.
10.05 CERTIFICATE OF CANCELLATION. On completion of the distribution of
Company assets as provided herein, the Company shall be terminated, and the
Board of Advisors (or such other Person or Persons as the Act may require or
permit) shall file a Certificate of Cancellation with the Secretary of State of
the State of Delaware under the Act, cancel any other filings made pursuant to
Sections 2.01, 2.02 and 2.04, and take such other actions as may be necessary to
terminate the existence of the Company.
ARTICLE XI - GENERAL PROVISIONS
11.01 OFFSET. Whenever the Company is to pay any sum to any Member, any
amounts that Member owes the Company may be deducted from that sum before
payment. All amounts
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so deducted shall nevertheless be treated as distributions for purposes of
Sections 5.03, 5.04 and 5.05 hereof.
11.02 NOTICES. Except as expressly set forth to the contrary in this
Agreement, all notices, requests, or consents provided for or permitted to be
given under this Agreement must be in writing and shall be given either by
registered or certified mail, addressed to the recipient, with return receipt
requested, or by delivering the writing to the recipient in Person, by courier,
or by facsimile transmission; and a notice, request, or consent given under this
Agreement is effective upon receipt or three days after the date mailed,
whichever is sooner. All notices, requests, and consents to be given to a Member
must be sent to or delivered at the addresses given for that Member on SCHEDULE
A, or such other address as that Member may specify by written notice to the
other Members and the Company. Any notice, request, or consent to be given to
the Company or the Board of Advisors must be given to the members of the Board
of Advisors at the address of the principal office of Company specified in
Section 2.03. Whenever any notice is required to be given by law, the
Certificate or this Agreement, a written waiver thereof, signed by the Person
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to the giving of such notice.
11.03 ENTIRE AGREEMENT. This Agreement, together with the Investment
Agreement, the Employment Agreements and each Member's Subscription Agreement,
constitutes the entire agreement of the Members relating to the Company and
supersedes all prior contracts or agreements with respect to the Company,
whether oral or written, and, to the extent that the terms of any Employment
Agreement vary in any respect from the terms of this Agreement, this Agreement
shall control and take precedence.
11.04 LIMITATION OF LITIGATION; DISPUTE RESOLUTION. No Member shall be
entitled to initiate or participate in a class action suit on behalf of all or
any part of the Members against the Company, its Board of Advisors or any
Member, and no Member shall be entitled to initiate or participate in a
derivative suit on behalf of the Company against its Board of Advisors or any
Member, unless such action or suit has received prior approval of the Board of
Advisors and Members holding a majority in interest of the Membership Units who
are not defendant parties to the proposed action or suit, or unless otherwise
required by law. A Member who initiates a class action or derivative suit in
violation of this Agreement shall be liable to the Company and its Board of
Advisors and any Members who are defendant parties to the action or suit for all
damages and expenses which they incur as a result, including without limitation
reasonable fees and expenses of legal counsel and expert witnesses and court
costs. The parties to this Agreement hereby agree that any dispute relating to,
or arising from, the terms or conditions of this Agreement shall, within thirty
(30) days after good faith negotiation among the parties to this Agreement, be
submitted to J.A.M.S./Endispute, Inc. ("Endispute") for final and binding
arbitration pursuant to Endispute's Arbitration Rules, and Endispute's
determination shall be made within thirty (30) days of being submitted. Any such
arbitration shall be conducted in Boston, Massachusetts. The costs of such
proceedings shall be borne as determined by Endispute.
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11.05 AMENDMENT OR MODIFICATION; TERMS. This Agreement, including any
Schedule hereto, may be amended from time to time, in whole or in part, by an
instrument in writing signed in accordance with Section 3.04 hereof. Copies of
each such amendment shall be delivered to each Member at least thirty (30) days
prior to the effective date of such amendment; PROVIDED, HOWEVER, in the case of
any amendment that the Board of Advisors determines is necessary or appropriate
to prevent the Company from being treated as a publicly traded partnership taxed
as a corporation under Section 7704 of the Code, the amendment shall be
effective on the date provided in the instrument containing the terms of such
amendment. Nothing contained in this Agreement shall permit the amendment of
this Agreement to impair the exemption from personal liability of the members of
the Board of Advisors, officers, employees and agents of the Company or Members
or to permit assessments upon the Members. In the event that the investors in
the Company on the date hereof (other than Class A Founder Members, Seller
Members or Management Members) cease at any time to hold (i) at least 35% in the
aggregate (based on Capital Contributions or principal amount) of the securities
issued to such investors on the date hereof or (ii) Investor Units, or
securities convertible into Investor Units, which are entitled to an aggregate
Non-Carry Distribution Percentage equal to or greater than fifty and one-tenth
percent (50.1%), then the provisions in Section 3.03(c), 3.04, and 4.08 shall
terminate and cease to be of any further force or effect.
11.06 BINDING EFFECT. Subject to the restrictions on Transfers set forth
in this Agreement, this Agreement is binding on and inures to the benefit of the
parties and their respective heirs, legal representatives, successors and
assigns.
11.07 GOVERNING LAW; SEVERABILITY. This Agreement is governed by and
shall be construed in accordance with the law of the State of Delaware,
exclusive of its conflict-of-laws principles. In the event of a direct conflict
between the provisions of this Agreement and any provision of the Certificate,
or any mandatory provision of the Act, the applicable provision of the
Certificate or the Act shall control. If any provision of this Agreement or the
application thereof to any Person or circumstance is held invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of that provision shall be enforced to the fullest extent permitted by law.
11.08 FURTHER ASSURANCES. In connection with this Agreement and the
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions, as requested by the Board of Advisors.
11.09 WAIVER OF CERTAIN RIGHTS. Each Member irrevocably waives any right
it may have to maintain any action for dissolution of the Company or for
partition of the property of the Company.
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11.10 THIRD-PARTY BENEFICIARIES. Except with respect to the Lenders, who
are expressly intended to be third-party beneficiaries of this Agreement, there
shall be no third-party beneficiaries of this Agreement.
11.11 FAILURE TO PURSUE REMEDIES. The failure of any party to seek
redress for violation of, or to insist upon the strict performance of, any
provision of this Agreement shall not prevent a subsequent act, which would have
originally constituted a violation, from having the effect of any original
violation.
11.12 CUMULATIVE REMEDIES. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any party
shall not preclude or waive its right to use any or all other remedies. Said
rights and remedies are given in addition to any other right the parties may
have by law, statute, ordinance or otherwise.
11.13 NOTICE TO MEMBERS OF PROVISIONS OF THIS AGREEMENT. By executing
this Agreement, each Member acknowledges that such Member has actual notice of
(a) all of the provisions of this Agreement, including, without limitation, the
restrictions on the Transfer of Membership Units set forth in Article VI and the
limitations on participation of Members in the management of the Company set
forth in Article III, and (b) all of the provisions of the Certificate. Each
Member hereby agrees that this Agreement constitutes adequate notice of all such
provisions, and each Member hereby waives any requirement that any further
notice thereunder be given.
11.14 INTERPRETATION. For the purposes of this Agreement, terms not
defined in this Agreement shall be defined as provided in the Act; and all
nouns, pronouns and verbs used in this Agreement shall be construed as
masculine, feminine, neuter, singular, or plural, whichever shall be applicable.
Titles or captions of Articles and Sections contained in this Agreement are
inserted as a matter of convenience and for reference, and in no way define,
limit, extend or describe the scope of this Agreement or the intent of any
provision hereof.
11.15 COUNTERPARTS. This Agreement may be executed in any number of
counterparts with the same effect as if all signing parties had signed the same
document, and all counterparts shall be construed together and shall constitute
the same instrument.
[END OF TEXT]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date set forth above.
ACME TELEVISION HOLDINGS, LLC
By: /s/ Thomas P. Allen
-------------------------------------
Name: Thomas P. Allen
Title: Exec. V.P.
MANAGEMENT MEMBERS
/s/ Jamie Kellner
-------------------------------------
Jamie Kellner
/s/ Doug Gealy
-------------------------------------
Doug Gealy, President
/s/ Tom Allen
-------------------------------------
Tom Allen
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SELLER MEMBER
CHANNEL 32 INCORPORATED
By: /s/ Roy Rose
---------------------------------
Name: Roy Rose
Title: Chairman & CEO
48
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INVESTOR MEMBERS
BANCBOSTON VENTURES INC.
By: /s/ Lars A. Swanson
---------------------------------
Name: Lars A. Swanson
Title: Vice President
CLASS A FOUNDER MEMBER
ACME CAPITAL PARTNERS
By: /s/ William K. Lisecky
---------------------------------
Name: William K. Lisecky
Title: EVP
CLASS B FOUNDER MEMBERS
ALTA ACME, INC.
By: /s/ Brian McNeill
---------------------------------
Name: Brian McNeill
Title: President
CEA ACME, INC.
By: /s/ James J. Collis
---------------------------------
Name: James J. Collis
Title: President
49
<PAGE>
SCHEDULE A - Membership Units and Exhibit A - Distribution Examples have
been intentionally omitted by the Registrants.
A copy of this omitted Schedule or Exhibit will be provided to the
Securities and Exchange Commission upon request.
50
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (the "Agreement") is entered into between
EDWARD J. KOPLAR, an individual residing in the State of Missouri ("Koplar"),
and ACME TELEVISION LICENSES OF MISSOURI, INC., a Missouri corporation ("Acme").
RECITALS
A. Koplar has for years been the chief executive and operating officer
for television broadcast station KPLR-TV, Channel 11 in St. Louis, Missouri (the
"Station").
B. Acme (either directly or through subsidiary entities) is the owner
and operator of television broadcast stations which are affiliates of the WB
Network.
C. Koplar desires to provide, and Acme desires to obtain, Koplar's
management services for the Station pursuant to and in accordance with the terms
and conditions of this Agreement ("Company Services").
NOW, THEREFORE, in consideration of the mutual promises of the
parties, the parties hereto, intending to be legally bound, agree as follows:
1. Scope of Company Services. During the Initial Term (as defined
below) and any Renewal Term (as defined below), unless earlier terminated,
Koplar shall be the Chief Executive Officer of the entity ("Company") owning or
operating the Station and shall, as directed by the Company's Board of
Directors, be responsible for the management of the operations of the Station
except as otherwise described herein. The autonomy and scope of the authority of
Koplar in the management of the Station will be subject to approval by the Board
of Directors regarding annual budgets, business plans, material contracts and
material financial arrangements normally requiring Board approval. As Chief
Executive Officer, Koplar shall have all of the powers normally attendant to an
individual who holds that position, subject to the terms hereof Koplar shall
continue to be involved in the same range of the Station's operations as he was
prior to the change of ownership of the Station. Acme and Koplar shall jointly
agree on the hiring and/or termination of the Station's General Manager. In
addition, Koplar shall be a Vice Chairman and serve as a member of Acme's Board
of Advisors or substitute entity having similar authority (in either case, the
"Board of Advisors"). At all times Koplar shall have twenty-five percent (25%)
of the combined voting rights of Koplar, Doug Gealy, Tom Allen and Jamie
Kellner, or their respective successors, provided, however, Koplar's right to be
a member of the Board of Advisors shall terminate upon a Voting Event as defined
in the Limited Liability Company Operating Agreement dated June 17, 1997,
provided that the primary purpose for such Voting Event is not to remove Koplar
as a member of the Board of Advisors. Koplar's position as Vice Chairman and
member of Acme's Board of Advisors shall continue for so long as
<PAGE>
Koplar or a trust in which Koplar is a trustee is an investor in Acme and shall
survive any termination of this Agreement.
2. Time Requirements. Notwithstanding anything to the contrary
contained in this Agreement, it is the intent of the parties that Koplar shall
determine, in his reasonable judgment, the amount of time necessary to perform
the Company Services pursuant to this Agreement, and shall devote that amount of
time necessary and appropriate to performing the Company Services. Koplar and
Acme acknowledge that Koplar will be a vice president and a director (or the
equivalent) of the Company.
3. Consulting Fee.
a. In consideration for the Company Services to be provided by
Koplar under this Agreement, Acme shall pay Koplar a fee of One Million and No/
I 00 Dollars ($1,000,000) per year in regular installments ("Consulting Fee")
provided that during the first year of the Initial Term, which initial year
shall expire on September 30, 1998, this Consulting Fee shall be reduced by all
monies paid to Koplar, the sum of which is listed on Schedule I hereto, pursuant
to the Time Brokerage Agreement, dated September 8, 1997, by and among Koplar
Communications, Inc., Koplar Communications Television, L.L.C., Acme and ACME
Television Holdings, L.L.C. Acme shall provide employee benefits to Koplar
similar to those provided to him prior to the effective date of this Agreement.
The cost of such employee benefits for Koplar, including without limitation,
health insurance and other insurance, shall reduce the amount of the Consulting
Fee.
b. In addition to paying the Consulting Fee as provided in a. above,
the Company shall provide Koplar with the following which shall not reduce the
Consulting Fee:
i. Reimbursement for reasonable business expenses (including, but
not limited to, travel and entertainment expenses) incurred by Koplar in
performing the Company Services;
ii. x (6) tickets to at least 25 Cardinals regular season home
baseball games using all the seats presently owned by the Company located behind
home plate ("Home Plate Seats");
iii. Six (6) tickets to at least four (4) Cardinals post season
home baseball games (consisting of at least two (2) playoff and two (2) World
Series games) using the Home Plate Seats (if the Cardinals are in the playoffs
and/or the World Series)-,
iv. Tickets to at least 15 Blues regular season home hockey games
using at least six (6) tickets in the luxury box leased by the Company ("Luxury
Box Seats");
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v. Tickets to at least two (2) Blues post season games in each
round of the playoffs in which the Blues participate (including the Stanley Cup)
using the Luxury Box Seats;
vi. A full time secretary selected by Koplar in his sole
discretion, at a reasonable salary; and
vii. Office space located in the Station's headquarters in St.
