<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACTS OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1998
COMMISSION FILE NUMBERS:
ACME Intermediate Holdings, LLC 333-40277
ACME Television, LLC 333-40281
-----------------
ACME TELEVISION, LLC
and
ACME INTERMEDIATE HOLDINGS, LLC
(Exact name of registrants as specified in their charter)
-----------------
<TABLE>
<S> <C> <C>
Delaware ACME Television, LLC 52-2050588
Delaware ACME Intermediate Holdings, LLC 52-2050589
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
----------------
2101 E. Fourth Street, Suite 202
Santa Ana, California 92705
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: 714-245-9499
----------------
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED:
------------------- ---------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrants (1) have filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) have been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
100% of the membership units of ACME TELEVISION, LLC are owned directly
or indirectly by ACME INTERMEDIATE HOLDINGS, LLC. 92% of the membership units of
ACME INTERMEDIATE HOLDINGS, LLC are owned by ACME Television Holdings, LLC. Such
membership units are not publicly traded and have no quantifiable market value.
Indicate the number of membership units outstanding of each of ACME
Television, LLC's classes of equity as of the latest practicable date: At
August 13, 1998, there were outstanding 200 membership units, without par
value.
Indicate the number of membership units outstanding of each of ACME
Intermediate Holdings, LLC's classes of equity, as of the latest practicable
date: At August 13, 1998, there were 895,425 membership units without par value.
================================================================================
<PAGE> 2
ACME TELEVISION, LLC AND
ACME INTERMEDIATE HOLDINGS, LLC
FORM 10-Q/A
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM
NUMBER PAGE
------ ----
<S> <C> <C>
PART I - FINANCIAL STATEMENTS
Item 1. FINANCIAL STATEMENTS
Introductory Comments............................................. 3
ACME INTERMEDIATE HOLDINGS, LLC and ACME
TELEVISION, LLC and Subsidiaries
Consolidated Balance Sheets as of
December 31, 1997 and June 30, 1998........................ 4
Consolidated Statements of Operations and
Members' Capital for the Three Months
Ended June 30, 1998 and June 30, 1997...................... 5
Consolidated Statements of Operations and
Members' Capital for the Six Months
Ended June 30, 1998 and June 30, 1997...................... 6
Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 1998 and
June 30, 1997.............................................. 7
Notes to Consolidated Financial Statements................... 8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............................... 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................. 10
Item 6. Exhibits and Reports on Form 8-K.................................. 11
SIGNATURES .................................................................. 12
</TABLE>
2
<PAGE> 3
ACME TELEVISION, LLC
AND
ACME INTERMEDIATE HOLDINGS, LLC
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS IMPORTANT EXPLANATORY NOTE:
This integrated Form 10-Q is filed pursuant to the Securities Exchange Act of
1934, as amended, for each of ACME INTERMEDIATE HOLDINGS, LLC and its
subsidiary, ACME TELEVISION, LLC. Unless the context requires otherwise,
references to the "Company" refer to both ACME INTERMEDIATE HOLDINGS, LLC and
ACME TELEVISION, LLC.
ACME INTERMEDIATE HOLDINGS, LLC is a holding company with no separate operations
apart from its operating subsidiary, ACME TELEVISION, LLC. Separate financial
information has been provided for each entity and, where appropriate, separate
disclosures. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations. It is
suggested that these Consolidated Financial Statements be read in conjunction
with the financial information set forth in the Annual Reports on Form 10-K of
each of ACME INTERMEDIATE HOLDINGS, LLC and ACME TELEVISION, LLC for the fiscal
year ended December 31, 1997.
3
<PAGE> 4
ACME TELEVISION, LLC AND
ACME INTERMEDIATE HOLDINGS, LLC
CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1997 JUNE 30, 1998
--------------------------- -------------------------
ACME ACME
ACME INTERMEDIATE ACME INTERMEDIATE
TELEVISION HOLDINGS TELEVISION HOLDINGS
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 8,820 $ 8,820 $ 1,886 $ 1,886
Accounts receivable, net 699 677 9,269 9,269
Due from affiliates 162 54 139 40
Current portion of program
broadcast rights 614 614 4,340 4,340
Prepaid expenses and other assets 3,032 3,060 1,246 1,246
Deferred income taxes -- -- 342 342
-------- -------- -------- --------
Total current assets 13,327 13,225 17,222 17,123
Property and Equipment, net 7,346 7,346 12,631 12,631
Program broadcast rights,
less current portion 587 587 5,961 5,961
Intangible assets, net 36,004 36,004 233,180 233,180
Investment in affiliates -- -- 5,766 5,766
Deposits 143,000 143,000 220 220
Other assets 17,418 19,010 12,707 14,311
-------- -------- -------- --------
Total assets $217,682 $219,172 $287,687 $289,192
======== ======== ======== ========
LIABILITIES AND MEMBERS' CAPITAL
Current Liabilities
Accounts payable $ 3,361 $ 3,363 $ 4,468 $ 4,468
Accrued expenses 651 651 5,987 5,987
Notes payable to banks -- -- 12,000 12,000
Current portion of program
rights payable 653 653 6,078 6,078
Current portion of obligations
under lease 292 292 637 637
Other current liabilities -- -- -- 22
-------- -------- -------- --------
Total current liabilities 4,957 4,959 29,170 29,192
Program broadcast rights
payable, net of current portion 1,351 1,351 4,634 4,634
Obligations under lease, net of
current portion 443 443 2,033 2,033
Deferred taxes -- -- 33,297 33,297
Other liabilities -- -- 1,801 1,801
Senior discount notes 130,833 130,833 137,947 137,947
Senior secured notes -- 36,863 -- 39,371
-------- -------- -------- --------
Total liabilities 137,584 174,449 208,882 248,275
-------- -------- -------- --------
Members' capital 85,516 51,357 92,561 58,400
Accumulated deficit (5,418) (6,634) (13,756) (17,483)
-------- -------- -------- --------
Total members' capital 80,098 44,723 78,805 40,917
-------- -------- -------- --------
Total liabilities and
members' capital $217,682 $219,172 $287,687 $289,192
======== ======== ======== ========
</TABLE>
See accompanying notes
4
<PAGE> 5
ACME TELEVISION, LLC AND
ACME INTERMEDIATE HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND MEMBERS' CAPITAL
(Unaudited - in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-------------------------------------------------------
1997 1998
------------------------- -------------------------
ACME ACME
ACME INTERMEDIATE ACME INTERMEDIATE
TELEVISION HOLDINGS TELEVISION HOLDINGS
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Broadcast revenues $ 751 $ 751 $ 11,570 $ 11,570
Operating expenses:
Programming 370 370 4,133 4,133
Selling, general and
administrative 960 960 5,458 5,458
LMA fees -- -- 228 228
Depreciation and
amortization 105 105 3,332 3,332
-------- -------- -------- --------
Operating expenses 1,435 1,435 13,151 13,151
Operating loss (684) (684) (1,581) (1,581)
Interest income 3 3 115 115
Interest expense (194) (194) (4,004) (5,303)
-------- -------- -------- --------
Loss before taxes (875) (875) (5,470) (6,769)
Income tax benefit -- -- 385 385
-------- -------- -------- --------
Net loss $ (875) $ (875) $ (5,085) $ (6,384)
Parent's
contribution 25,214 25,214 1,050 1,050
Members' capital (deficit)
at beginning of period (442) (442) 82,840 46,251
-------- -------- -------- --------
Members' capital at end
of period $ 23,897 $ 23,897 $ 78,805 $ 40,917
======== ======== ======== ========
</TABLE>
See accompanying notes
5
<PAGE> 6
ACME TELEVISION, LLC AND
ACME INTERMEDIATE HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND MEMBERS' CAPITAL
(Unaudited - in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------------------------------------
1997 1998
-------------------------- -------------------------
ACME ACME
ACME INTERMEDIATE ACME INTERMEDIATE
TELEVISION HOLDINGS TELEVISION HOLDINGS
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Broadcast revenues $ 1,396 $ 1,396 $ 19,327 $ 19,327
Operating expenses:
Programming 657 657 6,463 6,463
Selling, general and
administrative 1,882 1,882 9,668 9,668
LMA fees -- -- 228 228
Depreciation and amortization 166 166 4,181 4,181
-------- -------- -------- --------
Operating expenses 2,705 2,705 20,540 20,540
Operating loss (1,309) (1,309) (1,213) (1,213)
Interest income 3 3 188 188
Interest expense (461) (461) (7,683) (10,194)
-------- -------- -------- --------
Loss before taxes (1,767) (1,767) (8,708) (11,219)
Income tax benefit -- -- 365 365
-------- -------- -------- --------
Net loss $ (1,767) $ (1,767) $ (8,343) $(10,854)
Parent's contribution 25,664 25,664 7,050 7,050
Members' capital at
beginning of period -- -- 80,098 44,721
-------- -------- -------- --------
Members' capital
at end of period $ 23,897 $ 23,897 $ 78,805 $ 40,917
======== ======== ======== ========
</TABLE>
See accompanying notes
6
<PAGE> 7
ACME TELEVISION, LLC AND
ACME INTERMEDIATE HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------------------------------------
1997 1998
---------------------------- --------------------------
ACME ACME
ACME INTERMEDIATE ACME INTERMEDIATE
TELEVISION HOLDINGS TELEVISION HOLDINGS
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (1,767) $ (1,767) $ (8,343) $(10,854)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation and amortization 166 166 4,181 4,181
Amortization of discount on
Senior Notes and debt issuance costs -- -- 7,114 9,622
Changes in assets and liabilities:
Increase in accounts receivables, net (689) (689) (4,013) (4,013)
Increase in programming rights (9) (9) (1,108) (1,108)
Increase in prepaid expenses
and other current assets (39) (39) (691) (691)
Decrease in deferred income taxes -- -- (345) (345)
Increase in accounts payable 892 892 102 102
Increase in accrued expenses 722 722 4,304 4,304
Increase in programming rights payable -- -- 450 450
Decrease in other liabilities -- -- (1,730) (1,727)
-------- -------- -------- --------
Net cash provided by (used in)
operating activities (724) (724) (79) (79)
-------- -------- -------- --------
Cash flows from investing activities:
Purchase of property and equipment (112) (112) (3,934) (3,934)
Cash acquired in acquisition -- -- 779 779
Purchase of Ft. Myers / Naples Station -- -- (14,445) (14,445)
Increase in investment in affiliates
and other broadcast assets (650) (650) (2,975) (2,975)
Other -- -- (215) (215)
-------- -------- -------- --------
Net cash used in investing activities (762) (762) (20,790) (20,790)
-------- -------- -------- --------
Cash flows from financing activities:
Contribution from parent 2,589 2,589 -- --
Increase in notes payable to banks -- -- 12,000 12,000
Additional capital leases, net of
repayments -- -- 1,935 1,935
-------- -------- -------- --------
Net cash provided by
financing activities 2,589 2,589 13,935 13,935
-------- -------- -------- --------
Net increase (decrease) in cash 1,103 1,103 (6,934) (6,934)
Cash at beginning of period -- -- 8,820 8,820
-------- -------- -------- --------
Cash at end of period $ 1,103 $ 1,103 $ 1,886 $ 1,886
======== ======== ======== ========
Supplemental disclosures of
cash flow information:
Cash paid during the period for:
Interest $ 405 $ 405 $ 121 $ 121
Income taxes -- -- -- --
======== ======== ======== ========
Non cash transactions:
Contribution of station assets
from Parent in exchange for
membership units $ 23,075 $ 23,075 $ 7,050 $ 7,050
======== ======== ======== ========
</TABLE>
See accompanying notes
7
<PAGE> 8
ACME TELEVISION, LLC AND
ACME INTERMEDIATE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
ACME INTERMEDIATE HOLDINGS, LLC ("ACME Intermediate") is a holding
company with no assets or independent operations other than its investment in
ACME TELEVISION, LLC ("ACME TV"). ACME TV, through its subsidiaries, owns,
operates and / or holds licenses or options to acquire six commercially licensed
broadcast television stations (the "Stations") located throughout the United
States.
ACME Intermediate was formed on August 8, 1997. Upon formation, the
Company received a contribution from ACME Television Holdings, LLC (ACME Parent)
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 assets. This contribution 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 ACME Intermediate has reflected the results
of operations of the entities contributed for all of the periods presented.
ACME TV was formed on August 15, 1997. Upon formation, ACME Parent
contributed to ACME TV, through ACME Intermediate, the net assets of ACME
Oregon, ACME Tennessee and other net assets in exchange for membership units.
The accompanying unaudited consolidated financial statements of ACME
INTERMEDIATE include the accounts of ACME INTERMEDIATE and ACME TV. The
accompanying unaudited consolidated financial statements of ACME TV include the
accounts of ACME TV and its subsidiaries. All significant intercompany items and
transactions have been eliminated in each of the sets of consolidated financial
statements.
The accompanying consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for the fair presentation of
the financial position as of June 30, 1998 and the results of operations for the
three months ended June 30, 1998 have been included. Operating results for the
three months ended June 30, 1998 are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 1998. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Annual Reports on Form 10-K of each of ACME TV and ACME
Intermediate for the year ended December 31, 1997.
Note 2 - Acquisitions
The Company was formed in 1997 and operated only one station (under a
Local Marketing Agreement, an "LMA") - KWBP Channel 32, serving Portland, Oregon
- - during the second quarter of 1997. In June 1997, the Company completed its
acquisition of KWBP. During the fourth quarter of 1997, the Company completed
its acquisition of WBXX Channel 20, serving Knoxville, Tennessee and launched
the station, which was previously off the air.
In September 1997, the Company entered into a purchase agreement to
acquire station KPLR Channel 11, serving St. Louis, Missouri, and effective
October 1, 1997, began operating the station pursuant to an LMA. The acquisition
was completed in March 1998, at which time the LMA was terminated. The total
purchase price was $145 million. The acquisition was accounted for under the
purchase method. The excess of the purchase price over the fair value of net
assets acquired (including $83 million allocated to the FCC license) of
approximately $62 million was recorded as goodwill and is being amortized on a
straight line basis over 20 years.
In early March 1998, the Company entered into an agreement to purchase
station WTVK Channel 46, serving the Ft. Myers / Naples, Florida marketplace and
began operating the station pursuant to an LMA. The Company received regulatory
approvals and completed its acquisition of WTVK on June 30, 1998. In connection
with this transaction, $1.045 million in membership units were issued to the
sellers by ACME Parent, which was treated as a capital contribution to ACME TV
through ACME Intermediate.
The Company also owns a 49% interest in KUPX - Channel 16 (formerly
KZAR) serving the Salt Lake City, Utah marketplace and has exercised its option
to acquire the remaining interests in the station which was granted its license
from the FCC in May 1998. The Company and the majority owners of KUPX have
entered into an agreement with another broadcaster in the Salt Lake City market
to swap KUPX for KUWB Channel 30, which the Company has operated since April
1998 under an interim LMA. The swap of channels is subject to regulatory
approvals.
In January 1998 the Company acquired the interest to the construction
permit for station KWBQ Channel 19 (formerly KAUO) serving the Albuquerque, New
Mexico marketplace. The Company expects the station to be built and operational
by January 1, 1999.
The following table summarizes the operational status of each of the
stations as of June 30, 1998:
<TABLE>
<CAPTION>
Stations in Operation Date of LMA Date acquired
- ---------------------- ----------- -------------
<S> <C> <C>
Portland, Oregon January 1997 June 1997
St. Louis, Missouri October 1997 March 1998
Knoxville, Tennessee (1) October 1997
Ft. Myers / Naples, Florida March 1998 June 1998
Salt Lake City, Utah April 1998(2) January 1998(3)
</TABLE>
- --------------
(1) Commenced operations in October 1997
(2) As to Station KUWB
(3) As to minority interest in KUPX
<TABLE>
<CAPTION>
Station not in Operation Date acquired
- ------------------------ -------------
<S> <C>
Albuquerque, New Mexico January __, 1998
</TABLE>
Note 3 - Recent pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130 "Reporting
Comprehensive Income" which is effective for fiscal periods beginning after
December 15, 1997. SFAS No. 130 establishes standards for reporting and
displaying comprehensive income and its components. The Company believes SFAS
No. 130 will not have an effect on the manner in which the Company currently
reports.
8
<PAGE> 9
In June 1997, the FASB issued SFAS No. 131 "Disclosures About Segments
of an Enterprise and Related Information" which is effective for fiscal periods
beginning after December 15, 1997. SFAS No. 131 establishes standards for
reporting information about operating segments and for related disclosures about
products, services, geographic areas and major customers. The Company does not
divide its business into segments and, accordingly, does not believe SFAS No.
131 will have any applicability to the Company's financial reporting.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
This Quarterly Report on Form 10-Q contains forward-looking statements
that involve risks and uncertainties. Actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including changes in national and regional economies,
competition in the television business, pricing fluctuations in local and
national advertising, program ratings and changes in programming costs,
regulatory changes and technological advancements, among other factors.
The operating revenues of the Stations are derived primarily from the
sale of advertising time. The stations sell commercial time during the programs
to national, regional and local advertisers. Credit arrangements are determined
on an individual customer basis. The Company generally pays commissions to
advertising agencies on local, regional and national advertising and to national
sales representatives on national advertising. All such commission is reflected
as deductions from gross revenues in the accompanying consolidated financial
statements.
The primary operating expenses of the Company consist of employee
salaries, programming, advertising and promotional expenses and depreciation and
amortization.
The following table sets forth certain operating data for ACME
Television and ACME Intermediate for the three months and six months ended June
30, 1998 and 1997:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
1997 1998 1997 1998
-------- -------- ------- -------
AMOUNTS IN THOUSANDS
<S> <C> <C> <C> <C>
Operating income (loss) $ (684) $(1,581) $(1,309) $(1,213)
Add:
Time brokerage agreement fees -- 171 -- 228
Program amortization -- 1,186 -- 2,195
Depreciation and amortization 105 3,332 166 4,181
Corporate expense 157 689 419 1,362
Less:
Program payments -- 1,002 -- 2,153
------- ------- ------- -------
Broadcast cash flow $ (422) $ 2,795 $ (724) $ 4,601
======= ======= ======= =======
</TABLE>
"Broadcast cash flow" means operating income plus time brokerage fees,
program amortization, depreciation and amortization, corporate expense and
non-cash compensation, less scheduled program payments as adjusted to reflect
reductions for impaired or expired rights in connection with acquisitions. The
Company has included broadcast cash flow data because such data are commonly
used as a measure of performance for broadcast companies and are also used by
investors to measure a company's ability to service debt. Broadcast cash flow is
not, and should not be used as, an indicator or alternative to operating income,
net income or cash flow as reflected in the consolidated financial statements,
is not a measure of financial performance under generally accepted
9
<PAGE> 10
accounting principles and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with generally
accepted accounting principles.
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
Net broadcast revenues for the three months ended June 30, 1998
increased $10.8 million to $11.6 million compared to $751,000 for the three
months ended June 30, 1997. This increase is due to the expansion in the number
of the Company's operating stations as described in "Note 2 - Acquisitions"
above. Net revenues increased $3.8 million for the three months ended June 30,
1998 compared to the three months ended March 31, 1998 as a result of increased
sports revenues, increased market shares, new station start-ups and seasonally
higher advertising rates.
Operating expenses increased $11.7 million to $13.2 million compared to
the prior year quarter's operating expense of $1.4 million. This increase was
also due to the additional stations added since the second quarter of 1997.
Operating expenses increased $5.8 million for the quarter ended June 30, 1998
compared to the three months ended March 31, 1998. This increase is due
primarily to increased amortization of goodwill related to the acquisition of
KPLR, seasonally higher program costs relating to sports rights fees and the
start-up of new stations.
Interest expense for the current year quarter was $4.0 million for ACME
TV and $5.3 million for ACME Intermediate, primarily representing the
amortization of original issuance discount of the Company's September 1997
issued senior discount notes (ACME Television) and senior secured notes (ACME
Intermediate) along with related amortization of prepaid financing costs. The
interest expense of $194,000 during the second quarter of 1997 represents
primarily the interest expense assumed by the Company, on behalf of the seller
of KWBP (Portland), during the interim LMA period.
Apart from the Company's Missouri operations (which pertain solely to
the Company's investment in KPLR), which are organized as traditional "C"
corporations, ACME Intermediate and ACME TV and its operating subsidiaries are
organized as limited liability companies. Accordingly, although the Company is
subject to various minimum state taxes, all federal tax attributes are passed
through to the members of the Company. The Company's Missouri operations, after
deduction of allocable interest charges, generated a net taxable loss. The
Company has not recognized the benefit of such a loss. The Company has recorded
a tax benefit for the decrease on the deferred tax liability relating to the
amortization of other intangibles, primarily for the FCC licenses, relating to
the KPLR acquisition which are not deductible for tax purposes.
The net loss for ACME TV and for ACME Intermediate for the three months
ended June 30, 1998 was $5.1 million and $6.4 million, respectively, compared to
a net loss of $875,000 for the comparable quarter of the prior year. These
increased net losses are due primarily to the amortization of broadcast licenses
relating to the Companies' newly acquired and operating stations and the
substantially increased interest expense incurred in connection with the
September 1997 issuance of long-term debt to finance these acquisitions.
Broadcast cash flow for the three months ended June 30, 1998 was $2.8
million, compared to a ($422,000) broadcast cash flow for the corresponding
quarter in 1997. This increase is attributable to the Company's profitable
operations of KPLR, which was operated under an LMA from October 1, 1997 and
acquired on March 13, 1998.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Net broadcast revenues for the six months ended June 30, 1998 increased
$17.9 million to $19.3 million compared to $1.4 million for the six months
ended June 30, 1997. This increase is due to the expansion in the number of
Company's operating stations as described in "Note 2 - Acquisitions" above.
Operating expenses increased to $20.5 million compared to the prior
year's six months operating expenses of $2.7 million. This increase was also
due to the additional stations added since the second quarter of 1997.
Interest expense for the current year was $7.7 million for ACME TV and
$10.2 million for ACME Intermediate, primarily representing the amortization of
original issuance discount of the Company's September 1997 issued senior
discount notes (ACME Television) and senior secured notes (ACME Intermediate)
along with related amortization of prepaid financing costs. The interest
expense of $461,000 during the first six months of 1997 represents primarily the
interest expense assumed by the Company, on behalf of the seller of KWBP
(Portland), during the interim LMA period.
Apart from the Company's Missouri operations (which pertain solely to
the Company's investment in KPLR), which are organized as traditional "C"
corporations, ACME Intermediate and ACME TV and its operating subsidiaries are
organized as limited liability companies. Accordingly, although the Company is
subject to various minimum state taxes, all federal tax attributes are passed
through to the members of the Company. The Company's Missouri operations, after
deduction of allocable interest charges, generated a net taxable loss, and a
corresponding deferred tax benefit was recorded for the goodwill amortization.