Louis, Missouri, that is substantially similar in size, quality, and location as
the office space used by Koplar immediately prior to the Commencement Date.
4. Term.
a. Initial Term. The initial term (the "Initial Term") of the
Company Services provided for in this Agreement shall commence as of the closing
of the purchase by Acme of all the issued and outstanding shares of Stock of the
Company (the "Commencement Date") and shall expire on September 30, 2000
("Scheduled Termination Date"), unless other-wise renewed or terminated.
b. Renewal Term(s). The provisions with respect to the Company
Services provided for in this Agreement shall automatically be renewed after the
Initial Term for successive one year terms (each, a "Renewal Term") unless
either party hereto gives the other party written notice of the termination of
this Agreement at least ninety (90) days prior to the end of the Initial Term or
any effective Renewal Term.
c. Koplar Voluntary Termination. Koplar shall have the right, in
his sole discretion, to terminate the provisions regarding the Company Services
set forth in this Agreement. He may do so by giving Acme written notice of his
intent to do so, effective six (6) months after Acme's receipt of such notice.
Acme may, in its sole discretion, and at any time after such notice from Koplar,
accelerate the effective date of the termination by giving Koplar written notice
of such acceleration. In the event that Koplar exercises his right hereunder to
terminate the Company Services aspects of this Agreement, he shall, nonetheless,
be paid the unpaid and uncommitted (e.g., for benefits for Koplar) balance of
his Consulting Fee upon the effective date of such termination.
6. Default.
a. Should either party to this Agreement be in breach of or
default under this Agreement ("Breaching Party") for such Breaching Party's
nonperformance of a material obligation arising under this Agreement, this
Agreement may be terminated by the other party if such breach shall have
continued for a period of fifteen (I 5) days following the receipt of written
notice by the Breaching Party ("Cure Period") which notice shall indicate the
nature of such
3
<PAGE>
breach or default; provided, however, that there shall be a final accounting of
monies due but unpaid to Koplar under this Agreement.
b. Notwithstanding anything to the contrary contained herein, in
the event that Acme is the Breaching Party and does not cure its default or
breach within the Cure Period, Koplar may terminate this Agreement for cause.
Upon such termination for cause, Acme shall immediately pay Koplar as his sole
and exclusive remedy for such breach:
i. The balance of the Consulting Fee which would have been
payable to Koplar through the remaining portion of the then existing term,
whether Initial or Renewal, had such termination not occurred; and
ii. The amount of $4,000,000, if such termination occurs in
the first year of the Initial Term; the amount of $3,000,000 if such termination
occurs in the second year of the Initial Term; and the amount of $2,000,000 if
such termination occurs in the third year of the Initial Term.
THE PARTIES ACKNOWLEDGE THAT KOPLAR'S ACTUAL DAMAGES UPON DEFAULT BY ACME ARE
DIFFICULT AND IMPRACTICAL TO ESTIMATE. THEREFORE, BY PLACING THEIR INITIALS
BELOW, THE PARTIES EXPRESSLY AGREE THAT THE AMOUNTS SET FORTH IN b.i. AND b.ii.
ABOVE HAVE BEEN AGREED UPON AFTER NEGOTIATION AS THE PARTIES' REASONABLE
ESTIMATE OF KOPLAR'S DAMAGES AND THAT RECEIPT OF SUCH AMOUNTS IS KOPLAR'S
EXCLUSIVE REMEDY AT LAW AND IN EQUITY AGAINST ACME IN THE EVENT OF A DEFAULT BY
ACME.
/s/EJK Koplar /s/DG Acme
------- ------
c. Either (a) if, during the term of Koplar's employ hereunder,
the Station or entity owning the Station sells or determines not to continue to
purchase any or all of its Home Plate Seats (apart from a sale of substantially
all the assets of the Station), or (b) in the event of a termination of this
Agreement for any reason, Koplar shall be offered the right to buy the Home
Plate Seats from the Station (either annually, or "one-shot") or directly from
the St. Louis Cardinals, -to the extent such arrangement is consistent with the
policies of the St. Louis Cardinals.
7. Koplar Interactive Systems International, L.L.C. Acme agrees that
any other television stations which it owns and operates will enter into
agreements with Koplar Interactive Systems International, L.L.C. ("KISI"),
granting KISI the right to encode the broadcast signals of such stations with
KISI's interactive technology upon terms substantially similar to those set
forth in the Broadcast Signal Encoding Agreement ("Encoding Agreement") entered
into between Acme and KISI concurrently herewith. The provisions set forth in
this paragraph 7 shall be binding for the term of the Encoding Agreement and any
extensions or renewals thereof and shall remain in effect regardless of any
termination of this Agreement.
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8. Assignability. Koplar acknowledges that Company has entered into
this Agreement in reliance upon the particular reputation and expertise of
Koplar. This Agreement is personal to Koplar and is not assignable by Koplar, in
whole or in part, voluntarily or by operation of law, without the prior written
approval of Acme.
9. Governing Law, No Third Party Rights. This Agreement and any
dispute arising from this Agreement shall be governed by the internal laws of
the State of Missouri, without regard to conflict of law principles. This
Agreement shall not create any rights or benefits to parties other than Acme and
Koplar.
10. Notices. All notices required in writing under this Agreement
shall be considered as having been given by one party to the other party upon
the latter's receipt of the same. All such notices shall be: (i) transmitted by
registered or certified mail, Federal Express or other overnight delivery
service, or by telex, telegram, or facsimile confirmed by a subsequent written
letter; or (ii) by electronic mail, if confirmed by a subsequent written letter
to the party at the address set forth on the signature page of this Agreement or
such other address if either party provides written notice to the other of any
change of address.
11. Severability. If any court of competent jurisdiction determines
that any of the provisions of this Agreement or any part thereof is or are
invalid or unenforceable, the remainder of the provisions shall not thereby be
affected and shall be given full effect, without regard to invalid portions.
12. Non-Waiver. The failure by either party to enforce any provision
of this Agreement shall not be deemed a waiver of such provision or of either
party's right to enforce each and every provision of this Agreement.
13. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their permitted successors and assigns.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
EDWARD J. KOPLAR
/s/Edward J. Koplar
-----------------------------------
An individual
Notice Address:
500 South Warson Road
Ladue, MO 63124
ACME TELEVISION HOLDINGS, L.L.C.
By: /s/Douglas E. Gealy
-------------------------------
Name:
------------------------------
Title: President & COO
Notice Address:
10829 Olive Blvd., Suite 202
St. Louis, MO 63141
6
FIRST AMENDMENT TO
LLC AGREEMENT OF
ACME TELEVISION HOLDINGS, LLC
This First Amendment is made as of September 30, 1997 by ACME Television
Holdings, LLC (the "Company"), the Management Members, the Seller Member, the
Class A Founder Member, the Class B Founder Members and the Investor Members,
each as listed on SCHEDULE A hereto, for the purpose of amending the LLC
Agreement of the Company dated as of June 17, 1997, (the "LLC Agreement"). All
capitalized terms used herein and not defined shall have the respective meanings
ascribed to them in the LLC Agreement.
WHEREAS, the parties hereto desire to amend the LLC Agreement to, among
other things, increase the number of Membership Units authorized for issuance,
admit new Members to the Company and change the composition and the voting
rights of the Board of Advisors of the Company;
WHEREAS, Section 11.06 of the LLC Agreement provides that amendments to
the LLC Agreement may be made with the consent of the holders of at least 60% of
the Class B Founder Units; and
WHEREAS, the undersigned holders of all of the Class B Founder Units
desire to amend the LLC Agreement pursuant to this First Amendment.
NOW, THEREFORE, the parties hereto agree as follows:
1. AMENDMENTS.
(a) Article 1 of the LLC Agreement is hereby amended to add the
following defined terms:
"St. Louis Acquisition" shall mean the transactions contemplated
by that certain Stock Purchase Agreement among the Company, Koplar
Communications, Inc. and its stockholders pursuant to which the Company or a
subsidiary formed for the purpose has agreed to acquire for $146.0 million all
of the outstanding capital stock of Koplar Communications, Inc. upon the terms
and conditions set forth therein, and the Time Brokerage Agreement and Escrow
Agreement, each dated September 8, 1997 among the Company, Koplar
Communications, Inc. and its stockholders.
"Salt Lake City Acquisition" shall mean the transactions
contemplated by that certain agreement among the Company and the members of
Roberts Broadcasting of Salt Lake City, L.L.C., pursuant to which the Company or
a subsidiary formed for the purpose has agreed to acquire for $14.0 million all
of the ownership interest in Roberts Broadcasting of Salt Lake City, L.L.C.
<PAGE>
"Media Enterprise" shall mean any Person that, directly or
indirectly, owns, controls, or operates a broadcast radio or television station,
cable or wireless cable television system, daily newspaper or any communications
facility operated pursuant to a license granted by the FCC.
(b) Subparagraph (d) of Section 3.02 of the LLC Agreement is amended
and restated to read as follows:
"FOUNDER UNITS. The Company hereby authorizes for issuance
1,475.83 Founder Units, each of which shall represent a Capital
Contribution of $1,000 and have a Preferential Return Amount of
$1,500. 942.5 of such Founder Units shall be designated Class A
Founder Units and 533.33 of such Founder Units shall be
designated Class B Founder Units. As of the date hereof, the
Company shall have issued all of the Class A Founder Units to the
Class A Founder Members, as set forth on SCHEDULE A hereto, and
all of the Class B Founder Units to the Class B Founder Members,
as set forth on SCHEDULE A hereto. Except for the voting and
consensual rights applicable to the Class B Founder Units as
expressly provided herein, the holders of each class of Founder
Units shall have the identical rights and preferences under this
Agreement."
(c) Subparagraph (b) of Section 3.03 of the LLC Agreement is hereby
amended and restated to read as follows:
"Notwithstanding anything herein which may be construed to the
contrary and so long as no Voting Event has occurred that has
not been waived in writing, the holders of the Management Carry
Units shall have the sole right to elect and remove the members
of the Board of Advisors. The size of the Board of Advisors
shall be set at three (3) members who shall initially be Jamie
Kellner, Tom Allen and Doug Gealy (the "Management Members");
provided, however, that upon the consummation of the St. Louis
Acquisition the Board of Advisors may be increased to four (4)
members and the vacancy created thereby shall be filled by an
individual appointed by Edward J. Koplar or his assigns
(together with the Management Members, the "Initial Advisors").
Upon the consummation of the Salt Lake City Acquisition the
Board of Advisors may be further increased by one member and the
vacancy created thereby shall be filled by an individual
appointed by Michael Roberts or his assigns. No later than
December 17, 1997 the size of the Board of Advisors shall be
increased and two additional individuals (the "Outside
Advisors") shall be elected by the holders of the Management
Carry Units to the Board of Advisors who are unaffiliated with
the Management Members and who are reasonably acceptable to both
(i) the holders of a majority in interest of the Management Carry
Units and (ii) the holders of at least 60% in interest of the
Class B Founder Units. So long as no
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Voting Event has occurred that has not been waived in writing,
at each meeting of the Board of Advisors, each Initial Advisor,
regardless of the number of members of the Board of Advisors as
of the date of such meeting or the number of members of the
Board of Advisors in attendance at such meeting, shall be
entitled to two (2) votes on each matter to be voted on at such
meeting and each other member of the Board of Advisors shall be
entitled to one (1) vote on each matter to be voted on at such
meeting.
(d) Subparagraph (c) of Section 3.03 of the LLC Agreement is hereby
amended to add the following to the beginning of the first sentence in
place of the first word of such sentence:
"Notwithstanding anything to the contrary in subparagraph (b)
herein and so..."
(e) The following new section is hereby added to the LLC Agreement:
3.12 MEMBER INSULATION.
(a) For so long as, and only during periods from time to time in
which the Company shall directly or indirectly hold (or otherwise be
attributed with) an ownership or other interest in a Media Enterprise
that is "attributed" to the Company under the FCC Rules relating to the
particular FCC service in which the Media Enterprise operates, no
provision of this Agreement shall be construed to permit any Member
(other than an Excluded Member (as hereinafter defined)), or any person
or entity that is a director, officer, partner, employee, or 5% or
greater shareholder or other owner of a Member (an "INSULATED MEMBER
AFFILIATE"), to do any of the following:
(i) act as an employee of the Company if such Members
or Member Affiliate's functions, directly or indirectly, relate
to such Media Enterprise;
(ii) serve, in any material capacity, as an independent
contractor or agent of the Partnership with respect to such Media
Enterprise;
(iii) communicate with the Media Enterprise on matters
pertaining to the day-to-day operations of such Media Enterprise;
(iv) vote to admit any additional Member to the Company;
(v) vote to amend or modify this section of the LLC
Agreement;
(vi) perform any services for the Company materially
relating to such Media Enterprise, with the exception of making
loans to, or acting as a surety for, such Media Enterprise or the
Partnership; or
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<PAGE>
(vii) become actively involved in the management or
operation of such Media Enterprise.