The net loss for ACME TV and for ACME Intermediate for the six months
ended June 30, 1998 was $8.3 million and $10.9 million, respectively, compared
to a net loss of $1.8 million for the comparable six months of the prior year.
These increased net losses are due primarily to the amortization of broadcast
licenses relating to the Companies' newly acquired and operating stations and
the substantially increased interest expense incurred in connection with the
September 1997 issuance of long-term debt to finance these acquisitions.
Broadcast cash flow for the six months ended June 30, 1998 was $4.6
million, compared to a ($724,000) broadcast cash flow for the corresponding six
months in 1997. This increase is attributable to the Company's profitable
operations of KPLR, which was operated under an LMA from October 1, 1997 and
acquired on March 13, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows used by operating activities were $79,000 during the six
months ended June 30, 1998 compared to cash flows used by operating activities
of $724,000 during the six months ended June 30, 1997, a decrease of $645,000.
This decrease was primarily due to higher broadcast cash flow offset by seasonal
working capital needs.
Cash flows used in investing activities were $20.8 million during the
six months ended June 30, 1998, compared to $762,000 used in investing
activities during the six months ended June 30, 1997. Cash flows used in
investing activities during the six months ended June 30, 1998 related to
capital expenditures principally related to the build-out of KUWB, the Company's
acquisition of WTVK, and the CP acquisition for Channel 31 serving Springfield,
Missouri. The Company anticipates that future requirements for capital
expenditures will include those incurred in the continued build-out of its
station in Albuquerque, New Mexico and the upgrade of its other stations and
will be financed primarily through its $20 million capital equipment facility
(of which approximately $18 million is still available at June 30, 1998)
recently entered into with General Electric Capital Corporation ("GECC").
Cash flows used in financing activities were $13.9 million related to
$12 million in notes payable and additions to capital leases, net of repayments,
during the six months ended June 30, 1998 compared to cash flows provided by
financing activities of $2.6 million related to parent contributions during the
six months ended June 30, 1997. At June 30, 1998 there was an outstanding
balance of $12,000,000 due under the Company's existing credit agreement
facility with Canadian-Imperial Bank Corporation ("CIBC"). This facility allows
for revolving credit borrowings of up to a maximum of $40,000,000, dependent
upon certain financial ratios of the Company, can be used to fund future
acquisitions of broadcast stations and for general corporate purposes.
The Company believes that internally generated funds from operations,
financings under the Company's capital equipment facility and additional
borrowings under its credit agreement, if necessary, will be sufficient to
satisfy the Company's cash requirements for its existing operations for the next
twelve months and for the foreseeable future thereafter. The Company expects
that any future acquisitions of television stations would be financed through
funds generated from operations, through additional borrowings under the
existing CIBC credit agreement and through additional debt and equity
financings.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company currently and from time to time is involved in litigation
incidental to the conduct of its business. The Company is not currently party to
any lawsuit or proceeding which, in the opinion of management, is likely to have
a material adverse effect on the Company.
10
<PAGE> 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
10.1 Assignment Agreement, dated June 16, 1998, by and between ACME
Television Licenses of Tennessee, LLC, Ruth Payne Carman (dba E&R
Communications), Carman-Harrison, LLC and Donald E. Holley.
10.2 Time Brokerage Agreement, dated April 20, 1998, for KUPX-TV, by and
among Paxson Salt Lake City License, Inc., Paxson Communications of
Salt Lake City-30, Inc. and ACME Television of Utah, LLC.
10.3 Master Lease Agreement, dated June 30, 1998, by and between General
Electric Capital Corporation and ACME Television, LLC.
27.1 Financial Data Schedule for ACME Television, LLC
27.2 Financial Data Schedule for ACME Intermediate Holdings, LLC
(b) Reports on Form 8-K.
The Company filed no reports on Form 8-K during the three months ended
June 30, 1998.
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ACME TELEVISION, LLC
Date: September 28, 1998 By: /s/ Doug Gealy
------------------------------
Doug Gealy, President
Date: September 28, 1998 By: /s/ Thomas D. Allen
------------------------------
Thomas D. Allen
Executive Vice President/CFO
(principal financial officer)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ACME INTERMEDIATE HOLDINGS, LLC
Date: September 28, 1998 By: /s/ Doug Gealy
------------------------------
Doug Gealy, President
Date: September 28, 1998 By: /s/ Thomas D. Allen
------------------------------
Thomas D. Allen
Executive Vice President/CFO
(principal financial officer)
12
<PAGE> 13
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
10.1 Assignment Agreement, dated June 16, 1998, by and between ACME
Television Licenses of Tennessee, LLC, Ruth Payne Carman (dba E&R
Communications), Carman-Harrison, LLC and Donald E. Holley and the
Carman-Holly Partnership
10.2 Time Brokerage Agreement, dated April 20, 1998, for KUPX-TV, by and
among Paxson Salt Lake City License, Inc., Paxson Communications of
Salt Lake City-30, Inc. and ACME Television of Utah, LLC.
10.3 Master Lease Agreement, dated June 30, 1998, by and between General
Electric Capital Corporation and ACME Television, LLC.
27.1 Financial Data Schedule for ACME Intermediate Holdings, LLC
27.2 Financial Data Schedule for ACME Television, LLC
<PAGE> 1
EXHIBIT 10.1
This Assignment Agreement is made this 16th day of June, 1998, and is
by and between Ruth Payne Carman, d/b/a E&R Communications ("Carman"),
Carman-Harrison, LLC ("CHL"), Donald E. Holley ("Holley") and ACME Television
Licenses of Tennessee, LLC ("ACME") (Carman, CHL, Holley and ACME are sometimes
referred to herein collectively as the "Parties").
WHEREAS, ACME and Carman are parties to that certain Agreement (the
"Settlement Agreement") dated January 30, 1998, which, inter alia, contemplates
the grant of an application for a construction permit (the "CP") to authorize
ACME to build a new television station on Channel 31 in Harrison, Arkansas (the
"Station"); and
WHEREAS, Carman was one of the individuals referred to in the
Settlement Agreement as a partner in the "Carman-Holly Partnership" (the
"Partnership"), but a question exists as to whether that Partnership ever came
into existence as a legal entity; and
WHEREAS, Holley was the other individual referred to in the Settlement
Agreement as a partner in the Carman-Holly Partnership; and
WHEREAS, Paragraph 3 of the Settlement Agreement provides the
Partnership with an option to acquire the CP upon (1) the payment of certain
monies specified therein to ACME and (2) the Partnership's assumption of the WB
Television Network Affiliation Agreement (the "Affiliation Agreement") executed
by ACME, a copy of which is annexed hereto as Exhibit A; and
WHEREAS, Carman is the sole member of CHL, and Carman and Holley, as
individuals and as partners in the Carman-Holly Partnership (to the extent that
it exists) desire that CHL, rather than the Partnership, be the entity that
acquires the CP from ACME, with the understanding that, in agreeing to convey
the CP to CHL, ACME has fully complied with its obligations under the Settlement
Agreement; and
WHEREAS, Harrison Television, Inc. ("HTI")and Agape Church, Inc.
("Agape") also filed separate and mutually exclusive applications for the CP and
entered into settlement
<PAGE> 2
agreements with Carman whereby HTI and Agape relinquished, in exchange for
consideration, any rights they had with regard to the CP;
NOW, THEREFORE, in view of the foregoing and the mutual promises and
covenants contained herein, the parties hereby agree as follows:
1. Subject to the terms and conditions of this Agreement, at the
Closing, as defined herein, ACME will assign the CP to CHL in exchange for CHL's
(a) payment to ACME of the monies required to be paid under Paragraph 3 of the
Settlement Agreement and (b) assumption of ACME's rights and obligations under
the Affiliation Agreement.
2. By execution of this Agreement, Carman and Holley, as individuals
and as partners in the Carman-Holly Partnership (to the extent that it exists)
acknowledge (1) that the Partnership (to the extent that it exists) has assigned
all of its rights and obligations under the Settlement Agreement to CHL for
consideration (pursuant to that certain Settlement Agreement, Waiver and Mutual
Release executed by and between Carman and Holley), the sufficiency of which is
hereby acknowledged; and (2) that CHL may rightfully exercise the option for the
CP under the Settlement Agreement. Carman and Holley, as individuals and as
partners in the Carman-Holly partnership (to the extent that it exists), each
releases ACME, its members, affiliates, directors, officers and their agents,
from any and all claims which each of them or the Partnership has, would have or
may have under the Settlement Agreement, regardless of whether such claims are
known or unknown, asserted or unasserted. For its part, ACME hereby releases any
claims it does have or may have under the Settlement Agreement against the
Partnership, its partners, its agent, Carman and Holley, regardless of whether
such claims are known or unknown, asserted and unasserted.
3. In accordance with its obligations under Paragraph 7 of the
Settlement Agreement, ACME has paid the amounts of $700,000 to Agape and
$1,100,000 to HTI, and within five days from the execution of this Agreement,
ACME will endeavor to secure from each of Agape and HTI a release of Carman and
CHL, each of their members, affiliates, directors, officers, agents, successors,
and assigns from any and all claims, whether known or
2
<PAGE> 3
unknown, asserted or unasserted, which HTI or Agape has, would have or may have
pursuant to any application or settlement agreement concerning the CP.
4. Within five days of executing this Assignment Agreement, ACME and
CHL will jointly file with the FCC an application (the "Application") to assign
the CP from ACME to CHL. ACME and CHL will cooperate with each other and use
commercially reasonable efforts in preparing and prosecuting the Application.
5. CHL has placed $3,364,000 in an Escrow Account pursuant to the
Escrow Agreement (the "Second Escrow Agreement"), annexed hereto as Exhibit B,
which has been executed by CHL and the Escrow Agent and will be executed by ACME
simultaneously upon ACME's execution of this Agreement.
6. The consummation of the transactions contemplated hereby (the
"Closing") will take place at a mutually agreeable time at the offices of ACME's
counsel, within five business days of the date on which the FCC issues a grant
of the Application, with that grant including a waiver of the prohibition
against selling an unbuilt CP for more than out-of-pocket expenses. At the
Closing, the following actions will be taken:
a. CHL and ACME will jointly instruct the Escrow Agent to use the
monies in the aforesaid Escrow Account to pay ACME $2,939,000,
plus or minus whatever adjustments are warranted under Paragraph 3
of the Settlement Agreement, which payment shall constitute all
payments from Carman to ACME required by the Settlement Agreement,
including reimbursement for the aforementioned payments made by
ACME to Agape and HTI, and to pay the remainder of the principal
in the Escrow Amount to Carman. (Interest shall be paid to ACME.)
All payments pursuant to this subparagraph shall be by bank
cashier's or certified check, or by wire transfer of immediately
available funds.
b. CHL will execute whatever documents may be required to assume any
and all rights and obligations of ACME under the Affiliation
Agreement annexed hereto and thereby release ACME of any and all
obligations and liabilities thereunder.
c. ACME will assign to CHL all of the ACME's rights and interests in
the CP.