(b) Notwithstanding any other provision of this LLC Agreement to
the contrary: (i) a Member that would otherwise be subject to the
restrictions set forth in Section 3.12(a) may elect to be treated as an
excluded member (an "Excluded Member") for purposes of this Section 3.12
by giving notice thereof in writing to the other Members and (ii)
nothing in this Section 3.12 shall be deemed to prevent the Class B
Founder Members or any other Members from exercising any of their rights
specified under this LLC Agreement.
(f) Section 4.03 of the LLC Agreement is hereby amended to revise the
first sentence of such section to read as follows:
"All actions to be taken by the Board of Advisors
of the Company shall be taken by vote or written consent of a
majority of the votes held by Members of the Board of Advisors
then in office."
(g) Subparagraph (b) of Section 6.04 of the LLC Agreement is hereby
amended and restated to read as follows:
"Holders of Investor Units, Seller Units and Class B Founder
Units may Transfer such Investor Units, Seller Units and Class B
Founder Units to any other Investor Member, Seller Member or
Class B Founder Member or to a partner or Affiliate of such
Investor Member, Seller Member or Class B Founder Member or to
any other investment fund or other entity for which such Investor
Member, Seller Member or Class B Founder Member and/or one or
more partners, managers, advisers or Affiliates thereof, directly
or indirectly through one or more intermediaries, serve as
general partner or manager or in a like capacity."
(h) SCHEDULE A to the LLC Agreement is hereby amended and restated as
attached hereto.
2. EFFECT. Except as amended hereby, the LLC Agreement shall remain in
full force and effect in accordance with its terms. By signing this First
Amendment to the LLC Agreement each signatory shall become a party to the LLC
Agreement, and shall be subject to all provisions of the LLC Agreement
3. GOVERNING LAW. This Amendment and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of Delaware.
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<PAGE>
4. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
[Remainder of page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
ALTA ACME, INC.
/s/ Brian W. McNeill
BY:___________________________________________
Name: Brian W. McNeill
Title: President
CEA ACME, INC.
/s/ James J. Collis
BY:____________________________________________
Name: James A. Collis
Title: President
BANCBOSTON VENTURES INC.
/s/ Lars A. Swanson
BY:____________________________________________
Name: Lars A. Swanson
Title: Vice President
ACME TELEVISION HOLDINGS, LLC
/S/ Douglas Gealy
BY:____________________________________________
Name: Douglas Gealy
Title: President & COO
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/s/ Jamie Kellner
___________________________________________
Jamie Kellner
/s/ Doug Gealy
___________________________________________
Doug Gealy
/s/ Tom Allen
___________________________________________
Tom Allen
7
<PAGE>
CHANNEL 32 INCORPORATED
/s/ Daniel J. Alderman
BY:____________________________________________
Name: Daniel J. Alderman
Title: Executive Vice President
8
<PAGE>
TCW SHARED OPPORTUNITY FUND II, L.P.
By TCW Investment Management Company,
as General Partner
/s/ Melissa V. Weiler
BY:____________________________________________
Name: Melissa V. Weiler
Title: Managing Director
/s/ Darryl L. Schall
BY:____________________________________________
Name: Darryl L. Schall
Title: Senior Vice President
TCW LEVERAGED INCOME TRUST, L.P.
By TCW Investment Management Company,
its Investment Manager
/s/ Melissa V. Weiler
BY:____________________________________________
Name: Melissa V. Weiler
Title: Managing Director
/s/ Darryl L. Schall
BY:____________________________________________
Name: Darryl L. Schall
Title: Senior Vice President
TCW Advisers (Bermuda), Ltd., as General
Partner
/s/ Mark L. Attanasio
BY:____________________________________________
Name: Mark L. Attanasio
Title: Group Managing Director
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<PAGE>
LINC ACME, Corporation
/s/ Melissa V. Weiler
BY:____________________________________________
Name: Melissa V. Weiler
Title: Managing Director
/s/ Darryl L. Schall
BY:____________________________________________
Name: Darryl L. Schall
Title: Senior Vice President
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POST TOTAL RETURN FUND, L.P.
By Post Advisory Group, Inc.,
as General Partner
/s/ Lawrence A. Post
BY:____________________________________________
Name: Lawrence A. Post
Title: President
CANYON PARTNERS
The Canyon Value Realization Fund
(Cayman), Ltd.
/s/ Roger H. Hanson
BY:____________________________________________
Name: Roger H. Hanson
Title: Director
CANYON PARTNERS
The Value Realization Fund, L.P.
Canpartners Investments III, L.P.
BY:____________________________________________
` Canyon Capital Management, L.P.
BY:____________________________________________
Canpartners Incorporated
BY:____________________________________________
/s/ Mitchell R. Julls
BY:____________________________________________
Name: Mitchell R. Julls
Title: Vice President
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CONTINENTAL CASUALTY COMPANY
/s/ Richard W. Dubberke
BY:____________________________________________
Name: Richard W. Dubberke
Title: Vice President
CONTINENTAL CASUALTY COMPANY,
on behalf of its Designated High Yield
Subaccount
/s/ Richard W. Dubberke
BY:____________________________________________
Name: Richard W. Dubberke
Title: Vice President
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
By its Attorney-in-fact
Lincoln Investment Management
/s/ Mark Golenzer
BY:____________________________________________
Name: Mark Golenzer
Title: Vice President
12
<PAGE>
CAPITAL RESEARCH AND MANAGEMENT COMPANY,
on behalf of American High-Income Trust
/s/ Richard T. Schotte
BY:____________________________________________
Name: Richard T. Schotte
Title:
CAPITAL RESEARCH AND MANAGEMENT COMPANY,
on behalf of American Variable Insurance
Series - High Yield Bond Fund
/s/ Richard T. Schotte
BY:____________________________________________
Name: Richard T. Schotte
Title:
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ACME TELEVISION HOLDINGS, LLC
SCHEDULE A
INVESTOR UNITS NO. OF UNITS
BancBoston Ventures Inc 8,491.67
TCW Shared Opportunity Fund II, L.P. 1,590.88
Capital Research and Management Company 1,087.53
Continental Casualty Company 1,685.62
Lincoln National Life Insurance Company 543.74
Canyon Partners 163.11
Post Advisory Group, Inc. 54.41
CIBC Wood Gundy 4,593.75
SELLER UNITS
Channel 32 Incorporated 4,400
MANAGEMENT CAPITAL UNITS
Gealy 160
Allen 150
Kellner 290
CLASS A FOUNDER UNITS
ACME Capital Partners 942.5
CLASS B FOUNDER UNITS
Alta ACME, Inc. 133.34
CEA ACME, Inc. 133.34
BancBoston Ventures Inc. 133.34
TCW Shared Opportunity Fund II, L.P. 33.34
LINC ACME, Corporation 100.00
MANAGEMENT CARRY UNITS
Gealy 30
Allen 30
Kellner 40
GUARANTY
(New Mexico Companies)
THIS GUARANTY is made as of December 2, 1997 by ACME TELEVISION HOLDINGS OF
NEW MEXICO, LLC, ACME TELEVISION LICENSES OF NEW MEXICO, LLC, and ACME
TELEVISION OF NEW MEXICO, LLC, each a Delaware limited liability company
(collectively, the "Guarantors" and each individually, a "Guarantor"), to and
with CANADIAN IMPERIAL BANK OF COMMERCE, as agent (in such capacity, together
with its successors and assigns in such capacity, the "Agent") on behalf of CIBC
Inc. and the other financial institutions who are or who become Lenders under,
and as defined in, the Credit Agreement referred to below and any Affiliates of
such Lenders with whom the Borrower (as defined below) shall maintain any Rate
Hedging Obligations (collectively, the "Lenders").
RECITALS
A. Acme Television, LLC, a Delaware limited liability company (the
"Borrower"), certain of the Lenders and the Agent are parties to that certain
Credit Agreement dated as of August 15, 1997, as amended pursuant to a First
Amended and Restated Credit Agreement of even date herewith (as the same may be
amended, restated, renewed, replaced, supplemented or otherwise modified from
time to time, the "Credit Agreement"), providing, subject to the terms and
conditions thereof, for certain credit extensions to be made by such Lenders to
the Borrower, including, without limitation, revolving advances to be evidenced
by Borrower's secured Revolving Credit Notes of even date herewith issued
pursuant thereto in the aggregate principal amount of $40,000,000 (as amended,
restated, supplemented and otherwise modified from time to time and including
all substitutions therefor and replacements thereof, the "Notes"). Capitalized
terms used herein without definition have the meanings assigned to them in the
Credit Agreement.
B. The Guarantors expect to receive substantial direct and indirect
benefits from the Borrower pursuant to the Credit Agreement (which benefits are
hereby acknowledged).
C. It is a condition to the Agen's and such Lenders' willingness to enter
into the Credit Agreement and provide to the Borrower the financing contemplated
thereby that each Guarantor shall have guaranteed, subject to the terms hereof,
the obligations of the Borrower under the Credit Agreement, Notes and certain
other agreements as hereinafter provided, including, without limitation, the
punctual payment under the Notes of both principal and interest.
D. Each Guarantor is willing and has voluntarily and freely agreed to
guaranty the payment of the aforesaid obligations as hereinafter provided.
NOW, THEREFORE, in order to induce the Lenders and the Agent to enter into
the aforesaid loan transactions and to make said loans to the Borrower, and in
consideration of the premises and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each Guarantor hereby
covenants and agrees as follows:
<PAGE>
1. Guaranty. (a) Each Guarantor, as primary obligor and not merely as
surety, hereby absolutely, unconditionally and irrevocably guarantees: (i) the
performance of all obligations of the Borrower under the Credit Agreement; (ii)
the due and punctual payment in full (and not merely the collectibility) of the
Notes, including without limitation all principal thereof and all interest
payable thereon, at the interest rates provided therein and in the Credit
Agreement and regardless of the extent allowed as a claim in any proceeding in
respect of the bankruptcy, reorganization or insolvency of the Borrower, any
Guarantor or any of their respective Affiliates (a "Reorganization"), in each
case when due and payable, according to the terms of the Notes and the Credit
Agreement, whether at stated maturity, by reason of acceleration or otherwise;
(iii) the due and punctual payment in full (and not merely the collectibility)
of all other sums and charges which may at any time be due and payable in
accordance with, or under the terms of, the Notes or the Credit Agreement,
whether at stated maturity, by reason of acceleration or otherwise; (iv) the due
and punctual payment in full of all such Rate Hedging Obligations as may be due
from time to time; (v) the due and punctual payment in full (and not merely the
collectibility), performance and observance of all other indebtedness,
liabilities, obligations, terms, covenants and conditions contained in the Loan
Documents, whether now or hereafter existing, on the part of the Borrower, any
Guarantor or any of their respective Affiliates to be paid, performed or
observed; (vi) the accuracy of the representations and warranties made by the
Borrower, the Guarantors and their respective Affiliates in the Loan Documents;
and (vii) the due and punctual payment and performance in full (and not merely
the collectibility) of any and all other future advances and other obligations,
indebtedness, obligations and liabilities of the Borrower, the Guarantors and
their respective Affiliates to the Lenders and the Agent of every kind and
description, whether now existing or hereafter arising, whether direct, indirect
or contingent, whether secured or unsecured, and howsoever evidenced, incurred
or arising, including without limitation any future loans and advances made to
the Borrower, any Guarantor or any such Affiliate by any of the Lenders prior
to, during or following any Reorganization (all of the foregoing being
collectively hereinafter called the "Obligations"). All Obligations paid by the
Guarantors hereunder shall be paid in U.S. Dollars at the place of payment
designated therefor by the Agent in immediately available funds.
(b) Notwithstanding any provision contained in this Guaranty or any
security agreement or other agreement now or hereafter securing this Guaranty
including, without limitation, the Security and Pledge Agreements of even date
herewith among the Guarantors and the Agent (as the same may be amended,
restated, renewed, replaced, supplemented or otherwise modified from time to
time, collectively, hereinafter the "Security Agreement"; the foregoing,
together with any and all other agreements now or hereafter securing this
Guaranty being collectively referred to herein as the "Guaranty Documents") to
the contrary, it is the intention and agreement of each Guarantor, the Agent and
the Lenders that the obligations of such Guarantor under this Guaranty shall be
valid and enforceable against such Guarantor to the maximum extent permitted by
applicable law. Accordingly, if any provision of this Guaranty creating any
obligation of any Guarantor in favor of the Agent and the Lenders shall be
declared to be invalid or unenforceable in any respect or to any extent, it is
the stated intention and agreement of such Guarantor, the Agent and the Lenders
that any balance of the obligation created by such provision and all other
obligations of such Guarantor to the Agent and the Lenders created by other
provisions of this
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Guaranty shall remain valid and enforceable. Likewise, if any sums which the
Agent and the Lenders may be otherwise entitled to collect from such Guarantor
under this Guaranty shall be declared to be in excess of those permitted under
any law (including any federal or state fraudulent conveyance or like statute or
rule of law) applicable to such Guarantor's obligations under this Guaranty, it
is the stated intention and agreement of such Guarantor, the Agent and the
Lenders that all sums not in excess of those permitted under such applicable law
shall remain fully collectible by the Agent and the Lenders from such Guarantor
and such excess sums shall nevertheless survive as a subordinate obligation of
such Guarantor, junior in right to the claims of general unsecured creditors,
but prior to the claims of equityholders in such Guarantor. This provision shall
control every other provision of the Guaranty Documents.