3
<PAGE> 4
7. In the event that the FCC or a court of competent jurisdiction
issues an order requiring CHL to return the CP to ACME, and the order has become
final (meaning that the order is no longer subject to reconsideration or review
y the FCC or a court of competent jurisdiction), CHL and ACME shall cooperate so
that, within fourteen (14) days of such order, the CP is returned to ACME shall
cooperate so that, within fourteen (14) days of such order, the CP is returned
to ACME and, simultaneously therewith, ACME shall pay to CHL all amounts paid to
ACME pursuant to Paragraph 6 hereof, by bank cashier's check or certified check,
or by wire transfer of immediately available funds, provided that, in the event
the FCC or the court orders rescission and return of the CP to ACME prior to
such rescission becoming final, all amounts paid to ACME shall be returned to
CHL simultaneously with return of the CP.
8. This Agreement, and the documents referenced herein, constitute the
entire agreement of the Parties with respect to the subject matter hereof and
supersede any and all prior and contemporaneous agreements and understandings.
If there are any conflicts between this Agreement and the Settlement Agreement,
the provisions of this Agreement shall apply. This Agreement may not be amended
except by a document executed by the Parties affected by the amendment.
9. No failure or delay on the part of the ACME or CHL in exercising
any right or power hereunder shall operate as a waiver thereof. Nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Parties herein provided are cumulative and are not exclusive
of any right or remedies which they may otherwise have. ACME recognizes that the
CP is a special and unique asset which gives it a particular value, the loss of
which cannot be adequately or reasonably compensated by damages in an action at
law, and that ACME's failure to perform its obligations under this Agreement
would therefore cause CHL irreparable injury or damage. In addition to any other
right or remedy given to CHL under this Agreement
4
<PAGE> 5
or at law or in equity, CHL shall therefore be entitled to specific performance
relief in the event that ACME fails to perform its obligations under this
Agreement when required.
10. This Agreement shall be governed by the laws of the District of
Columbia without regard to conflict of law provisions.
11. At or prior to the Closing, the Parties will execute any and all
other documents which may be reasonably requested by any other Party to
effectuate and consummate the transaction contemplated by this Agreement.
12. Either Carman, CHL or ACME may terminate this Agreement upon
written notice to the other Parties if the FCC has not issued an order by April
1, 1999, approving the assignment of the CP to CHL, provided that the
terminating Party is not then in breach of its obligations under this Agreement.
13. Any notice or other communication required or authorized by this
Agreement shall be delivered in person, by certified mail-return receipt
requested (postage prepaid) or by overnight courier (charges prepaid) to the
parties at the address specified below (or at any other address which any party
may specify in writing to the other parties):
If to Acme: Douglas Gealy
ACME Television Licenses of Tennessee, LLC
10829 Olive Boulevard
St. Louis, MO 63141
If to Carman: Ruth Payne Carman
5864 New Harmony Road
Hartsville, TN 37074
If to Escrow Agent: Gregory Jordan
First Union National Bank
Corporate Trust Administration
800 East Main Street, 2nd Floor
Richmond, VA 23219
5
<PAGE> 6
IN WITNESS WHEREOF, the Parties have executed this Assignment
Agreement as of the date first set forth above.
CARMAN-HARRISON, LLC
By: /s/ Ruth Payne Carman
----------------------------------
Ruth Payne Carman
ACME TELEVISION LICENSES OF
TENNESSEE, LLC
By: /s/ Douglas Gealy
----------------------------------
Douglas Gealy, President
RUTH PAYNE CARMAN
On behalf of herself, and to the extent
that it exists, the Carman-Holly
Partnership
By: /s/ Ruth Payne Carman
-----------------------------------
Ruth Payne Carman
DONALD E. HOLLEY
On behalf of himself, and to the extent
extent that it exists, the Carman-Holly
Partnership
By: /s/ Donald E. Holley
-----------------------------------
Donald E. Holley
6
<PAGE> 1
EXHIBIT 10.2
TIME BROKERAGE AGREEMENT
for
KUPX-TV, Salt Lake City, UT Market
By and Among
PAXSON SALT LAKE CITY LICENSE, INC.,
PAXSON COMMUNICATIONS OF SALT LAKE CITY-30, INC.
and
ACME TELEVISION OF UTAH, LLC
<PAGE> 2
TABLE OF CONTENTS
1 STATEMENT OF CONFIDENTIALITY
2 STANDARD OPERATING PROCEDURES
3 STANDARDIZATION
3.1 Creating New Standard Operating Procedures
3.2 Revising Current Standard Operating Procedures
3.3 The Review Process
3.4 Document Control
3.5 SOP Manual Control
3.6 Procedure for Procedures
3.7 Procedure for Auditing
3.8 Forms
4 ROLES AND RESPONSIBILITIES
4.1 Organization Chart
4.2 Job Descriptions
5 PROCESSING OF HOURLY EMPLOYEE PAYROLL
5.1 Footing the Time Cards
5.2 Hourly Time Card Data Entry
5.3 Rapid Pay Data Entry
6 PROCESSING SALARIED PAYROLL/REGULAR PAY DATA ENTRY
6.1 Deductions
6.2 Additions/Adjustments
6.3 Salaried Overtime
6.4 Personnel Changes
6.5 Second Pays
6.6 Special Pays
6.7 Void/Manual Check Entry
6.8 Autopay Cancellation
7 RECEIPT AND DISTRIBUTION OF PAYROLL
7.1 Receipt and Review of Pay Checks
7.2 Receipt and Review of Electronic File
7.3 Distribution of Pay Checks
7.4 ADP Invoice Approval
8 PAYROLL REPORTING
8.1 Profit Sharing Report
8.2 Stock Report
8.3 Garnishments Report
8.4 United Way Report
8.5 Medical, Life and Long-term Disability Insurance Report
9 INTERDEPARTMENTAL REPORTING
9.1 Labor Entry to Pricing
10 GENERAL REPORTING
10.1 Budget/Headcount Report
10.2 Labor Reporting/EDD
10.3 Termination
10.4 New Hire/Terminations Report
10.5 HRizon Report
10.6 EDD Audit Forms
10.7 Quarterly Tax Review
10.8 Quarterly Hours Report (State of Washington only)
11 NON-PAYROLL DUTIES
11.1 Manual Checks
11.2 Monthly Posting
11.3 Vacation Record Maintenance
11.4 Employment Verification
11.5 Supplying Payroll Information
11.6 Yearly W-2 Adjustments
11.7 Reconciliation of General Ledger Payroll Accounts
<PAGE> 3
This Agreement ("Agreement") is dated this 20th day of April, 1998
and is by and among ACME Television of Utah, LLC (the "Broker"), a limited
liability company formed under the laws of the State of Delaware and Paxson Salt
Lake City License, Inc., a corporation formed under the laws of the State of
Florida ("Paxson Licenses") and Paxson Communications of Salt Lake City-30, Inc.
("Paxson-30" and collectively with Paxson Licenses "Licensee").
WHEREAS, Licensee holds a broadcast license and associated auxiliary
licenses (the "Licenses") from the Federal Communications Commission ("FCC") for
KUPX-TV, a television station on Channel 30, Ogden, Utah in the Salt Lake City,
Utah Market (the "Station"); and
WHEREAS, Broker has programming and other resources which could be
utilized for the benefit of the Station;
WHEREAS, Licensee is desirous of using Broker's programming on the
Station under the terms and conditions of this Agreement; and
WHEREAS, Paxson-30 and Roberts Broadcasting of Salt Lake City,
L.L.C., an affiliate of Broker ("Roberts") have entered into a Time Brokerage
Agreement, of even date herewith (the "KUWB Time Brokerage Agreement"), pursuant
to which Paxson-30 shall provide programming to television station KUWB (the
"KUWB Station");
NOW, THEREFORE, in light of the foregoing and the mutual promises and
covenants contained herein, the parties hereby agree as follows:
1. PROVISION OF PROGRAMMING
1.1. BROKER'S USE OF STATION FACILITIES. Licensee shall make its broadcast
transmission facilities available to Broker beginning on the
commencement of the Term specified in Section 1.2 of this Agreement.
The Licensee shall make the foregoing facilities available to Broker
one hundred sixty-eight (168) hours per week, Sunday through Saturday,
except for (i) downtime occasioned by routine maintenance, and (ii)
time utilized by the Licensee to comply with applicable law or to
fulfill its obligations under the Communications Act of 1934, as
amended (the "Act"), or the rules and policies of the FCC. Upon
commencement of the Term, Broker will provide programming to be
broadcast on the Station for the entire 168-hour weekly period subject
to any diminution under this Agreement. At Broker's option, the
programming may originate either from Broker's studios or from
Licensee's studios: provided, that, if Broker's programming originates
from Broker's studio, Broker's programming shall be delivered to
Licensee's studios via phone lines, radio or mechanical means for
transmission to Licensee's transmitters.
1.2. TERM OF PROGRAMMING OBLIGATION. Subject to the terms and conditions of
this Agreement, Broker shall be authorized to provide programming on
the Station, commencing on April 20, 1998 (the "Effective Date"). This
Agreement shall
1
<PAGE> 4
terminate upon the first to occur of (i) the consummation of the sale
of the Station, (ii) the termination of this Agreement in accordance
with its terms, (iii) ten years from the date of this Agreement, (iv)
the termination of the Asset Exchange Agreement among the parties
hereto (the "Exchange Agreement"), or (v) the termination of the KUWB
Time Brokerage Agreement.
1.3. QUALITY AND NATURE OF PROGRAMMING.
1.3.1. COMPLIANCE WITH LAW. Any and all programming provided by
Broker under this Agreement shall be in accordance with the
Act and the rules and policies of the FCC. All advertising
messages and promotional material or announcements shall
comply with all applicable federal, state and local laws,
regulations and policies.
1.3.2. LICENSEE DISCRETION. In accordance with Section 1.7.1 hereof,
the Licensee may, in the exercise of its discretion, refuse to
broadcast any program which the Licensee deems to be
inconsistent with subsection 1.3.1. of this section or the
Licensee's obligations under the Act or FCC rules or policies.
1.4. MAINTENANCE OF STATION FACILITIES
1.4.1. BROKER'S RESPONSIBILITIES. Broker shall be responsible,
subject to Licensee's ultimate supervision, for maintenance of
the Station's transmission facilities except for repairs not
occasioned by ordinary wear and tear (unless such repairs are
required as a result of the negligence or willful misconduct
of Broker, its employees or agents). Broker shall reimburse
Licensee for any and all usual and ordinary expenses incurred
by Licensee in the operation of the Station during the term of
this Agreement, including, but not limited to, salaries and
benefits of two employees, utilities and repair costs, tower
lease payments, property insurance and taxes, programming
expenses and miscellaneous reasonable and necessary station
expenses: provided, that in no event shall Broker be required
to reimburse License for (i) lease payments, taxes and
insurance on the main studio or (ii) acquisition costs for
stereo or transmission equipment. Broker shall remit a check
to Licensee for any and all such expenses within ten (10) days
of Broker's receipt from Licensee of invoices or other
itemized bills for such expenses.
1.4.2. LICENSEE'S RESPONSIBILITIES. Except for those matters falling
within Broker's responsibility under Section 1.4.1, the
Licensee shall be responsible for the repair of any damage to
or malfunction of any of the Station's transmission facilities
not caused by ordinary wear and tear or by the negligent or
willful misconduct of Broker, its employees or agents (which
repairs or damage shall be the responsibility of Broker).
2
<PAGE> 5
1.5. HANDLING OF MAIL. Except as required to comply with the Act or FCC
rules and policies, including those regarding the maintenance of the
public inspection files (which shall at all times remain the
responsibility of the Licensee), the Licensee shall not be required to
receive or handle mail, faxes, or telephone messages in connection
with programming provided by Broker unless the Licensee, at the
request of Broker, has agreed in writing to do so. Notwithstanding
anything herein to the contrary, Broker shall provide the Licensee
with copies of any mail, fax, or telephone messages concerning the
programming furnished by Broker under this Agreement to permit
Licensee to place copies thereof in the Station's public inspection
files if required by applicable law, rule, or policy.
1.6. STAFFING REQUIREMENTS AND EXPENSES
1.6.1. MAIN STUDIO. The Licensee shall, to the extent required by
applicable law or policy, maintain a main studio within the
Station's principal community contour. The Licensee shall be
responsible for the payment of salaries, taxes, insurance and
related costs of Station personnel, including managerial
staff, at the main studios, subject to any reimbursement by
Broker as provided herein.
1.6.2. STATION OPERATION. Broker shall employ and be responsible for
the salaries, commissions, taxes, insurance and other related
costs of all personnel (including air personalities,
engineering personnel, sales persons, traffic personnel, board
operators and other programming staff members) involved in the
production and broadcast of its programming. Broker may
establish, staff and maintain a remote control point for the
Station, subject to the control and oversight of the Licensee
and provided that Broker ensures that Licensee maintains the
ability to preempt Broker's programming at any time. Broker
shall pay for (i) all telephone calls associated with program
production and listener responses, (ii) any fees billed by
ASCAP, BMI and SESAC, and (iii) all other copyright fees
attributable to programming provided by Broker under this
Agreement.
1.6.3. LICENSEE EMPLOYEES. Broker is not required to hire any of
Licensee's employees.
1.7. OPERATION OF STATION
1.7.1. LICENSEE'S AUTHORITY. Notwithstanding anything to the contrary
in this Agreement, the Licensee shall retain exclusive
authority for the operation of the Station, including, without
limitation, the right (i) to accept or reject any programming
or advertisements proffered by Broker, (ii) to cancel or
preempt any programs proffered by Broker the broadcast of
which would not, in the Licensee's opinion, be in the public
interest, (iii) to substitute for any program proffered by
Broker a program deemed by the Licensee to
3
<PAGE> 6
be of greater national, regional or local interest, (iv) to
require that time sales by Broker to political candidates
comply with law and policy regarding access, charges and equal
opportunities, and (v) to take any other action which the
Licensee deems necessary for compliance with federal, state
and local laws, including the Act and the rules and policies
of the FCC. At any time that Broker's personnel are using
Licensee's facilities, they shall be under the ultimate
direction, control and supervision of the Licensee's general
manager.
1.7.2. PRIOR NOTICE. The Licensee will use its best efforts to
provide Broker with reasonable prior notice of any intention
to cancel or preempt any programming proffered by Broker.
1.7.3. LICENSEE'S COMPLIANCE WITH ACT AND FCC REQUIREMENTS. Licensee
shall be solely responsible for the Station's compliance with
the Act as well as FCC rules and policies. Broker shall
provide information to the Licensee with respect to Broker's
programs to assist the Licensee in assessing the extent to
which such programming is responsive to the needs and
interests of each Station's service area and to enable the
Licensee to prepare reports and applications required by the
FCC and other governmental entities, including but not limited
to a quarterly list of community issues and responsive
programming and the children television programming reports.
Broker's programming shall comply with all FCC rules and
policies with regard to children's programming.
1.7.4. BROKER'S LIABILITIES. Broker shall be responsible for all
liabilities, debts and obligations with respect to the sale of
time on the Station and use of the Station's transmission
facilities after the Effective Date; provided, that nothing in
this subsection shall impose any liability on Broker for
Licensee's federal, state or local income taxes incurred as a
consequence of the operation of the Station. Broker shall
reimburse Licensee for any franchise, personal property or
real estate taxes incurred from and after the date hereof
until termination of this Agreement or consummation of the
Exchange Agreement.
1.8. STATION IDENTIFICATION. The Licensee shall be responsible for the
broadcast of required station identification announcements. Broker
shall make available to Licensee, without charge, such announcements
for such purpose as requested by Licensee and shall air such
announcements during the programming supplied by Broker.
1.9. FORCE MAJEURE. No breach of this Agreement shall be deemed to occur if
circumstances beyond the control of the Licensee cause any (i) damage
or malfunction in any Station's transmission facilities or (ii) delay
or interruption in the broadcast of programs.
4
<PAGE> 7
1.10. RIGHT TO USE THE PROGRAMS. The right to use the Broker's programming
and to authorize its use in any manner in any media whatsoever shall
be, and remain, vested in Broker.
1.11. PAYOLA. Neither Broker nor its employees or designated agents shall
accept any consideration, compensation, gift or gratuity of any kind,
regardless of its value or form, including but not limited to a
commission, discount, bonus, material, supplies or other merchandise,
services or labor, whether or not pursuant to written contract or
agreement between Broker and merchants or advertisers, unless the
payer is identified in the program in accordance with the Act and FCC
rules and policies. Broker shall provide the Licensee with an
appropriate affidavit within 45 days of the Effective Date of this
Agreement and thereafter on an annual basis, and more frequently if
reasonably requested by Licensee, attesting to its compliance with
this section.
1.12. BROKER'S COMPLIANCE WITH LAW. Broker shall comply in all material
respects with all laws, rules, regulations and policies applicable to
Broker's performance under this Agreement or to which the Licensee is
subject in the operation of the transmission facilities and the
broadcast of programs.
2. REPRESENTATIONS AND WARRANTIES
2.1. MUTUAL REPRESENTATIONS AND WARRANTIES. Each party represents and
warrants to the other that it is legally qualified, duly empowered and
expressly authorized to enter into this Agreement, and that the
execution, delivery and performance of this Agreement shall not
constitute a breach or violation of any agreement, contract or other
obligation to which either party is subject or by which it is bound.
2.2. LICENSEE'S REPRESENTATIONS AND WARRANTIES. Licensee represents and
warrants to Broker that it owns and holds the Licenses for the Station
and that each such License or authorization is in full force and
effect, unimpaired by any acts or omissions of Licensee or its agents.
Except as set forth in the schedules to the Exchange Agreement, there
is not now pending or, to the Licensee's knowledge, threatened any
action by or before the FCC to revoke, cancel, suspend, refuse to
renew or modify adversely the Licenses. To Licensee's knowledge, as of
the date of this Agreement, no event has occurred that does justify
or, after notice or lapse of time or both, would justify, the
revocation or termination of any License or the imposition of any
restrictions or modifications thereon that would adversely affect the
operation of any of the Station
5
<PAGE> 8
as of the date of this Agreement. Licensee is not in material
violation of any statute, ordinance, rule, regulation, policy, order
or decree of any federal, state, or local governmental entity, court
or authority having jurisdiction over it or over any part of the
operations or assets of the Station, which violation would have a
material adverse effect on the Licenses, the Station assets, or
Licensee's ability to perform this Agreement. Licensee will not
dispose of, transfer, assign or pledge any of the Station assets
except with the prior written consent of Broker or except for
non-material assets disposed of in the ordinary course of business.
2.3. BROKER'S REPRESENTATIONS AND WARRANTIES
2.3.1. COMPLIANCE WITH LAW. Broker represents and warrants to
Licensee that Broker is not in material violation of any
statute, ordinance, rule, regulation, policy, order or decree
of any federal, state or local governmental entity, court or
authority having jurisdiction over it or over any part of its
operation or assets, which violation would have a material
adverse effect on Broker, its assets, or its ability to
perform this Agreement, or the operation of the Station, or
the FCC Licenses. Broker represents and warrants to Licensee
that Broker has full authority to broadcast its programming on
the Station and Programmer shall not broadcast any material in
violation of the Copyright Act or the rights of any third
party.
2.3.2. TRADE AND BARTER AGREEMENTS. During the term of this
Agreement, Broker shall broadcast, without charge, any
advertisements which Licensee is obligated to air under trade
or barter agreements in existence prior to the date of this
Agreement: provided, that the scope of Licensee's trade or
barter obligations as of the date hereof is set forth in
Schedule 1 annexed hereto; and provided further that such
advertisements will be aired on a run of schedule basis at a
time or times determined by Broker and preemptable for any
party who will pay cash for the time. Broker shall honor
Licensee's cash advertising agreements and programming
agreements that are in existence as of the date of this
Agreement and were entered into in the ordinary course of
business.
2.4. INDEMNIFICATION. Each party shall defend, indemnify and hold
harmless the other party and its partners, officers,
stockholders, directors, employees, agents, successors and
assigns, from and against any and all costs, losses, claims,
liabilities, fines, expenses, penalties, and damages
(including reasonable attorneys' fees) in connection with or
resulting from: (i) any breach or default under this Agreement
or (ii) any claim of any nature whatsoever made with respect
to programming supplied by the indemnifying party, including
without limitation, any liability for any fines imposed by the
FCC as a result of programming supplied by the indemnifying
party.
6
<PAGE> 9
EVENTS OF DEFAULT
3.1. EVENTS OF DEFAULT. The following shall, after the expiration of the
applicable cure period provided for in Section 3.2, constitute an
Event of Default:
3.1.1. Broker's failure to timely make any payments to Licensee
required under this Agreement;
3.1.2. the default by either party hereto in the material observance
or performance of any material covenant, condition or
undertaking contained herein, or any material breach of the
Exchange Agreement by a party thereto.
3.1.3. if any material representation or warranty made by either
party (whether in this Agreement, the Exchange Agreement, the
KUWB Time Brokerage Agreement or in any certificate or
document furnished pursuant to the provisions of either
Agreement) shall prove to have been or become false or
misleading in any material respect and such condition is not
susceptible to timely cure or not cured within the period
allowed under either agreement.
3.2. CURE PERIOD. An Event of Default shall not be deemed to have occurred
until, in the case of payment of any money to Licensee, five (5)
business days, or in the case of any other default, twenty (20)
business days, after the nondefaulting party has provided the
defaulting party with written notice specifying the event or events
that, if not cured, would constitute an Event of Default and
specifying the action necessary to cure the Event of Default within
such period. Except as to defaults relating to the payment of money to
Licensee, this period may be extended for a reasonable period of time
if the defaulting party is acting in good faith to cure the default
and such default is not materially adverse to the other party.
4. TERMINATION
4.1. TERMINATION UPON DEFAULT. Upon the occurrence of an Event of Default,
the nondefaulting party may terminate this Agreement, unless the
latter party is also in default hereunder. The nondefaulting party
shall also have all rights and remedies at law or in equity upon the
occurrence of an Event of Default.
4.2. BROKER TERMINATION OPTION. Broker may terminate this Agreement at any
time if, notwithstanding anything in this Agreement to the contrary,
the Licensee cancels or preempts programming not in violation of this
Agreement proffered for broadcast by Broker during fifteen percent
(15%) or more of the total hours of operation of the Station during
any calendar month. In the event it elects to terminate this Agreement
pursuant to this section, Broker shall give Licensee notice of such
election within sixty (60) days of the last day of such month and at
least ninety (90) days prior to the termination date. Upon
termination, all sums owing Licensee shall be paid, and neither party
shall have any further liability to the other (except as provided
under Section 2.4).
7
<PAGE> 10
4.3. LICENSEE TERMINATION OPTION. This Agreement shall terminate upon
termination of the KUWB Time Brokerage Agreement. Upon termination,
all sums owing Licensee shall be paid, and neither party shall have
any further liability to the other (except as provided under Section
2.4).