(c) This Guaranty (as the same may be amended, modified, supplemented,
replaced or extended from time to time) and all obligations, indebtedness or
liabilities of the Guarantors arising hereunder shall be secured by the Security
Agreement.
2. Subsequent Changes. Each Guarantor expressly agrees that the Agent and
each Lender may, in its sole and absolute discretion, without notice to or
further assent of such Guarantor and without in any way releasing, affecting or
impairing the obligations and liabilities of such Guarantor hereunder: (i) waive
compliance with, or any default under, or grant any other indulgences with
respect to, the Obligations; (ii) modify, amend or change any provisions of the
Obligations; (iii) grant extensions or renewals of or with respect to the
Obligations, and/or effect any release, compromise or settlement in connection
therewith; (iv) agree to the substitution, exchange, release or other
disposition of the Borrower or of all or any part of the collateral securing the
Obligations; (v) make advances for the purpose of performing any term or
covenant contained in the documents evidencing the Obligations, with respect to
which the Borrower shall be in default; (vi) subject to the provisions of the
Credit Agreement, assign or otherwise transfer the Obligations, including,
without limitation, this guaranty, or any interest therein; (vii) deal in all
respects with the Borrower, the Obligations or any collateral securing the
Obligations as if this guaranty were not in effect; (viii) extend credit to the
Borrower whether or not (A) notice of election to terminate any of the Loan
Documents or any other agreement among the Agent, the Lenders and the Borrower
has been given by the Agent or the Borrower, (B) the limit of borrowings under
the Loan Documents has been or will be exceeded or (C) any Event of Default, or
any event which with notice or lapse of time, or both, would constitute an Event
of Default, has occurred under the Loan Documents or any other agreement among
the Agent, the Lenders and the Borrower; (ix) replace any existing obligations
and the documentation therefore with an amended and restated obligation and the
documentation therefor; and (x) settle or compromise any or all of the
obligations with the Borrower, and/or any other person or persons liable
therein, and/or subordinate the payment of same or any part hereof to the
payment of any other debts or claims which may at any time be due or owing to
the Agent, any Lender and/or other person.
3. Direct and Absolute Obligation. The liability of each Guarantor under
this Guaranty shall be primary, direct and immediate and not conditional or
contingent upon pursuit by the Agent or any Lender of any remedies it may have
against the Borrower or any other party with respect to the Obligations, whether
pursuant to the terms of the Loan Documents or otherwise. The obligations of
each Guarantor under this Guaranty shall be absolute and unconditional,
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irrespective of the genuineness, validity, regularity, enforceability or
priority of the Loan Documents, the Obligations or any other circumstances which
might otherwise constitute a legal or equitable discharge of a surety or
guarantor and without regard to any counterclaim, setoff, declaration or defense
of any kind which any party obligated under the Loan Documents or any other
document evidencing or securing any of the Obligations may have or assert. No
exercise or nonexercise by the Agent or any Lender of any right given to it
hereunder or under the Loan Documents, and no change, impairment or suspension
of any right or remedy of the Agent or any Lender, shall in any way affect any
of such Guarantor's obligations hereunder or give such Guarantor any recourse
against the Agent or any Lender. Without limiting the generality of the
foregoing, neither the Agent nor any Lender shall be required to make any demand
on the Borrower and/or any other party, or otherwise pursue or exhaust its
remedies against the Borrower or any other party, before, simultaneously with or
after, enforcing its rights and remedies hereunder against such Guarantor. Any
one or more successive and/or concurrent actions may be brought hereon against
such Guarantor, either in the same action, if any, brought against the Borrower
and/or any other party, or in separate actions, as often as the Agent, in its
sole discretion, may deem advisable.
4. Waivers. (a) Each Guarantor hereby expressly waives: (i) diligence,
presentment and demand for payment and protest of nonpayment; (ii) notice of
acceptance of this Guaranty and of presentment, demand, dishonor and protest;
(iii) demand for observance or performance of, or enforcement of, any terms or
provisions of this Guaranty or the Loan Documents; (iv) notice of extensions of
credit by the Agent or the Lenders to the Borrower and of any change in the rate
at which interest accrues under the Loan Documents or the other Obligations; (v)
all other notices and demands otherwise required by law which such Guarantor may
lawfully waive; (vi) the right to assert in any action or proceeding hereupon
any setoff, counterclaim or other claim which it may have against the Agent or
any Lender; and (vii) the benefit of all other principles or provisions of law,
statutory or otherwise, which are or might be in conflict with the terms hereof.
As further consideration for the loan or loans by the Agent and the Lenders to
the Borrower and as a material inducement to the Agent and the Lenders to make
the loan or loans and accept this Guaranty, each Guarantor hereby irrevocably
waives, disclaims and relinquishes all claims, whether based in equity or law,
whether by contract, statute or otherwise, that such Guarantor might now or
hereafter have against the Borrower or any other person that is primarily or
contingently liable on the Obligations guarantied hereby or that arise from the
existence or performance of such Guarantor's obligations under this Guaranty,
including, but not limited to, any right of subrogation, reimbursement,
exoneration, contribution, indemnification, or participation in any claim or
remedy of the Borrower against the Agent or any Lender or any collateral
security that the Agent or any Lender now has or hereafter acquires.
(b) Each Guarantor is presently informed of the financial condition of the
Borrower and of all of the circumstances which a diligent inquiry would reveal
and which bear upon the risk of nonpayment of the obligations. Each Guarantor
hereby covenants and agrees that such Guarantor will continue to keep itself
informed of the Borrower's financial condition, the status of other guarantors,
sureties, or other parties liable with respect to the Obligations, if any, and
of all of the circumstances which bear upon the risk of nonpayment. Absent a
written request for such information by such Guarantor to the Agent, such
Guarantor hereby waives its right if any,
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to require the Agent to disclose to such Guarantor any information which the
Agent may now or hereafter require concerning such condition or circumstances,
including, without limitation, the release of or revocation by any other
guarantor or other party liable with respect to the Obligations.
5. Unenforceability of Obligations against Borrower. If for any reason the
Borrower has no legal existence or is under no legal obligation to discharge any
of the Obligations, or if any of the Obligations have become irrecoverable from
the Borrower by reason of the Borrower's insolvency, bankruptcy or
reorganization or by other operation of law or for any other reason, this
Guaranty shall nevertheless be binding on each Guarantor to the same extent as
if such Guarantor at all times had been the principal obligor on all such
Obligations. In the event that acceleration of the time for payment of any of
the Obligations is stayed upon the insolvency, bankruptcy or reorganization of
the Borrower or for any other reason, all such amounts otherwise subject to
acceleration under the terms of the Credit Agreement, the Notes, the other Loan
Documents or any other agreement evidencing, securing or otherwise executed in
connection with any Obligation shall be immediately due and payable by such
Guarantor.
6. Instrument for the Payment of Money. Each Guarantor hereby acknowledges
that this Guaranty constitutes an instrument for the payment of money, and
consents and agrees that Agent, at its sole option on behalf of Lenders, in the
event of a dispute by such Guarantor in the payment of monies due hereunder,
shall have the right to bring motion-action under New York CPLR Section 3213.
7. Representations and Warranties. Each Guarantor hereby represents and
warrants to the Agent and the Lenders (which representations and warranties
shall survive the delivery of this Guaranty) that:
(a) Such Guarantor (i) is a limited liability company duly organized
and validly existing and in good standing under the laws of the
State of Delaware and is duly qualified to transact business in
the State of New Mexico and in each jurisdiction where because of
the nature of its business or property such qualification is
required, except where failure to be so qualified would not have
a Material Adverse Effect, (ii) has full power and authority to
own its properties and assets and to carry on its business as now
being conducted and as presently contemplated, and (iii) has full
power and authority to execute and deliver, and perform its
obligations under, the Guaranty Documents to which it is a party
or signatory.
(b) The execution and delivery of, and performance by such Guarantor
of its obligations under, the Guaranty Documents are within its
power, have been duly authorized by all requisite action and do
not and will not violate any provision of law, any order,
judgment or decree of any court or other agency of government,
the articles of organization or operating agreement of such
Guarantor or any indenture, agreement or other
5
<PAGE>
instrument to which such Guarantor is a party, or by which such
Guarantor is bound, or be in conflict with, result in a breach
of, or constitute (with due notice or lapse of time or both) a
default under, or result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of
the property or assets of Guarantor pursuant to, any such
indenture, agreement or instrument except where such violation,
conflict or default would not have a Material Adverse Effect.
Each of the Guaranty Documents constitutes the valid and binding
obligation of such Guarantor enforceable against it in accordance
with its terms subject, however, to bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the rights
and remedies of creditors generally or the application of
principles of equity, whether in any action in law or proceeding
in equity, and subject to the availability of the remedy of
specific performance or of any other equitable remedy or relief
to enforce any right under any such agreement.
(c) Except as set forth in Section 4.04 of the Credit Agreement, such
Guarantor is not required to obtain any consent, approval or
authorization from, or to file any declaration or statement with,
any governmental instrumentality or other agency, or any other
person, in connection with or as a condition to the execution,
delivery or performance of any of the Guaranty Documents.
(d) There is no action, suit or proceeding at law or in equity or by
or before any governmental instrumentality or other agency,
including any arbitration board or tribunal, now pending or, to
the knowledge of such Guarantor, threatened (nor is any basis
therefor known to such Guarantor), (i) which questions the
validity of any of the Guaranty Documents, or any action taken or
to be taken pursuant hereto or thereto, or (ii) against or
affecting such Guarantor which, if adversely determined, either
in any case or in the aggregate, would have a Material Adverse
Effect.
(e) Such Guarantor is not in violation of any provision of its
articles of organization or operating agreement and, except as
set forth in the Credit Agreement, such Guarantor is not in
violation of any material indenture, agreement or instrument to
which it is a party or by which it is bound or, to the best of
such Guarantor's knowledge and belief, of any provision of law,
or any order, judgment or decree of any court or other agency of
government, the violation of any of which could have a Material
Adverse Effect.
(f) Such Guarantor is solvent as set forth in Section 4.11 of the
Credit Agreement; such Guarantor is not contemplating either the
filing of a
6
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petition by such Guarantor under any state or federal bankruptcy
or insolvency laws or, except as provided in the Credit
Agreement, the liquidating of all or a major portion of its
property; and such Guarantor has no knowledge of any person
contemplating the filing of any such petition against it.
8. Affirmative and Negative Covenants. Each Guarantor hereby covenants and
agrees that, until payment in full of the Obligations, such Guarantor will:
(a) Furnish to the Agent the financial statements as required under
the Credit Agreement and such other information regarding the
business affairs and financial condition of such Guarantor, as
the Agent may reasonably request.
(b) Permit employees, agents and representatives of the Agent and the
Lenders to inspect, at any time during normal business hours, its
premises and its books and records and to make abstracts or
reproductions thereof as and to the extent provided by the Credit
Agreement. In connection with any such inspections, the Agent
will use reasonable efforts to avoid an unreasonable disruption
of the Companies' businesses and, to the extent possible or
appropriate absent any Default (as defined in the Credit
Agreement), will give reasonable notice thereof.
(c) Not dissolve, liquidate, merge or consolidate such Guarantor or
otherwise modify such Guarantor's limited liability company
existence or name, except as expressly provided in the Credit
Agreement, provided such Guarantor may merge with and into the
Borrower or any of the other Guarantors or Companies with the
Borrower or such other entity as the surviving entity; and,
except as expressly provided in the Credit Agreement, not amend
its articles of organization or operating agreement in any manner
that could have a Material Adverse Effect (it being expressly
agreed that the inclusion in any such charter documents of any
provisions similar to those set forth in Section 102(b)(2) of
Title 8 of the Delaware Code is prohibited under this Section);
and not take any action to contravene the terms of the Credit
Agreement.
(d) Comply with all of the covenants and other provisions of the
Credit Agreement which apply to it.
9. Events of Default. In each case of the happening of an "Event of
Default" as defined in the Credit Agreement (each of which is herein sometimes
called an "Event of Default"), then and upon any such Event of Default and at
any time thereafter during the continuance of such Event of Default, at the
election of the Agent on behalf of the Lenders (or automatically in the case of
certain Events of Default as specified in the Credit Agreement), the Notes and
the Obligations and any and all other obligations of the Borrower and each
Guarantor and either of
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<PAGE>
them to the Agent and the Lenders shall for the purposes of this Guaranty
immediately become due and payable, both as to principal and interest, without
presentment, demand, or protest, all of which are hereby expressly waived,
anything contained herein or in the Notes or other evidence of such Obligations
to the contrary notwithstanding.
10. Notices. All notices, requests, demands and other communications
provided for hereunder shall be in writing (including telecopied communication)
and mailed or telecopied or delivered to the Agent at the address provided for
Agent in the Credit Agreement and to each Guarantor at the address provided for
Borrower in the Credit Agreement or, as to each party, at such other address as
shall be designated by such parties in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communication shall be deemed given upon receipt by
the party to whom such notice is directed.
11. Place of Payment. Any payments made by any Guarantor under the
provisions of this Guaranty shall be made to the Agent at its office at the
address set forth above unless some other address is hereafter designated by the
Agent.
12. Setoff. Each Guarantor hereby agrees that the Agent and the Lenders
shall have a lien and upon the occurrence and during the continuance of an Event
of Default a right to setoff for all liabilities whether or not matured arising
out of this Guaranty upon and against all deposits, credits, and property of
such Guarantor now or hereafter in the possession or control of the Agent or any
Lender or in transit to it, whether or not Agent and Lenders are otherwise fully
secured.