4.4. TERMINATION UPON GOVERNMENT ACTION. This Agreement may be terminated
under any one of the following circumstances: (i) by Broker, if the
FCC revokes, refuses to renew, or fails to extend any FCC
Authorization for any Station; (ii) by Broker or Licensee, as the case
may be, if the FCC or any other governmental agency with jurisdiction
over this agreement, by order, rule, or policy requires a modification
to this Agreement which is materially adverse to Broker and/or
Licensee; or (iii) by Broker or Licensee, if the FCC or any other
governmental agency with jurisdiction over this agreement, by order,
rule, or policy, requires the termination of this Agreement; provided,
that, if Licensee elects to contest the agency's proposed action, this
Agreement shall remain in effect if permitted under applicable law;
provided, that Licensee shall be responsible for the expenses it
incurs as a result of the agency proceeding; and provided further,
that Broker shall, at its own expense, cooperate and comply with any
reasonable request of Licensee to assemble and provide to Licensee
information relating to Broker's performance under this Agreement.
4.5. In the event of termination of this Agreement under this Section, (i)
Broker shall pay to the Licensee any monies due under this Agreement
but unpaid as of the date of termination; and (ii) Licensee shall
cooperate with Broker to the extent practicable to enable Broker to
fulfill advertising or other programming contracts for cash
compensation then outsanding, in which event the Licensee shall
receive such compensation payable to Broker therefor. Thereafter,
neither party shall have any liability to the other, except as
provided in Section 2.4.
4.6. PAYMENTS TO LICENSEE. Upon termination of this Agreement in accordance
with its terms (by an Event of Default, consummation of the Purchase
Agreement, or expiration of the term of this Agreement), Broker shall,
within ten (10) days of such termination, pay to Licensee all monies
due Licensee.
5. MISCELLANEOUS
5.1. INSURANCE. Licensee shall maintain in full force and effect such
insurance policies as carried by it on the Effective Date of this
Agreement with responsible and reputable insurance companies or
associations covering such risks (including fire and other risks
insured against by extended coverage, broadcaster's general liability,
including errors and omissions, invasion of privacy, libel and
defamation claims, public liability insurance, insurance for claims
against personal injury or death or property damage and such other
insurance as may be required by law) and in such amounts and on such
terms as is conventionally carried by broadcasters operating
television stations with facilities comparable to those of the
Station. Licensee shall cause Broker to be named as an additional
insured thereunder. Broker shall maintain similar insurance covering
8
<PAGE> 11
its actions and omissions under this Agreement, including invasion of
privacy, libel and defamation claims based on Broker's programming,
and such other insurance as may be appropriate. Broker will cause
Licensee to be named as an additional insured thereunder. Any
insurance proceeds received by any party hereto for damaged property
will be used to repair or replace such property so that the operation
of the Station conforms with this Agreement. The premiums for any
insurance policies maintained by Licensee shall be included in the
expenses subject to reimbursement by Broker under Section 1.4 of this
Agreement.
5.2. NOTICES. All necessary notices, demands, requests and other
communications permitted or required under this Agreement shall be in
writing and shall be mailed by certified mail-return receipt requested
(postage prepaid) by hand; by telecopy or fax with confirmation of
receipt, or by overnight courier service (charges prepaid), and
addressed as follows (or to such other address as either party may
designate in writing to the other):
5.2.1. If to Broker:
Douglas Gealy
ACME Television of Utah, LLC
10829 Olive Boulevard
St. Louis, Missouri 63141
copy to:
Lewis J. Paper, Esq.
Dickstein Shapiro Morin & Oshinsky
2101 L Street, N.W.
Washington, D.C. 20037
5.2.2. If to the Licensee:
Lowell Paxson, Chairman
Paxson Salt Lake City License, Inc.
601 Clearwater Park Road
West Palm Beach, Florida 33401
copy to:
John R. Feore, Esq.
Dow Lohnes & Albertson, PLLC
Suite 800
1200 New Hampshire Avenue, NW
Washington, D.C. 20036-6802
5.2.3. Such notices shall be effective upon delivery.
9
<PAGE> 12
5.3. WAIVER. No waiver of any provision of this Agreement shall be
effective unless in writing. Such waiver shall be effective only in
the specific instance and for the purpose for which given.
5.4. CONSTRUCTION. This Agreement shall be construed in accordance with the
laws of the State of Delaware without regard to conflict of laws
provisions.
5.5. HEADINGS. The headings contained in this Agreement are included for
convenience only and no heading shall alter the meaning of any
provision.
5.6. ASSIGNMENT. This Agreement may not be assigned by either party without
the prior written consent of the other: provided, that Broker may
assign, without Licensee's consent, its rights and obligations under
this Agreement to any other party to whom Broker assigns its rights as
permitted under the Exchange Agreement.
5.7. COUNTERPART SIGNATURE. This Agreement may be signed in one or more
counterparts, and all counterparts shall be deemed to be one and the
same document.
5.8. ENTIRE AGREEMENT. This Agreement and the Purchase Agreement embody the
entire agreement between the parties and supersede any and all prior
and contemporaneous agreements and understandings, oral or written. No
amendment of this Agreement shall be valid unless embodied in a
document executed by both parties.
5.9. NO PARTNERSHIP OR JOINT VENTURE CREATED. Nothing in this Agreement
shall be construed to make the Licensee and Broker partners or part of
a joint venture or to vest any rights in any third party.
5.10. SEVERABILITY OF PROVISIONS. Except as set forth in Section REF
_Ref412027509 \r \h ~4.3 hereto, in the event any provision contained
in this Agreement is held to be invalid, illegal or unenforceable by
the FCC or any court of competent jurisdiction, such holding shall not
affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had
not be contained herein.
5.11. LITIGATION PROCEDURES AND EXPENSES. If either party initiates any
formal legal action to enforce its rights hereunder, the prevailing
party shall be reimbursed by the other party for all reasonable
expenses incurred thereby, including reasonable attorney's fees.
10
<PAGE> 13
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first written above.
ACME TELEVISION OF UTAH, LLC
By: /s/ Douglas Gealy
--------------------------------
Douglas Gealy
President
PAXSON SALT LAKE CITY LICENSE, INC.
By: /s/ Lowell Paxson
--------------------------------
Lowell Paxson
Chairman
PAXSON COMMUNICATIONS OF
SALT LAKE CITY-30, INC.
By: /s/ Lowell Paxson
--------------------------------
Lowell Paxson
Chairman
11
<PAGE> 1
EXHIBIT 10.3
MASTER LEASE AGREEMENT
(QUASI)
THIS MASTER LEASE AGREEMENT, dated as of June 30, 1998 ("AGREEMENT"),
between GENERAL ELECTRIC CAPITAL CORPORATION, with an office at 4 North Park
Drive, Suite 500, Hunt Valley, Maryland, 21030 (hereinafter called, together
with its successors and assigns, if any, "LESSOR"), and ACME TELEVISION, LLC , a
limited liability company organized and existing under the laws of the State of
Delaware with its mailing address and chief place of business at 2101 E. Fourth
Street, Suite 202, Santa Ana, California 92705 (hereinafter called "LESSEE").
WITNESSETH:
I. LEASING:
(a) Subject to the terms and conditions set forth below, Lessor agrees to lease
to Lessee, and Lessee agrees to lease from Lessor, the equipment ("EQUIPMENT")
described in Annex A to any schedule hereto ("SCHEDULE"). Terms defined in a
Schedule and not otherwise defined herein shall have the meanings ascribed to
them in such Schedule. (b) The obligation of Lessor to purchase Equipment from
the manufacturer or supplier thereof ("SUPPLIER") and to lease the same to
Lessee under any Schedule shall be subject to receipt by Lessor, prior to the
Lease Commencement Date (with respect to such Equipment), of each of the
following documents in form and substance satisfactory to Lessor: (i) a Schedule
relating to the Equipment then to be leased hereunder executed by the Lessee,
(ii) a purchase order assignment and consent in form satisfactory to Lessor,
unless Lessor shall have delivered its purchase order for the Equipment, or paid
in full invoice or other evidence of ownership of the Equipment, whichever is
applicable, (iii) evidence of insurance which complies with the requirements of
Section IX, and (iv) such other documents as Lessor may reasonably request. As a
further condition to such obligations of Lessor, Lessee shall, upon delivery of
such Equipment (but not later than the Last Delivery Date specified in the
applicable Schedule) execute and deliver to Lessor a Certificate of Acceptance
(in the form of Annex C to the applicable Schedule) covering such Equipment.
Lessor hereby appoints Lessee its agent for inspection and acceptance of the
Equipment from the Supplier. Upon execution and delivery by Lessee of any
Certificate of Acceptance, the Equipment described thereon shall be deemed to
have been delivered to, and irrevocably accepted by, Lessee for lease hereunder.
II. TERM, RENT AND PAYMENT:
(a) The rent payable hereunder and Lessee's right to use the Equipment shall
commence on the date of execution by Lessee of the Certificate of Acceptance for
such Equipment ("LEASE COMMENCEMENT DATE"). The term of this Agreement shall be
the period specified in the applicable Schedule. If any term is extended, the
word "term" shall be deemed to refer to all extended terms, and all provisions
of this Agreement shall apply during any extended terms, except as may be
otherwise specifically provided in writing. (b) Rent shall be paid to Lessor at
its address stated above, except as otherwise directed by Lessor. Payments of
rent shall be in the amount set forth in, and due in accordance with, the
provisions of the applicable Schedule. If one or more Advance Rentals are
payable, such Advance Rental shall be (i) set forth on the applicable Schedule,
(ii) due upon acceptance by Lessor of such Schedule, and (iii) when received by
Lessor, applied to the first rent payment and the balance, if any, to the final
rental payment(s) under such Schedule. In no event shall any Advance Rental or
any other rent payments be refunded to Lessee. If rent is not paid within ten
days of its due date, Lessee agrees to pay a late charge of five cents ($0.05)
per dollar on, and in addition to, the amount of such rent but not exceeding the
lawful maximum, if any. (c) So long as no default shall have occurred and be
continuing under the terms of this Agreement, neither Lessor nor its agents,
employees, creditors, or assigns will disturb Lessee's quite, peaceful and
uninterrupted possession of the Equipment during the term of this Lease and
Lessee's uninterrupted use thereof for its intended purpose.
III. TAXES:
Lessee shall have no liability for taxes imposed by the United States of America
or any State or political subdivision thereof which are on or measured by the
net income of Lessor. Subject to the foregoing, Lessee shall report (to the
extent that it is legally permissible) and pay promptly all other taxes, fees
and assessments due, imposed, assessed or levied against any Equipment (or the
purchase, ownership, delivery, leasing, possession, use or operation thereof),
this Agreement (or any rentals or receipts hereunder), any Schedule, Lessor or
Lessee by any foreign, federal, state or local government or taxing authority
during or related to the term of this Agreement, including, without limitation,
all license and registration fees, and all sales, use, personal property,
excise, gross receipts, franchise, stamp or other taxes, imposts, duties and
charges, together with any penalties, fines or interest thereon (all hereinafter
called "Taxes"). Lessee shall (i) (on an after-tax basis) reimburse Lessor upon
receipt of written request for reimbursement for any Taxes charged to or
assessed against Lessor, (ii) on request of Lessor, submit to Lessor written
evidence of Lessee's payment of Taxes, (iii) send a copy thereof to Lessor. The
obligations of Lessee under this Section III shall survive any expiration or
termination of this Agreement.