13. Subordination, Assignment & Transfer. Until the payment and performance
in full of all Obligations, each Guarantor shall not accept or retain any
distribution or other payment from the Borrower unless the same is permitted
under the terms of the Credit Agreement or otherwise consented to by the
Required Lenders. Each Guarantor further agrees with the Agent and the Lenders
(a) that all of the present and future indebtedness of the Borrower to such
Guarantor shall be and hereby is subordinated to, assigned and transferred as
collateral to the Agent on behalf of the Lenders and pledged and made security
for the payment of all Obligations; (b) that such Guarantor contemporaneously
herewith and from time to time hereafter shall on request execute such further
endorsements, assignments or other proper transfers as the Agent may request
further to evidence the assignment hereby agreed to and made; and (c) that such
Guarantor hereby appoints irrevocably the Agent as such Guarantor's
attorney-in-fact in its name to demand and enforce payment of said indebtedness,
to prove all claims, receive all dividends and take all other action on said
indebtedness in any liquidation or any proceedings whatsoever affecting the
Borrower or its property under any bankruptcy or other laws now or hereafter in
effect for the relief of debtors and in general to do any act or take any action
in regard to said indebtedness which such Guarantor might otherwise do.
14. Termination of Guaranty. This Guaranty is a continuing Guaranty and
shall remain in full force and effect until the indefeasible payment in full in
cash (or other property
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<PAGE>
acceptable to the Lenders, in their sole discretion) of the Obligations or the
termination by the Agent, the Lenders and the Borrower of the Credit Agreement.
15. Borrower's Insolvency. The obligations of each Guarantor to make
payment in accordance with the terms of this Guaranty shall not be impaired,
modified, changed, released or limited in any manner whatsoever by any
impairment, modification, change, release or limitation of the liability of the
Borrower or its estate, in bankruptcy or reorganization resulting from the
operation of any present or future provision of the U.S. Bankruptcy Code or
other statute or from the decision of any court. Each Guarantor agrees that in
the event any amounts referred to herein are paid in whole or in part by the
Borrower or by such Guarantor, such Guarantor's liability hereunder shall
continue and remain in full force and effect in the event that all or any part
of any such payment is recovered from the Agent or any Lender as a preference,
fraudulent transfer or similar payment under any bankruptcy, insolvency or
similar law. Each Guarantor further agrees that this Guaranty includes the costs
incurred by the Agent and any Lender in defending any claim or suit seeking such
recovery.
16. Nonwaiver of Rights. All rights and remedies afforded to the Agent and
the Lenders by reason of this Guaranty and the Loan Documents or by law are
separate and cumulative and the exercise of one shall not in any way limit or
prejudice the exercise of any other such rights or remedies. No delay or
omission by the Agent or any Lender in exercising any such right or remedy shall
operate as a waiver thereof. No waiver of any rights and remedies hereunder, and
no modification or amendment hereof, shall be deemed made by the Agent and the
Lenders unless in writing and duly executed. Any such written waiver shall apply
only to the particular instance specified therein and shall not impair the
further exercise of such right or remedy or of any other right or remedy of the
Agent and the Lenders, and no single or partial exercise of any right or remedy
hereunder shall preclude further exercise of any other right or remedy.
17. Obligations Joint and Several. The obligations of each Guarantor
hereunder shall be joint and several with each other Guarantor hereunder.
18. CONSENT TO JURISDICTION. EACH GUARANTOR, TO THE EXTENT THAT SUCH
GUARANTOR MAY LAWFULLY DO SO, HEREBY CONSENTS TO THE JURISDICTION OF THE COURTS
OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK, AS WELL AS TO THE JURISDICTION OF ALL COURTS TO WHICH AN
APPEAL MAY BE TAKEN FROM SUCH COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR
OTHER PROCEEDING ARISING OUT OF SUCH GUARANTOR'S OBLIGATIONS UNDER OR WITH
RESPECT TO THIS GUARANTY AND THE GUARANTY DOCUMENTS, AND EXPRESSLY WAIVES ANY
AND ALL OBJECTIONS SUCH GUARANTOR MAY HAVE AS TO VENUE INCLUDING, WITHOUT
LIMITATION, THE INCONVENIENCE OF SUCH FORUM, IN ANY OF SUCH COURTS. IN ADDITION,
TO THE EXTENT THAT IT MAY LAWFULLY DO SO, SUCH GUARANTOR CONSENTS TO THE SERVICE
OF PROCESS BY PERSONAL SERVICE OR U.S. CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, ADDRESSED TO SUCH GUARANTOR IN CARE OF THE
9
<PAGE>
BORROWER AT THE ADDRESS PROVIDED IN THE CREDIT AGREEMENT. TO THE EXTENT SUCH
GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY
COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, SUCH GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY
IN RESPECT OF ITS OBLIGATIONS UNDER THIS GUARANTY.
19. WAIVER OF TRIAL BY JURY. EACH GUARANTOR HEREBY VOLUNTARILY AND
IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT IN OR WITH RESPECT TO
THIS GUARANTY, THE GUARANTY DOCUMENTS OR ANY OTHER AGREEMENTS EXECUTED IN
CONNECTION HEREWITH.
20. Governing Law. This Guaranty shall be construed in accordance with and
governed by the laws of the State of New York applicable to contracts made and
performed in said state. It is intended that this Guaranty shall take effect as
a sealed instrument.
21. Successors. This Guaranty shall inure to the benefit of, and be
enforceable by, the Agent and its permitted successors and assigns as provided
in the Credit Agreement on behalf of the Lenders, and shall be binding upon, and
enforceable against, each Guarantor and its successors and assigns.
22. Severability. In case this Guaranty or any one or more of the
provisions contained herein shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, and this Guaranty shall be
construed as if such invalid, illegal or unenforceable provision had never been
included.
23. Section Headings. The section headings in this Guaranty are inserted
for convenience of reference only and shall not in any way affect the meaning or
construction of any provision of this Guaranty.
24. Agency. The parties hereto, and any person not a party hereto for whose
benefit the Agent acts hereunder, acknowledge that the Agent has been requested
to act as agent for the Lenders hereunder pursuant to the terms of the Credit
Agreement, and that the Agent, to the extent it may so act hereunder, shall
exercise all of the rights and remedies hereunder on behalf of, and as agent for
the benefit of, the Lenders and each of them. Without limiting the generality of
the foregoing, the Agent is authorized to execute and deliver, from time to
time, on behalf of the Lenders, any and all amendments and modifications to this
Guaranty and any and all waivers to any conditions herein or any Event of
Default hereunder. The parties hereto acknowledge and agree that the acts and
representations of the Agent hereunder shall be binding upon the Lenders.
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<PAGE>
25. Inconsistencies. Any inconsistencies between the provisions of this
Agreement and the Credit Agreement shall be governed by a reference to the
provisions of the Credit Agreement.
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<PAGE>
IN WITNESS WHEREOF, each party hereto has caused this Guaranty to be duly
executed by its duly authorized officer under seal as of the day and year first
above written.
GUARANTORS:
ACME TELEVISION HOLDINGS OF NEW
MEXICO, L.L.C.
By:/s/Douglas E. Gealy
----------------------------
Douglas E. Gealy, President
ACME TELEVISION LICENSES OF NEW
MEXICO, L.L.C.
By:/s/Douglas E. Gealy
----------------------------
Douglas E. Gealy, President
ACME TELEVISION OF NEW MEXICO, L.L.C.
By:/s/Douglas E. Gealy
----------------------------
Douglas E. Gealy, President
AGENT:
CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY
By:/s/Matthew Jones
---------------------------
Matthew Jones, Executive Director,
CIBC Oppenheimer Corp., as agent
SECURITY AND PLEDGE AGREEMENT
(ACME Subsidiary Holdings III, LLC)
THIS SECURITY AND PLEDGE AGREEMENT made as of December 2, 1997, by and
between ACME SUBSIDIARY HOLDINGS III, LLC, a Delaware limited liability company
(the "Debtor"); and CANADIAN IMPERIAL BANK OF COMMERCE, as agent (in such
capacity, together with its successors and assigns in such capacity, the
"Agent") for the benefit of CIBC Inc. and the other financial institutions who
are or who become Lenders under, and as defined in, the Credit Agreement
referred to below and any Affiliates of such Lenders with whom the Debtor shall
maintain any Rate Hedging Obligations (collectively, the "Secured Parties").
RECITALS
A. Acme Television, LLC, a Delaware limited liability company (the
"Borrower"), the Lenders and the Agent are parties to that certain First Amended
and Restated Credit Agreement of even date herewith (as the same may be amended,
restated, renewed, replaced, supplemented or otherwise modified from time to
time, the "Credit Agreement"), pursuant to which the Lenders have extended, and
are extending, credit to the Borrower. In addition, the Borrower, from time to
time, may be obligated to one or more of the Lenders or any Affiliates of such
Lenders in respect of Rate Hedging Obligations. Capitalized terms used herein
without definition have the meanings assigned to them in the Credit Agreement.
B. It is a condition to such Secured Parties' willingness (1) to enter into
the Credit Agreement and provide to the Borrower the financing contemplated
thereby and (2) to extend credit to the Borrower that would constitute Rate
Hedging Obligations that the Debtor shall have (i) Guaranty all existing
obligations of the Borrower to the Agent and the Secured Parties pursuant to its
Guaranty of even date herewith from the Debtor and certain Affiliates of the
Debtor in favor of the Agent and the Secured Parties (the "Guaranty"), and (ii)
granted to the Secured Parties and the Agent the liens and security interests
contemplated hereby.
C. The security interests granted hereunder are expressly subject to the
applicable rules, regulations and policies of the Federal Communications
Commission ("FCC") as further set forth at Section 17 hereof.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by each of the parties hereto, the
parties hereby agree as follows:
Section 1. The Security Interests.
(a) In order to secure: (i) the performance of all obligations of the
Borrower under the Credit Agreement; (ii) the due and punctual payment in full
(and not merely the collectibility) of the Note, including without limitation
all principal thereof and all interest payable thereon, at the
<PAGE>
interest rates provided therein and in the Credit Agreement and regardless of
the extent allowed as a claim in any proceeding in respect of the bankruptcy,
reorganization or insolvency of the Borrower, the Debtor or any of their
respective Affiliates (a "Reorganization"), in each case when due and payable,
according to the terms of the Note and the Credit Agreement, whether at stated
maturity, by reason of acceleration or otherwise; (iii) the due and punctual
payment in full (and not merely the collectibility) of all other sums and
charges which may at any time be due and payable in accordance with, or under
the terms of, the Note or the Credit Agreement, whether at stated maturity, by
reason of acceleration or otherwise; (iv) the due and punctual payment in full
(and not merely the collectibility) of the Guaranty; (v) the due and punctual
payment in full of all such Rate Hedging Obligations as may be due from time to
time; (vi) the due and punctual payment in full (and not merely the
collectibility), performance and observance of all of the other indebtedness,
liabilities, obligations, terms, covenants and conditions contained in the Loan
Documents, whether now or hereafter existing, on the part of the Borrower, the
Debtor or any of their respective Affiliates to be paid, performed or observed;
(vii) the accuracy of the representations and warranties made by the Borrower,
the Debtor and their respective Affiliates in the Loan Documents; and (viii) the
due and punctual payment and performance in full (and not merely the
collectibility) of any and all other future advances and other obligations,
indebtedness, obligations and liabilities of the Borrower, the Debtor and their
respective Affiliates to the Secured Parties and the Agent of every kind and
description, whether now existing or hereafter arising, whether direct, indirect
or contingent, whether secured or unsecured, and howsoever evidenced, incurred
or arising, including without limitation any future loans and advances made to
the Borrower or any Debtor by any of the Secured Parties prior to, during or
following any Reorganization (all of the foregoing are collectively hereinafter
called the "Obligations"), the Debtor hereby grants to the Agent and each of the
Secured Parties a continuing security interest in and a collateral assignment
and pledge of, the following described fixtures and personal property, in each
case to the extent, and only to the extent, it is lawful to grant a security
interest in and collaterally assign and pledge such property (hereinafter
collectively called the "Collateral"):
All fixtures and all tangible and intangible personal property of
the Debtor, whether now owned or hereafter acquired by the Debtor, or
in which the Debtor may now have or hereafter acquire an interest,
including without limitation, the following property: (A) all
properties and assets of every type used or useful in connection with
the ownership or operation of broadcast television stations and any
and all other communication businesses (collectively, "Communication
Businesses"); (B) all equipment (including, without limitation, all
machinery, motor vehicles, tools, furniture, studio equipment, towers,
transmitters, translators, antennas, satellite dishes, and all other
equipment relating to the operation of Communications Businesses),
inventory (including, without limitation, all merchandise, raw
materials, work in process, finished goods, and supplies) and goods,
whether now owned or hereafter acquired by the Debtor, or in which the
Debtor may now have or hereafter acquire an interest; (C) all
accounts, accounts receivable and other receivables (including,
without limitation, intercompany receivables, rights to receive
payments of money under contracts, chattel paper and rights to receive
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<PAGE>
payments of money under leases) and general intangibles (including,
without limitation, (i) all limited liability company member interests
now or hereafter held by or issued to the Debtor, subject to the
limitation set forth below, (ii) all existing and future rights of the
Debtor to any refund of any tax assessed against or paid by the
Debtor, loss carryback tax refunds, insurance premium refunds,
unearned premiums, insurance proceeds, chooses in action, goodwill,
going concern value, trademarks, service marks, tradenames, patents,
blueprints, designs, product lines, and research and development, and
all of the Debtor's rights to receive payments of money as a tenant
under any and all leases, (iii) all of the Debtor's rights under all
present and future authorizations, permits and licenses heretofore or
hereafter granted or assigned to the Debtor by the Federal
Communications Commission (the "FCC") or any other public or
governmental agency or regulatory body for the operation and ownership
of broadcast television stations and or other Communications
Businesses (such authorizations, licenses and permits, together with
any extensions or renewals thereof, being referred to collectively as
the "Licenses") (excluding, however, any such Licenses to the extent,
and only to the extent, it is unlawful to grant a security interest in
such Licenses, but including, to the maximum extent permitted by law,
all rights incident or appurtenant to such Licenses, including,
without limitation, the right to receive all proceeds derived or
arising from or in connection with the sale, assignment or transfer of
such Licenses), whether now owned or hereafter acquired by the Debtor,
or in which the Debtor may now have or hereafter acquire an interest,
(iv) all of the Debtor's rights under all construction contracts,
satellite broadcasting distribution agreements and licenses, leases,
permits, authorizations and other agreements granting to such the
Debtor the right to construct, operate, and maintain television
stations, communications cable, wire or line, whether now existing or
hereafter arising (excluding, however, any Specified Contract, as
defined below); (v) all management agreements, programming agreements,
network affiliation agreements and all other agreements for the
provision of management, engineering or similar services, microwave or
earth station service agreements, and other similar agreements to
which the Debtor is a party (excluding, however, any Specified
Contract); and (vi) all other agreements relating to Communications
Businesses whether now owned or hereafter acquired by the Debtor, or
in which the Debtor may now have or hereafter acquire an interest
(excluding, however, any Specified Contract); and (vii) all right,
title and interest, if any, under any intercompany notes, obligations
or agreements, whether now owned or hereafter acquired by the Debtor,
or in which the Debtor may now have or hereafter acquire an interest;
(D) all investment property, securities and other equity interests now
or hereafter held by or issued to the Debtor, including, without
limitation, all shares of stock, warrants, options, notes, investment
contracts, partnership interests and member interests in limited
liability companies; (E) all instruments, documents of title, policies
and certificates of insurance, securities, bank deposits, deposit
accounts, checking accounts and
3
<PAGE>
cash now or hereafter owned by the Debtor, or in which the Debtor may
now have or hereafter acquire an interest; (F) all accessions,
additions or improvements to, all replacements, substitutions and
parts for, and all proceeds and products of, and all distributions and
dividends relating to, all of the foregoing, including, without
limitation, proceeds of insurance; and (G) all books, records and
documents relating to all of the foregoing.