IV. REPORTS:
(a) Lessee will notify Lessor in writing, within ten days after any tax or other
lien shall attach to any Equipment, of the full particulars thereof and of the
location of such Equipment on the date of such notification. (b) In the event
Lessee does not file a Form 10-K with the Securities and Exchange Commission,
Lessee will within 90 days of the close of each fiscal year of Lessee, deliver
to Lessor, Lessee's balance sheet and profit and loss statement, certified by a
recognized firm of certified public accountants. Lessee will, within thirty (30)
days after the date on which they are filed, deliver to Lessor all Forms 10-K
and 10-Q filed with the Securities and Exchange Commission. Upon request (but
only in the event Lessee does not file a Form 10-Q with the Securities and
Exchange Commission) Lessee will deliver to Lessor quarterly, within 90 days of
the close of each fiscal quarter of Lessee, in reasonable detail, copies of
Lessee's quarterly financial report certified by the chief financial officer of
Lessee. Upon request, Lessee will deliver to Lessor one copy of each financial
statement, report, notice or proxy statement sent by Lessee to shareholders
generally and one copy of each regular or periodic report, registration
statement or prospectus filed by Lessee with any securities exchange or the
Securities and Exchange Commission or any successor agency, such copies to be
delivered to Lessor within thirty (30) days after they become available or are
otherwise filed.(c) Lessee will permit Lessor to inspect any Equipment during
normal business hours and upon reasonable notice as long as such inspection does
not interfere with Lessee's operations. (d) Lessee will keep the Equipment at
the Equipment Location (specified in the applicable Schedule) and will promptly
notify Lessor of any relocation of Equipment. Upon the written request of
Lessor, Lessee will notify Lessor forthwith in writing of the location of any
Equipment as of the date of such notification. (e) Lessee will promptly and
fully report to Lessor in writing if any Equipment is lost or damaged (where the
estimated repair costs would exceed 10% of its then fair market value), or is
otherwise involved in an accident causing personal injury or property damage.
(f) Within 30 days after any request by Lessor (but in no event more than once a
year, unless Lessee is in default hereunder), Lessee will furnish a certificate
of an authorized officer of Lessee stating that he
1
<PAGE> 2
has reviewed the activities of Lessee and that, to the best of his knowledge,
there exists no default (as described in Section XI) or event which with notice
or lapse of time (or both) would become such a default.
V. DELIVERY, USE AND OPERATION:
(a) All Equipment shall be shipped directly from the Supplier to Lessee. (b)
Lessee agrees that the Equipment will be used by Lessee solely in the conduct of
its business and in a manner complying with all applicable federal, state, and
local laws and regulations and any applicable insurance policies and Lessee
shall not discontinue use of the Equipment. (c) LESSEE SHALL NOT ASSIGN,
MORTGAGE, SUBLET OR HYPOTHECATE ANY EQUIPMENT, OR THE INTEREST OF LESSEE
HEREUNDER, NOR SHALL LESSEE REMOVE ANY EQUIPMENT FROM THE CONTINENTAL UNITED
STATES, WITHOUT THE PRIOR WRITTEN CONSENT OF THE LESSOR. (d) Lessee will keep
the Equipment free and clear of all liens and encumbrances other than those
which are granted in favor of or result from acts of Lessor.
VI. SERVICE:
(a) Lessee will, at its sole expense, maintain each unit of Equipment in good
operating order, repair, condition and appearance in accordance with
manufacturer's recommendations, normal wear and tear excepted. Lessee shall, if
at any time requested by Lessor, affix in a prominent position on each unit of
Equipment plates, tags or other identifying labels showing ownership thereof by
Lessee and Lessor's security interest therein. (b) Lessee will not, without the
prior consent of Lessor, affix or install any accessory, equipment or device on
any Equipment if such addition will impair the originally intended function or
use of such Equipment. All additions, repairs, parts, supplies, accessories,
equipment, and devices furnished, attached or affixed to any Equipment which are
not readily removable shall be made only in compliance with applicable law; and
shall become subject to the lien of Lessor. Lessee shall not make any
attachments or improvements to the Equipment which are not readily removable
unless Lessee subjects the attachments or improvements to the lien of Lessor
hereunder. Lessee will not, without the prior written consent of Lessor and
subject to such conditions as Lessor may impose for its protection, affix or
install any Equipment to or in any other personal or real property. (c) Any
alterations or modifications to the Equipment that may, at any time during the
term of this Agreement, be required to comply with any applicable law, rule or
regulation shall be made at the expense of Lessee.
VII. STIPULATED LOSS VALUE:
Lessee shall promptly and fully notify Lessor in writing if any unit of
Equipment shall be or become worn out, lost, stolen, destroyed, irreparably
damaged in the reasonable determination of Lessee, or permanently rendered unfit
for use from any cause whatsoever (such occurrences being hereinafter called
"CASUALTY OCCURRENCES"). On the rental payment date next succeeding a Casualty
Occurrence (the "PAYMENT DATE"), Lessee shall pay Lessor the sum of (x) the
Stipulated Loss Value of such unit calculated as of the rental payment date next
preceding such Casualty Occurrence ("CALCULATION DATE"); and (y) all accrued and
unpaid rental and other amounts which are due hereunder as of the Payment Date.
Upon payment of all sums due hereunder, the term of this lease as to such unit
shall terminate and (except in the case of the loss, theft or complete
destruction of such unit) Lessor shall be entitled to recover possession of such
unit.
VIII. LOSS OR DAMAGE:
Lessee hereby assumes and shall bear the entire risk of any loss, theft, damage
to, or destruction of, any unit of Equipment from any cause whatsoever from the
time the Equipment is shipped to Lessee.
IX. INSURANCE:
Lessee agrees, at its own expense, to maintain insurance for damage to or loss
of all Equipment and liability coverage for personal injuries, death or property
damage, with Lessor named as additional insured and with a loss payable clause
in favor of Lessor, as its interest may appear, irrespective of any breach of
warranty or other act or omission of Lessee. The insurance shall provide (i)
liability coverage in an amount equal to at least ONE MILLION U.S. DOLLARS
($1,000,000.00) (or such other amount as specified on the applicable Schedule)
total liability per occurrence, and (ii) casualty/property damage coverage in an
amount equal to the higher of the Stipulated Loss Value or the full replacement
cost of the Equipment. All such policies shall be with companies, and on terms,
satisfactory to Lessor. Lessee agrees to deliver to Lessor certificates or other
evidence of insurance reasonably satisfactory to Lessor. No insurance shall be
subject to any co-insurance clause. Lessee hereby appoints Lessor as Lessee's
attorney-in-fact to make proof of loss and claim for insurance, and to make
adjustments with insurers and to receive payment of and execute or endorse all
documents, checks or drafts in connection with payments made as a result of such
insurance policies. Any expense of Lessor in adjusting or collecting insurance
shall be borne by Lessee. Lessee will not make adjustments with insurers except
(i) with respect to claims for damage to any unit of Equipment where the repair
costs do not exceed 10% of such unit's fair market value, or (ii) with Lessor's
written consent. Said policies shall provide that the insurance may not be
altered or canceled by the insurer until after thirty (30) days written notice
to Lessor. Unless Lessee is in default, Lessee may, at its option, cause Lessor
to apply proceeds of insurance, in whole or in part, to (i) repair or replace
Equipment or any portion thereof, or (ii) satisfy any obligation of Lessee to
Lessor hereunder. If Lessee is in default, then Lessor shall direct the
application of such proceeds to either of the foregoing.
X. RETURN OF EQUIPMENT:
(a) Upon any expiration or termination of this Agreement or any Schedule, Lessee
shall promptly, at its own cost and expense: (i) perform any testing and repairs
required to place the affected units of Equipment (other than any Equipment as
to which a Casualty Occurrence has occurred) in the same condition and
appearance as when received by Lessee (reasonable wear and tear excepted) and in
good working order for their originally intended purpose; (ii) if
deinstallation, disassembly or crating is required, cause such units to be
deinstalled, disassembled and crated by an authorized manufacturer's
representative or such other service person as is satisfactory to Lessor; and
(iii) return such units to a location as Lessor shall direct within a radius of
1,000 miles of the location of such Equipment at the time of termination. (b)
Until Lessee has fully complied with the requirements of Section X(a) above,
Lessee's rent payment obligation and all other obligations under this Agreement
shall continue from month to month notwithstanding any expiration or termination
of the lease term. Lessor may terminate such continued leasehold interest upon
ten (10) days notice to Lessee.
XI. DEFAULT:
(a) Lessor may in writing declare this Agreement in default if: Lessee breaches
its obligation to pay rent or any other sum when due and fails to cure the
breach within ten (10) days; Lessee breaches any of its insurance obligations
under Section IX; Lessee breaches any of its other obligations to Lessor
hereunder or under any instrument, document or agreement between Lessor and
Lessee and fails to cure that breach within thirty (30) days after written
notice thereof; any representation or
2
<PAGE> 3
warranty made by Lessee in connection with this Agreement shall be false or
misleading in any material respect; Lessee or any guarantor becomes insolvent
(as defined under applicable law) or ceases to do business as a going concern;
any Equipment is illegally used; or a petition is filed by Lessee or any
guarantor under any bankruptcy or insolvency laws or, an involuntary petition is
filed against Lessee and is not dismissed within ninety (90) days; there is a
default in or a revocation or anticipatory repudiation of any guarantor's
obligations under any guaranty issued in connection with this Agreement;
3
<PAGE> 4
Lessee shall be in default under its credit/loan agreement with Canadian
Imperial Bank of Commerce or any replacement or successor credit/loan agreement
(whether by refinancing or otherwise) and the applicable grace or cure period
with respect thereto shall have expired and such default remains uncured or
unwaived; Lessee or any guarantor shall have terminated its existence,
consolidated with, merged into or conveyed or leased substantially all of its
assets as an entirety to any person (such actions being referred to as an
"EVENT"), unless not less than sixty (60) days prior to such Event: (x) such
person is organized and existing under the laws of the United States or any
state, and executes and delivers to Lessor an agreement containing an effective
assumption by such person of the due and punctual performance of this Lease or
guaranty thereof, as the case may be, and (y) the debt-to-net worth ratio of
such person is no greater than the debt-to-net worth ratio of Lessee as of the
date of this Agreement (such ratios as determined in accordance with generally
accepted accounting principles); if effective control of Lessee's voting
membership interests, issued and outstanding from time to time, is not retained
by the present members (unless Lessee shall have provided sixty (60) days' prior
written notice to Lessor of the proposed disposition of membership interests and
Lessor shall have consented thereto in writing). Any provision of this Agreement
to the contrary notwithstanding, Lessor may exercise all rights and remedies
hereunder independently with respect to each Schedule. Such declaration shall
apply to all Schedules to which Lessor or an assignee is a party except as
specifically excepted by Lessor or such assignee. (b) After default, at the
request of Lessor, Lessee shall comply with the provisions of Section X(a).
Lessee hereby authorizes Lessor to enter, with or without legal process, any
premises where any Equipment is believed to be and take possession thereof.