The foregoing includes, without limitation, all of Debtor's right, title
and interest (whether now owned or hereafter arising) in and to ACME TELEVISION
HOLDINGS OF UTAH, L.L.C., and ACME TELEVISION OF UTAH, L.L.C., ACME TELEVISION
LICENSES OF UTAH, L.L.C., ACME TELEVISION HOLDINGS OF NEW MEXICO, L.L.C., ACME
TELEVISION LICENSES OF NEW MEXICO, L.L.C. and ACME TELEVISION OF NEW MEXICO,
L.L.C., including, without limitation, all right to receive any distributions or
payments due or to become due under such membership agreement and other
agreements and all general intangibles relating thereto and proceeds resulting
therefrom.
As used herein, the term "Specified Contract" shall mean any contract,
agreement or lease, to the extent that the grant of a security interest therein
would (i) result in a default thereunder giving rise to the right of any third
party thereto to terminate or materially adversely amend the same, or (ii)
result in the termination or expiration thereof, but shall not include any
account receivable relating thereto.
(b) Customer Receivables. All Collateral consisting of accounts, contract
rights, chattel paper and general intangibles of the Debtor arising from the
sale, delivery or provision of goods and/or services are sometimes hereinafter
collectively called the "Customer Receivables".
(c) Security Interests. The security interests granted pursuant to this
Section 1 (the "Security Interests") are granted as security only and shall not
subject the Agent or any of the Secured Parties to, or transfer or in any way
affect or modify, any obligation or liability of a the Debtor under any of the
Collateral or any transaction which gave rise thereto.
(d) Collateral Account.
(i) There is hereby established with the Agent an interest bearing
cash collateral account (the "Collateral Account") in the name and under
the control of the Agent into which there shall be deposited from time to
time the cash proceeds of any of the Collateral and any other cash proceeds
of insurance, condemnation award or other compensation in respect of any
casualty or disposition affecting any property of the Debtor (whether
received by the Agent or by the Debtor) required to be delivered to the
Agent pursuant to the Credit Agreement and into which the Debtor may from
time to time deposit any additional amounts that the Debtor wishes to
pledge to the Agent for the benefit of the Secured Parties as additional
collateral security hereunder. The balance from time to time in the
Collateral Account shall constitute part of the Collateral hereunder and
shall not constitute payment of the Obligations until applied in accordance
with the Credit Agreement.
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<PAGE>
(ii) The balance from time to time in the Collateral Account shall be
subject to withdrawal only as provided in the Credit Agreement (including,
without limitation, Sections 1.06 and 6.02 thereof). Unless an Event of
Default shall have occurred and shall be continuing, the Agent shall remit
the collected balance outstanding to the credit of the Collateral Account
to or upon the order of the Debtor, as the Credit Agreement so provides
and, if applicable and to the extent consistent with the provisions of the
Credit Agreement, as the Debtor shall from time to time instruct. Upon the
occurrence and during the continuance of an Event of Default, the Agent may
(and, if instructed by the Secured Parties as specified in the Credit
Agreement, shall) in its (or their) discretion apply or cause to be applied
(subject to collection) the balance from time to time outstanding to the
credit of the Collateral Account to the payment of the Obligations in the
manner specified in Section 13.
Section 2. Delivery of Pledged Securities and Chattel Paper.
All securities now or hereafter owned or held by the Debtor, including
without limitation, all shares of stock, warrants, options, notes, investment
contracts, partnership interests in limited or general partnerships and member
interests in limited liability companies, shall be promptly delivered to the
Agent, by the Debtor pursuant hereto (which securities, together with all other
securities and shares of stock which may hereafter be delivered to the Agent
pursuant to the terms hereof, are hereinafter called the "Pledged Securities"),
shall be in suitable form for transfer by delivery, in the case of certificated
securities, or shall be accompanied by duly executed instruments of transfer or
assignments in blank, and accompanied in each case by any required transfer tax
stamps, all in form and substance satisfactory to the Agent. In the case of
uncertificated securities, the Debtor hereby gives written instructions to the
issuer thereof to register the pledge thereof hereunder in the books and records
maintained by such issuer and such issuer, by signing a Confirmation of Issuer
in form satisfactory to Agent, to confirm that it has so registered said pledge.
Exhibit A attached hereto and made a part hereof sets forth a complete
description of all securities owned or held by the Debtor on the date hereof.
The Agent and the Secured Parties may at any time or from time to time, at
their sole discretion, require the Debtor to cause any chattel paper included in
the Customer Receivables to be delivered to the Agent or any agent or
representative designated by it for the purpose of causing a legend referring to
the Security Interests to be placed on such chattel paper and upon any ledgers
or other records concerning the Customer Receivables.
Section 3. Filing; Further Assurances.
The Debtor will, at its expense, execute, deliver, file and record (in such
manner and form as the Agent may reasonably require), or permit the Agent to
file and record, any financing statements, any carbon, photographic or other
reproduction of a financing statement or this Security Agreement (which shall be
sufficient as a financing statement hereunder), any specific assignments or
other paper that may be reasonably necessary or desirable, or that the Agent may
reasonably request, in order to create, preserve, perfect or validate any
Security Interest or to
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enable the Agent to exercise and enforce its rights and the rights of the
Secured Parties hereunder with respect to any of the Collateral. The Debtor
hereby appoints the Agent, which appointment is irrevocable and coupled with an
interest, as the Debtor's attorney-in-fact solely as to this Section 3 to
execute and file in the name and on behalf of such Debtor such additional
financing statements as the Agent may reasonably request.
Section 4. Representations and Warranties of the Debtor.
The Debtor hereby represents and warrants to the Agent and the Secured
Parties that (a) the Debtor is, or to the extent that certain of the Collateral
is to be acquired after the date hereof, will be, the sole legal and beneficial
owner of the Collateral free from any lien, security interest, encumbrance or
restrictions on transfer except in each case as permitted hereunder or under the
Credit Agreement or under any other Loan Document; (b) except as specified in
and permitted by the Credit Agreement, no financing statement covering the
Collateral is on file in any public office, other than the financing statements
filed pursuant to this Security Agreement; (c) all additional information,
representations and warranties contained in Exhibit B hereto as to the Debtor
and made a part hereof are true, accurate and complete on the date hereof; (d)
there are no restrictions as to which consent has not been obtained upon the
voting rights of any of the Pledged Securities and the Debtor has the right to
vote, pledge, grant a security interest in and otherwise transfer the Pledged
Securities owned by it free of any encumbrances (other than applicable
restrictions imposed by any Federal, state or local authorities, specifically
including the FCC, or Federal or state securities laws or regulations); (e) the
Pledged Securities are duly and validly issued, fully paid and nonassessable;
and (f) the Pledged Securities are not represented by certificates or other
instruments and are not held in a brokerage or similar account.
Section 5. Covenants of the Debtor.
The Debtor hereby covenants and agrees with the Agent and the Secured
Parties that the Debtor (a) shall take such commercially reasonable action as
reasonably necessary to protect the Collateral against all claims and demands of
all persons at any time claiming any interest therein senior to that of the
Agent and the Secured Parties; (b) shall provide the Agent with prompt written
notice of (i) any change in the Debtor's principal office or the office where
any Debtor maintains its books and records pertaining to the Customer
Receivables, and (ii) the movement or location of any Collateral to or at any
address other than as set forth in said Exhibit B with respect to the Debtor;
(c) shall promptly pay any and all taxes, assessments and governmental charges
upon the Collateral prior to the date penalties are attached thereto, except to
the extent permitted under the Credit Agreement; (d) shall immediately notify
the Agent of any event causing a substantial loss or diminution in the value of
all or any material part of the Collateral and the amount or an estimate of the
amount of such loss or diminution, except as otherwise permitted by the Credit
Agreement; (e) shall have and maintain insurance at all times in accordance with
the provisions of the Credit Agreement; (f) except in accordance with the Credit
Agreement, shall not sell or offer to sell or otherwise assign, transfer or
dispose of the Collateral or any interest therein, without the written consent
of the Agent; (g) shall keep the Collateral free from any adverse lien, security
interest or encumbrance other than liens, security interests or
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encumbrances contemplated hereby and permitted under the Credit Agreement; (h)
shall keep the Collateral in good order and repair, reasonable wear and tear
excepted, and shall not waste, destroy or dispose of the Collateral or any part
thereof, except as otherwise permitted by the Credit Agreement; and (i) shall
not use the Collateral in violation of any statute or ordinance, the violation
of which could have a Material Adverse Effect.
Section 6. Records Relating to Collateral.
The Debtor will keep its records concerning the Collateral, including the
Customer Receivables and all chattel paper included in the Customer Receivables,
at its office or one or more of the other locations designated in Exhibit B or
at such other place or places of business of which the Agent shall have been
notified in writing upon no less than twenty (20) days in advance. The Debtor
will hold and preserve such records and chattel paper and will permit
representatives of the Agent and the Secured Parties at any time during normal
business hours to examine and inspect the Collateral and to make abstracts from
such records and chattel paper in accordance with the terms of the Credit
Agreement, and will furnish to the Agent and the Secured Parties such
information and reports regarding the Collateral as the Agent and the Secured
Parties may from time to time reasonably request; provided, however, that no
notice shall be required of the Agent if an Event of Default has occurred and is
continuing.
Section 7. Record Ownership of Pledged Securities.
Upon the occurrence of an Event of Default (as defined in Section 11) and
subject to the requirements of applicable law, specifically including the rules,
regulations and policies of the FCC, the Agent may cause, upon written
notification to the Debtor, any or all of the Pledged Securities to be
transferred of record into the Agent's name; provided, however, that in the
event such Event of Default is cured within the time period provided in the
Credit Agreement, then Agent shall cause such Pledged Securities to be
transferred of record into the Debtor's name. The Debtor shall promptly give to
the Agent copies of any notices or other communications received by the Debtor
with respect to Pledged Securities registered in its name.
Section 8. Right to Receive Distributions on Pledged Securities.
(a) Unless and until an Event of Default has occurred and is continuing,
and the Agent shall have notified the Debtor in writing of its election to
exercise the Agent's rights under subsection (b) below, the Debtor shall be
entitled, from time to time, to receive for its own use any and all dividends,
interest and other payments and distributions made upon or with respect to the
Pledged Securities (subject to any restrictions thereon set forth in the Credit
Agreement or any other Loan Document referred to therein), except:
(i) stock dividends or distributions,
(ii) dividends payable in securities, member interests or other
property (except cash dividends or distributions),
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(iii) dividends or distributions on dissolution or on partial or total
liquidation or in connection with a reduction of capital, capital
surplus or paid-in surplus, and
(iv) other securities issued with respect to or in lieu of the Pledged
Securities (whether upon conversion of any convertible securities
included therein or through stock split, spin-off, split-off,
reclassification, merger, consolidation, sale of assets,
combination of shares or otherwise).
All of the foregoing, together with all new, substituted or additional shares of
capital stock, warrants, options, notes or other rights, or other securities
issued in addition to or in respect of all or any of the Pledged Securities
shall be delivered to the Agent hereunder as required by Section 2 hereof, to be
held as Collateral pursuant to the terms hereof in the same manner as the
Pledged Securities delivered to the Agent on the date hereof. The Debtor shall
have the right to receive and retain all dividends, distributions, principal,
interest and other payments made upon or with respect to the Pledged Securities,
except those which the Agent is specifically authorized to receive as provided
above, and the Agent at the Secured Parties' direction shall take all such
action as may be necessary or appropriate to give effect to such right. From
time to time upon receiving a written request from the Debtor accompanied by a
certificate signed by the Debtor stating that no Event of Default has occurred
and is continuing, the Agent shall deliver to the Debtor suitable assignments
and orders for the payment to the Debtor or upon its order of all dividends,
distributions, principal, interest and other payments to which the Debtor is
entitled as aforesaid, upon or with respect to any Pledged Securities which are
registered or standing in the name of the Agent. Nothing in this Section 8 shall
be deemed to permit any issuance of debt or equity securities, exercise of
rights, distributions, payments or other actions not otherwise expressly
permitted by the Credit Agreement.
(b) Notwithstanding any provision herein to the contrary, if any Event of
Default shall have occurred and be continuing, upon the giving of written notice
referred to in subsection (a) above, then and whether or not any holder of the
Obligations exercises any available option to declare such Obligations due and
payable or seeks or pursues any other relief or remedy available to such holder
under this Agreement or any instrument or agreement evidencing or securing any
Obligations, all dividends, distributions or interest or principal payments, as
the case may be, on the Pledged Securities shall be paid directly to the Agent
on behalf of the Secured Parties, and retained by it as part of the Pledged
Securities, subject to the terms of this Security and Pledge Agreement, and, if
the Agent shall so request in writing, the Debtor agrees to execute and deliver
to the Agent appropriate additional distributions and other orders and documents
to that end.
Section 9. Right to Vote Pledged Securities.
(a) Unless and until an Event of Default has occurred and is continuing and
the Agent shall have notified the Debtor in writing of its election to exercise
the Agent's rights under subsection (b) below, the Debtor shall have the right,
from time to time, to vote and to give consents, ratifications and waivers with
respect to the Pledged Securities and to exercise
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conversion rights with respect to any convertible securities included therein
(provided, however, that no vote shall be cast, and no consent shall be given or
shareholder action taken, which would have the effect of impairing the position
or interest of the Agent and the Secured Parties with respect to the Pledged
Securities or cause an Event of Default or which would authorize or effect any
action then prohibited by the Credit Agreement or any other Loan Document
referred to therein). The Agent shall, upon receiving a written request from any
Debtor accompanied by a certificate signed by its principal financial officer
stating that no Event of Default has occurred and is continuing, deliver to the
Debtor or as specified in such request such proxies, powers of attorney,
consents, ratifications and waivers in respect of any Pledged Securities which
are registered in the Agent's name, and make such arrangements with respect to
the conversion of convertible securities as shall be specified in the Debtor's
request and be in form and substance satisfactory to the Agent.
(b) Notwithstanding any provision herein to the contrary, except as set
forth in Section 17 hereof, if any Event of Default shall have occurred and be
continuing, upon written notice to the Debtor of such election, then and whether
or not any holder of the Obligations exercises any available option to declare
such Obligations due and payable or seeks or pursues any other relief or remedy
available to such holder under this Security and Pledge Agreement or any
instrument or agreement evidencing or securing any Obligations, the Agent, or
its nominee, shall forthwith, without further act on the part of any person,
have the sole and exclusive right (to the extent permitted by law specifically
including the rules, regulations and policies of the FCC) to exercise all voting
and other powers of ownership pertaining to the Pledged Securities and shall
exercise such powers in such manner as the Agent, at the Secured Parties'
direction, shall determine to be necessary, appropriate or advisable. The Debtor
hereby agrees to execute and deliver to the Agent such additional powers,
authorizations, proxies, dividends and such other documents as the Agent may
reasonably request to secure to the Agent the rights, powers and authorities
intended to be conferred upon the Agent by this subsection (b).
Section 10. General Authority.
To the extent permitted under FCC rules, regulations and policies, and
other Federal, state or local authorities, including, without limitation,
Federal and state securities laws, the Debtor hereby appoints the Agent as the
Debtor's lawful attorney, with full power of substitution, in the name of the
Debtor, for the sole use and benefit of the Agent on behalf of the Secured
Parties, but at the Debtor's expense, to exercise, all or any of the following
powers with respect to all or any of the Collateral during the existence and
continuance of any Event of Default:
(i) to demand, sue for, collect, receive and give acquittance for any
and all monies due or to become due;
(ii) to receive, take, endorse, assign and deliver all checks, notes,
drafts, documents and other negotiable and non-negotiable
instruments and chattel paper taken or received by the Agent;
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(iii) to settle, compromise, initiate, prosecute or defend any action
or proceeding with respect thereto;
(iv) to sell, transfer, assign or otherwise deal in or with the same
or the proceeds or avails thereof or the related goods securing
the Customer Receivables, as fully and effectually as if the
Agent on behalf of the Secured Parties was the absolute owner
thereof;
(v) to extend the time of payment of any or all thereof and to make
any allowance and other adjustments with reference thereto;
(vi) to discharge any taxes, liens, security interests or other
encumbrances at any time placed thereon; and
(vii) to the extent permitted by law, including without limitation the
rules, regulations and policies of the FCC, state and local
rules, regulations and policies and Federal and state securities
laws, to execute any document or form, in the name of the Debtor,
which may be necessary or desirable in connection with any sale
of the Pledged Securities by the Agent, including without
limitation Form 144 (or any successor form) promulgated by the
Securities and Exchange Commission; provided that the Agent shall
give the Debtor not less than twenty (20) days' prior written
notice of the time and place of any sale or other intended
disposition of any of the Collateral. Such appointment as
attorney is irrevocable and coupled with an interest.
Section 11. Events of Default.
The Debtor shall be in default under this Security and Pledge Agreement
upon the occurrence of any "Event of Default" under and as defined in the Credit
Agreement (hereinafter referred to as an "Event of Default").
Section 12. Remedies Upon Event of Default.
(a) If an Event of Default shall occur and be continuing, the Agent, on
behalf of the Secured Parties, may exercise all the rights and remedies of a
secured party under the Uniform Commercial Code. Without limitation of the
foregoing, unless the Obligations shall have been paid in full in cash (or other
property acceptable to the Secured Parties, in their sole discretion), the
Agent, at the Secured Parties' direction, may, in the Secured Parties' sole
discretion, without further demand, advertisement or notice, except as expressly
provided for in subsection (i) of this Section, apply the cash, if any, then
held by it as Collateral hereunder, for the purposes and in the manner provided
in Section 13 hereof, and if there shall be no such cash or the cash so applied
shall be insufficient to make payment in full of all payments provided in
Section 13 hereof,
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(i) Subject to the provisions of Section 17 hereof and any other
applicable laws, including, without limitation, Federal and state
securities laws, sell the Collateral, or any part or component
thereof, in one or more sales, at a public or private sale,
conducted by any officer or agent of the Agent, at a place of
business of the Agent or elsewhere, for cash, upon credit or
future delivery, and at such price or prices as the Agent shall,
in a commercially reasonable manner, determine, and, to the
extent permitted by law, the Agent or any Secured Party may be
the purchaser of any or all of the Collateral so sold. Upon any
such sale, the Agent shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each
purchaser (including the Agent or any Secured Party) at any such
sale shall hold the Collateral so sold, absolutely free from any
claim or right of whatsoever kind, including, without limitation,
any equity or right of redemption of any Debtor which the Debtor,
to the extent it may lawfully do so, hereby specifically waives.
The Agent shall give the Debtor at least twenty (20) days'
written notice of any such public or private sale. The Agent
shall not be obligated to make any sale pursuant to any such
notice. The Agent may, without notice or publication, adjourn any
public or private sale from time to time by announcement at the
time and place fixed for such sale, or any adjournment thereof,
and any such sale may be made at any time or place to which the
same may be so adjourned without further notice or publication.
In case of any sale of all or any part of the Collateral for
credit or for future delivery, the Collateral so sold may be
retained by the Agent until the selling price is paid by the
purchaser thereof, but the Agent shall not incur any liability in
case of the failure of such purchaser to pay for the Collateral
so sold, and in case of any such failure, such Collateral may
again be sold under and pursuant to the provisions hereof; or
(ii) Proceed by a suit or suits at law or in equity to foreclose upon
this Security and Pledge Agreement and, subject to the provisions
of Section 17 hereof and applicable laws, including, without
limitation, Federal and state securities laws, sell the
Collateral, or any portion or component thereof, under a judgment
or decree of a court or courts of competent jurisdiction.
(b) If at any time when the Agent, at the Secured Parties' direction, shall
determine to exercise its right to sell all or any part of the Pledged
Securities pursuant to subsection (a)(i) of this Section, such Pledged
Securities or the part thereof to be sold shall not, for any reason whatsoever,
be effectively registered under the Securities Act of 1933, as from time to time
in effect (the "Securities Act") or the securities laws of any state, the Agent,
at the Secured Parties'
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direction, in their sole and absolute discretion, is hereby expressly authorized
to sell such Pledged Securities or such part thereof by private sale in such
manner and under such circumstances as the Agent and the Secured Parties may
deem commercially reasonable in order that such sale may legally be effected
without such registration. The Agent and the Secured Parties shall sell all or
any part of the Pledged Securities at a price which they deem commercially
reasonable under the circumstances.
(c) The Agent as attorney-in-fact pursuant to Section 10 hereof may, in
the name and stead of the Debtor, make and execute all conveyances, assignments
and transfers of any Collateral sold in accordance with this Agreement. The
Debtor shall, if so reasonably requested by the Agent, ratify and confirm any
sale or sales by executing and delivering to the Agent, or to such purchaser or
purchasers, all such instruments as may, in the reasonable judgment of the
Agent, be advisable for such purpose.
(d) The receipt by the Agent of the purchase money paid at any such
sale made by it shall be a sufficient discharge therefor to any purchaser (other
than the Agent) of the Collateral, or any portion thereof, sold as aforesaid;
and no such purchaser (or his or its representatives or assigns) (other than the
Agent), after paying such purchase money and receiving such receipt, shall be
bound to see to the application of such purchase money or any part thereof or in
any manner whatsoever be answerable for any loss, misapplication or
nonapplication of any such purchase money, or any part thereof, or be bound to
inquire as to the authorization, necessity, expediency or regularity of any such
sale.
Section 13. Application of Collateral and Proceeds.
The proceeds of any sale of, or other realization upon, all or any part
of the Collateral shall be applied in the following order of priority: (a)
first, to pay the expenses of such sale or other realization, including
reasonable attorneys' fees, and all expenses, liabilities and advances
reasonably incurred or made by the Agent or any of the Secured Parties in
connection therewith, and any other unreimbursed expenses for which the Agent or
any of the Secured Parties are to be reimbursed pursuant to Section 14; (b)
second, to the payment of the Obligations in such order of priority as the
Secured Parties, in their sole discretion, shall determine; and (c) finally, to
pay to the Debtor, or its successors and assigns, or as a court of competent
jurisdiction may direct, any surplus then remaining from such proceeds.
Section 14. Expenses; Agent's Lien.
The Debtor will forthwith upon demand pay to the Agent: (a) the amount
the Agent or any of the Secured Parties have paid (i) in respect of taxes
arising by reason of the Security Interests (including, without limitation, any
applicable transfer, intangible, recordation and personal property taxes but
excluding taxes in respect of the Agent's and the Secured Parties' income and
profits) or (ii) in order to free any of the Collateral from any lien thereon,
except as permitted under the Credit Agreement, and (b) the amount of any and
all reasonable costs and expenses (including, without limitation, the reasonable
fees and disbursements of its counsel and of any agents not regularly in its
employ) which the Agent or any of the Secured Parties may
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incur in connection with (i) the preparation and interpretation of this Security
and Pledge Agreement and any amendments hereto or modifications hereof, (ii) the
collection, sale or other disposition of any of the Collateral, (iii) the
exercise by the Agent or any of the Secured Parties of any of the powers
conferred upon any of them hereunder, (iv) any Event of Default on any the
Debtor's part hereunder or (v) any Reorganization.
Section 15. Survival of Obligations; Termination of Security Interests;
Release of Collateral.
This Agreement and the warranties, representations, agreements and
covenants contained herein and in any certificates or instruments delivered
pursuant hereto shall survive the making of the Loans (as defined in the Credit
Agreement) and the execution and delivery of the Notes, regardless of any
investigation made by the Agent or the Secured Parties or any person on behalf
of the Agent or the Secured Parties, and shall continue for so long as any of
the Obligations shall remain outstanding or any of the Secured Parties shall
have any obligation to advance funds to the Borrower under the Loan Documents.
Upon the repayment and performance in full of all the Obligations and the
expiration or termination of any obligations of any of the Secured Parties to
advance funds to the Borrower under the Loan Documents, the Security Interests
shall terminate and all rights to the Collateral shall revert to the Debtor
except that the Security Interest shall be reinstated with respect to any
payment made or received by the Secured Parties in respect of the Obligations
that is subsequently voided as a fraudulent conveyance, preference or otherwise.
Upon such termination of the Security Interests or release of Collateral, the
Agent will, at the Debtor's expense to the extent permitted by law, promptly
execute and deliver to the Debtor such documents as reasonably necessary or as
the Debtor shall reasonably request to evidence the termination of the Security
Interests or the release of such Collateral, as the case may be.
Section 16. Notices.
All notices, requests, demands and other communications provided for
hereunder shall be in writing in the manner set forth in the Credit Agreement.
Section 17. FCC and Municipal Approvals.
The Agent's and the Secured Parties' rights hereunder are subject to all
applicable rules and regulations of the FCC and all municipal ordinances and
state law by which any License is created or granted. Notwithstanding anything
to the contrary contained herein, neither the Agent nor any of the Secured
Parties will take any action pursuant to this Agreement which would constitute
or result in any assignment of any FCC license or any transfer of control of the
Debtor or any FCC license, whether de jure or de facto, if such assignment of
license or transfer of control would require under then existing law (including
the written rules and regulations promulgated by the FCC), the prior approval of
the FCC, without first obtaining such approval. the Debtor agrees to take any
action, at the Debtor's sole cost and expense, which the Agent may reasonably
request in order to obtain and enjoy the full rights and benefits granted to the
Agent and the Secured Parties by this Agreement and each other agreement,
instrument and document delivered to the Agent and the Secured Parties in
connection herewith or in any document
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evidencing or securing the Collateral, including specifically, at the Debtor's
own cost and expense, the use of its best efforts to assist in obtaining
approval of the FCC or any state or municipality or other governmental authority
for any action or transaction contemplated by, and consistent with the terms of,
this Agreement which is then required by law, and specifically, without
limitation, upon request after an Event of Default, to prepare, sign and file
(or cause to be filed) with the FCC or any state or municipality or other
governmental authority the assignor's or transferor's portion of any application
or applications for consent to (a) the assignment of any FCC Licenses or
transfer of control thereof, (b) any sale or sales of property constituting the
Collateral by any of the Secured Parties or the Agent on their behalf, or (c)
any assumption by any of the Secured Parties or the Agent on their behalf of
voting rights or management rights in property constituting the Collateral
effected in accordance with the terms of this Agreement. Furthermore,
notwithstanding anything to the contrary contained in this Agreement, the Agent
and the Secured Parties agree that (aa) voting rights in the Pledged Securities
shall remain with the Debtor even upon an Event of Default unless all required
prior approvals of the FCC to the transfer of such voting rights shall have been
obtained, (bb) upon an Event of Default, and only if so permitted by this
Agreement, the Agent or the Secured Parties may dispose of the Pledged
Securities, but only by private or public sale or other means acceptable to the
FCC, and (cc) prior to the exercise of stockholder or other equityholder rights
by a purchaser at such sale, all necessary FCC consents with respect to such
sale shall be timely obtained.
Section 18. Right of Set-Off.
In furtherance and not in limitation of any provisions herein contained,
the Debtor hereby agrees that any and all deposits or other sums at any time
claimed by or due from the Agent or any of the Secured Parties to the Debtor
shall at all times constitute security for the Obligations and, upon the
occurrence of an Event of Default, the Agent and each of the Secured Parties may
exercise any right of set-off against such deposits or other sums as may accrue
or exist under applicable law, whether or not the Obligations are otherwise
fully secured, with prompt notice thereof.
Section 19. Miscellaneous.
(a) No failure on the part of the Agent or the Secured Parties to exercise,
and no delay in exercising, and no course of dealing with respect to, any right,
power or remedy under this Security and Pledge Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise by the Agent or any of
the Secured Parties of any right, power or remedy under this Security and Pledge
Agreement preclude any other right, power or remedy. The remedies in this
Security and Pledge Agreement are cumulative and are not exclusive of any other
remedies provided by law. Neither this Security and Pledge Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally but
only by a statement in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought.
(b) THIS SECURITY AND PLEDGE AGREEMENT SHALL BE DEEMED EXECUTED AS A SEALED
INSTRUMENT AND SHALL BE CONSTRUED IN
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ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
(c) This Agreement may be executed in several counterparts, each of which
shall be an original and all of which shall constitute but one and the same
Agreement.
Section 20. Payment of Expenses.
In the event this Agreement shall be enforced by suit or otherwise, the
Debtor will reimburse the Agent and the holder or holders of the Obligations,
upon demand, for all reasonable expenses incurred in connection therewith,
including, without limitation, reasonable attorneys' fees (including without
limitation all such costs, charges and expenses incurred by the Agent or any of
the Secured Parties in connection with any Reorganization).
Section 21. Severability.
If any provision hereof is invalid or unenforceable in any jurisdiction,
the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Agent.
Section 22. Inconsistencies.
Any inconsistencies between the provisions of this Agreement and the Credit
Agreement shall be governed by reference to the provisions of the Credit
Agreement.
Section 23. Consent to Jurisdiction.
THE DEBTOR, TO THE EXTENT THAT IT MAY LAWFULLY DO SO, HEREBY CONSENTS TO
THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AS WELL AS TO THE
JURISDICTION OF ALL COURTS TO WHICH AN APPEAL MAY BE TAKEN FROM SUCH COURTS, FOR
THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF ANY OF ITS
OBLIGATIONS ARISING HEREUNDER OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY, AND EXPRESSLY WAIVES ANY AND ALL OBJECTIONS IT MAY HAVE AS TO VENUE,
INCLUDING, WITHOUT LIMITATION, THE INCONVENIENCE OF SUCH FORUM, IN ANY OF SUCH
COURTS. IN ADDITION, TO THE EXTENT THAT IT MAY LAWFULLY DO SO, THE DEBTOR
CONSENTS TO THE SERVICE OF PROCESS BY PERSONAL SERVICE OR U.S. CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO THE DEBTOR AT THE
ADDRESS PROVIDED HEREIN. TO THE EXTENT THE DEBTOR HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH
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RESPECT TO ITSELF OR ITS PROPERTY, THE DEBTOR HEREBY IRREVOCABLY WAIVES SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT.
Section 24. Waiver of Jury Trial.
THE DEBTOR HEREBY VOLUNTARILY AND IRREVOCABLY WAIVES TRIAL BY JURY IN ANY
ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT OR ANY OTHER AGREEMENTS
EXECUTED IN CONNECTION HEREWITH.
Section 25. Agency.
The parties hereto, and any person not a party hereto for whose benefit the
Agent holds the Collateral hereunder, acknowledge that the Agent has been
requested to act as agent for the Secured Parties hereunder pursuant to the
terms of the Credit Agreement, and that the Agent, to the extent it may so act
hereunder, shall exercise all of the rights and remedies hereunder on behalf of,
and as agent for the benefit of, the Secured Parties and each of them. Without
limiting the generality of the foregoing, the Agent is authorized to execute and
deliver, from time to time, on behalf of the Secured Parties, any and all
amendments and modifications to this Agreement and any and all waivers to any
conditions herein or any Event of Default hereunder.
16
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
by their duly authorized representatives all as of the day and year first above
written.
DEBTOR:
ACME SUBSIDIARY HOLDINGS III, LLC
By:/s/Douglas E. Gealy
--------------------------------
Douglas E. Gealy, President
AGENT:
CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY
By:/s/Matthew Jones
---------------------------------
Matthew Jones, Executive Director,
CIBC Oppenheimer Corp., as agent
<PAGE>
EXHIBIT A
SECURITIES
1 Membership Unit in each of:
ACME Television of Utah, L.L.C.
ACME Television Licenses of Utah, L.L.C.
ACME Television of New Mexico, L.L.C.
ACME Television of Licenses of New Mexico, L.L.C.
<PAGE>
EXHIBIT B
ACME SUBSIDIARY HOLDINGS III, LLC
ADDITIONAL REPRESENTATIONS AND WARRANTIES
1. The exact name of the Debtor is ACME SUBSIDIARY HOLDINGS III, LLC
2. The Debtor does not do business under any other name.
3. The Debtor is not required to qualify to transact business in any
jurisdiction other than Delaware.
4. The Debtor's chief executive office and principal office is:
650 Town Center Drive, Suite 850, Costa Mesa, CA 92626
5. All of the Debtor's personal property or fixtures are located at the
following addresses: 650 Town Center Drive, Suite 850, Costa Mesa, CA 92626
AMENDMENT TO TOWER LEASE AGREEMENT
AGREEMENT entered into this 9th day of December by and between ROBERTS
BROADCASTING COMPANY OF UTAH, INC. , a Delaware corporation ("Landlord"), and
ROBERTS BROADCASTING COMPANY OF SALT LAKE CITY, L.L.C., a Delaware limited
liability company ("Tenant").
W I T N E S S E T H:
WHEREAS, the parties entered into a Tower Lease Agreement dated August 22,
1997 (the "Lease");
WHEREAS, the parties have agreed to amend the Lease as hereinafter provided
and desire to set forth their agreement.
NOW, THEREFORE, in consideration of the premises, the parties agree to
amend the Lease as follows:
1. Unless otherwise defined, capitalized terms shall have the same meaning
as in the Lease.
2. During the term of the Lease, provided there are at least 12 months
remaining in the term or any renewal term of the Lease, upon 30 days' notice to
Landlord, Tenant shall have the right to install on the Tower one TFV-25USM
antenna (DTV) or its mechanical equivalent, side mounted at the 90 ft. to 150
ft. level and fed by one 6 1/8 inch coaxial cable (the "DTV Antenna").
3. Landlord shall during the term of the Lease reserve and keep available
on the Tower space suitable for installation of the DTV Antenna unless the
remaining term of the Lease or any renewal term is less than 12 months and
Tenant has not theretofore exercised its right to install the DTV Antenna.
4. Upon installation of the DTV Antenna on the Tower, the Rent shall
increase by an amount equal to the fair market rental value (the "FMV Rent") for
the increase in Antenna Space provided
<PAGE>
hereunder. If Landlord and Tenant have not agreed on the amount of the FMV Rent
within 30 days of Tenant's notice of intent to install the DTV Antenna, Landlord
and Tenant shall each designate an independent individual knowledgeable in
communications tower rental rates and the two individuals so selected shall
designate on additional independent individual knowledgeable in communications
tower rental rates (such individuals are hereinafter referred to as the
"Arbitrators"). The Arbitrators shall have 30 days after their appointment to
determine the FMV Rent. If the highest and lowest FMV Rents so proposed are
within 20% of one another, the final FMV Rent shall be the average of the three
proposals. If the highest and lowest proposed FMV Rents are more than 20% apart,
the rent that is farthest apart shall be discarded and the final FMV Rent shall
be the average of the remaining two proposed rents.
5. Prior to designation of the Arbitrators, Landlord and Tenant shall each
propose the FMV Rent they are willing to accept. If the rents proposed by
Landlord and Tenant are each within 10% of the FMV Rents as finally determined
by the Arbitrators, the parties shall share equally the fees and expenses of the
Arbitrators. Otherwise, such fees and expenses shall be paid by the party whose
proposed rate was farthest apart from the FMV Rent as finally determined.
6. Pending final determination of the FMV Rent, Tenant shall pay Landlord
the Rent as previously in effect plus the average of the amounts proposed by the
parties pursuant to Paragraph 5.
2
<PAGE>
Within 10 days after final determination of the FMV Rate, Tenant shall make
additional payments of rent or receive credits for future rent payments as
necessary to retroactively adjust the Rent by the FMV Rent as finally
determined. All Rent as adjusted herein shall be paid in the same manner and at
the times, and be subject to the same Consumer Price Index increases, as
otherwise provided under the Lease.
7. The DTV Antenna shall be subject to the same provisions of the Lease as
are applicable to the Antenna originally installed on the Tower, including
without limit those provisions relating to the construction, installation and
maintenance.
8. As hereby amended, the Lease is ratified and confirmed.
IN WITNESS WHEREOF, the parties have executed this agreement on the first
above written.
LANDLORD:
ROBERTS BROADCASTING COMPANY
OF UTAH, INC.
By: /s/Steven C. Roberts
---------------------------------
TENANT:
ROBERTS BROADCASTING COMPANY
OF SALT LAKE CITY, L.L.C.
By: /s/Michael V. Roberts
---------------------------------
3
EXHIBIT 23.2
The Members
ACME Television, LLC:
We consent to the use of our reports included herein and to the reference to our
firm under the heading 'Experts' in the prospectus.
KPMG PEAT MARWICK LLP
Los Angeles, California
November 13, 1997
Exhibit 23.3
Consent of Independent Accountants
We consent to the inclusion in this registration statement on Form S-4 of our
report dated March 28, 1997, except for Note 19, as to which the date is
September 30, 1997, on our audits of the financial statements of Koplar
Communications, Inc. and Subsidiary. We also consent to the reference to our
Firm under the captions "Experts."
/s/Coopers & Lybrand L.L.P.
St. Louis, Missouri
January 16, 1998
EXHIBIT 23.4
The Board of Directors
Channel 32, Incorporated:
We consent to the use of our reports included herein and to the reference to our
firm under the heading 'Experts' in the prospectus.
KPMG PEAT MARWICK LLP
Los Angeles, California
November 13, 1997