Lessee shall, without further demand, forthwith pay to Lessor (i) as liquidated
damages for loss of a bargain and not as a penalty, the Stipulated Loss Value of
the Equipment (calculated as of the rental next preceding the declaration of
default), and (ii) all accrued and unpaid rentals and other sums then due
hereunder. Lessor may, but shall not be required to, sell Equipment at private
or public sale, in bulk or in parcels, with or without notice, and without
having the Equipment present at the place of sale; or Lessor may, but shall not
be required to, lease, otherwise dispose of or keep idle all or part of the
Equipment; and Lessor may use Lessee's premises for any or all of the foregoing
without liability for rent, costs, damages or otherwise. The proceeds of sale,
lease or other disposition, if any, shall be applied in the following order of
priorities: (1) to pay all of Lessor's costs, charges and expenses incurred in
taking, removing, holding, repairing and selling, leasing or otherwise disposing
of Equipment; then, (2) to the extent not previously paid by Lessee, to pay
Lessor all sums due from Lessee hereunder; then (3) to reimburse to Lessee any
sums previously paid by Lessee as liquidated damages; and (4) any surplus shall
be retained by Lessor. Lessee shall pay any deficiency in (1) and (2) forthwith.
(c) The foregoing remedies are cumulative, and any or all thereof may be
exercised in lieu of or in addition to each other or any remedies at law, in
equity, or under statute. Lessee waives notice of sale or other disposition (and
the time and place thereof), and the manner and place of any advertising. Lessee
shall pay Lessor's actual attorney's fees incurred in connection with the
enforcement, assertion, defense or preservation of Lessor's rights and remedies
hereunder, or if prohibited by law, such lesser sum as may be permitted. Waiver
of any default shall not be a waiver of any other or subsequent default. (d) Any
default under the terms of this or any other agreement between Lessor and Lessee
may be declared by Lessor a default under this and any such other agreement.
XII. ASSIGNMENT:
Lessor may, without the consent of Lessee, assign this Agreement or any
Schedule. Lessee agrees that if Lessee receives written notice of an assignment
from Lessor, Lessee will pay all rent and other amounts payable under any
assigned Equipment Schedule to such assignee or as instructed by Lessor. Lessee
further agrees to confirm in writing receipt of a notice of assignment as may be
reasonable requested by assignee. Lessee hereby waives and agrees not to assert
against any such assignee any defense, set-off, recoupment claim or counterclaim
which Lessee has or may at any time have against Lessor for any reason
whatsoever.
XIII. NET LEASE; NO SET-OFF, ETC:
This Agreement is a net lease. Lessee's obligation to pay rent and other amounts
due hereunder shall be absolute and unconditional. Lessee shall not be entitled
to any abatement or reductions of, or set-offs against, said rent or other
amounts, including, without limitation, those arising or allegedly arising out
of claims (present or future, alleged or actual, and including claims arising
out of strict tort or negligence of Lessor) of Lessee against Lessor under this
Agreement or otherwise. Nor shall this Agreement terminate or the obligations of
Lessee be affected by reason of any defect in or damage to, or loss of
possession, use or destruction of, any Equipment from whatsoever cause. It is
the intention of the parties that rents and other amounts due hereunder shall
continue to be payable in all events in the manner and at the times set forth
herein unless the obligation to do so shall have been terminated pursuant to the
express terms hereof.
XIV. INDEMNIFICATION:
(a) Lessee hereby agrees to indemnify, save and keep harmless (on an after-tax
basis) Lessor, its agents, employees, successors and assigns from and against
any and all losses, damages, penalties, injuries, claims, actions and suits,
including legal expenses, of whatsoever kind and nature, in contract or tort,
including, but not limited to, Lessor's strict liability in tort, arising out of
(i) the selection, manufacture, purchase, acceptance or rejection of Equipment,
the ownership of Equipment during the term of this Agreement, and the delivery,
lease, possession, maintenance, uses, condition, return or operation of
Equipment (including, without limitation, latent and other defects, whether or
not discoverable by Lessor or Lessee and any claim for patent, trademark or
copyright infringement or environmental damage) or (ii) the condition of
Equipment sold or disposed of after use by Lessee, any sublessee or employees of
Lessee. Lessee shall, upon request, defend any actions based on, or arising out
of, any of the foregoing. (b) All of Lessor's rights, privileges and indemnities
contained in this Section XIV shall survive the expiration or other termination
of this Agreement and the rights, privileges and indemnities contained herein
are expressly made for the benefit of, and shall be enforceable by Lessor, its
successors and assigns.
XV. DISCLAIMER:
LESSEE ACKNOWLEDGES THAT IT HAS SELECTED THE EQUIPMENT WITHOUT ANY ASSISTANCE
FROM LESSOR, ITS AGENTS OR EMPLOYEES. LESSOR DOES NOT MAKE, HAS NOT MADE, NOR
SHALL BE DEEMED TO MAKE OR HAVE MADE, ANY WARRANTY OR REPRESENTATION, EITHER
EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO THE EQUIPMENT LEASED
HEREUNDER OR ANY COMPONENT THEREOF, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY
AS TO DESIGN, COMPLIANCE WITH SPECIFICATIONS, QUALITY OF MATERIALS OR
WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE, USE OR OPERATION, SAFETY,
PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, OR TITLE. All such risks, as
between Lessor and Lessee, are to be borne by Lessee. Without limiting the
foregoing, Lessor shall have no responsibility or liability to Lessee or any
other person with respect to any of the following, (i) any liability, loss or
damage caused or alleged to be caused directly or indirectly by any Equipment,
any inadequacy thereof, any deficiency or defect (latent or otherwise) therein,
or any other circumstance in connection therewith; (ii) the use, operation or
performance of any Equipment or any risks relating thereto; (iii) any
interruption of service, loss of business or anticipated profits or
consequential damages; or (iv) the delivery, operation, servicing, maintenance,
repair, improvement or replacement of any Equipment. If, and so long as, no
default exists under this Lease, Lessee shall be, and hereby is, authorized
during the term of this Lease to assert and enforce, at Lessee's sole cost and
expense, from time to time, in the name of and for the account of Lessor and/or
Lessee, as their interests may appear, whatever claims and rights Lessor may
have against any Supplier of the Equipment.
4
<PAGE> 5
XVI. REPRESENTATIONS AND WARRANTIES OF LESSEE:
Lessee hereby represents and warrants to Lessor that on the date hereof and on
the date of execution of each Schedule: (a) Lessee has adequate power and
capacity to enter into, and perform under, this Agreement and all related
documents (together, the "DOCUMENTS") and is duly qualified to do business
wherever necessary to carry on its present business and operations, including
the jurisdiction(s) where the Equipment is or is to be located. (b) The
Documents have been duly authorized, executed and delivered by Lessee and
constitute valid, legal and binding agreements, enforceable in accordance with
their terms, except to the extent that the enforcement of remedies therein
provided may be limited under applicable bankruptcy and insolvency laws. (c) No
approval, consent or withholding of objections is required from any governmental
authority or instrumentality with respect to the entry into or performance by
Lessee of the Documents except such as have already been obtained. (d) The entry
into and performance by Lessee of the Documents will not: (i) violate any
judgment, order, law or regulation applicable to Lessee or any provision of
Lessee's Certificate of Incorporation or By-Laws; or (ii) result in any breach
of, constitute a default under or result in the creation of any lien, charge,
security interest or other encumbrance upon any Equipment pursuant to any
indenture, mortgage, deed of trust, bank loan or credit agreement or other
instrument (other than this Agreement) to which Lessee is a party. (e) There are
no suits or proceedings pending or threatened in court or before any commission,
board or other administrative agency against or affecting Lessee, which will
have a material adverse effect on the ability of Lessee to fulfill its
obligations under this Agreement. (f) The Equipment accepted under any
Certificate of Acceptance is and will remain tangible personal property. (g)
Each Balance Sheet and Statement of Income delivered to Lessor has been prepared
in accordance with generally accepted accounting principles, and since the date
of the most recent such Balance Sheet and Statement of Income, there has been no
material adverse change. (h) Lessee is and will be at all times validly existing
and in good standing under the laws of the State of its organization (specified
in the first sentence of this Agreement). (i) The Equipment will at all times be
used for commercial or business purposes.
XVII. OWNERSHIP FOR TAX PURPOSES, GRANT OF SECURITY INTEREST;
USURY SAVINGS:
(a) For income tax purposes, the parties hereto agree that it is their mutual
intention that Lessee shall be considered the owner of the Equipment.
Accordingly, Lessor agrees (i) to treat Lessee as the owner of the Equipment on
its federal income tax return, (ii) not to take actions or positions
inconsistent with such treatment on or with respect to its federal income tax
return, and (iii) not to claim any tax benefits available to an owner of the
Equipment on or with respect to its federal income tax return. The foregoing
undertakings by Lessor shall not be violated by Lessor's taking a tax position
inconsistent with the forgoing sentence to the extent such a position is
required by law or is taken through inadvertence so long as such inadvertent tax
position is reversed by Lessor promptly upon its discovery. Lessor shall in no
event be liable to Lessee if Lessee fails to secure any of the tax benefits
available to the owner of the Equipment . (b) Lessee hereby grants to Lessor a
first security interest in the Equipment, together with all additions,
attachments, accessions, accessories and accessions thereto which are not
readily removable and subject to this Agreement and any and all substitutions,
replacements or exchanges for such Equipment under this Agreement, and any and
all insurance and/or other proceeds of the property in and against which a
security interest is granted hereunder. Notwithstanding anything to the contrary
contained elsewhere in this Agreement, to the extent that Lessor asserts a
purchase money security interest in any items of Equipment ("PMSI EQUIPMENT"):
(i) the PMSI Equipment shall secure only those sums which have been advanced by
Lessor for the purchase of the PMSI Equipment, or the acquisition of rights
therein, or the use thereof (the "PMSI INDEBTEDNESS"), and (ii) no other
Equipment shall secure the PMSI Indebtedness. (c) It is the intention of the
parties hereto to comply with any applicable usury laws to the extent that any
Schedule is determined to be subject to such laws; accordingly, it is agreed
that, notwithstanding any provision to the contrary in any Schedule or the
Lease, in no event shall any Schedule require the payment or permit the
collection of interest in excess of the maximum amount permitted by applicable
law. If any such excess interest is contracted for, charged or received under
any Schedule or the Lease, or in the event that all of the principal balance
shall be prepaid, so that under any of such circumstances the amount of interest
contracted for, charged or received under any Schedule or the Lease shall exceed
the maximum amount of interest permitted by applicable law, then in such event
(a) the provisions of this paragraph shall govern and control, (b) neither
Lessee nor any other person or entity now or hereafter liable for the payment
hereof shall be obligated to pay the amount of such interest to the extent that
it is in excess of the maximum amount of interest permitted by applicable law,
(c) any such excess which may have been collected shall be either applied as a
credit against the then unpaid principal balance or refunded to Lessee, at the
option of the Lessor, and (d) the effective rate of interest shall be
automatically reduced to the maximum lawful contract rate allowed under
applicable law as now or hereafter construed by the courts having jurisdiction
thereof. It is further agreed that without limitation of the foregoing, all
calculations of the rate of interest contracted for, charged or received under
any Schedule or the Lease which are made for the purpose of determining whether
such rate exceeds the maximum lawful contract rate, shall be made, to the extent
permitted by applicable law, by amortizing, prorating, allocating and spreading
in equal parts during the period of the full stated term of the indebtedness
evidenced hereby, all interest at any time contracted for, charged or received
from Lessee or otherwise by Lessor in connection with such indebtedness;
provided, however, that if any applicable state law is amended or the law of the
United States of America preempts any applicable state law, so that it becomes
lawful for Lessor to receive a greater interest per annum rate than is presently
allowed, the Lessee agrees that, on the effective date of such amendment or
preemption, as the case may be, the lawful maximum hereunder shall be increased
to the maximum interest per annum rate allowed by the amended state law or the
law of the United States of America.
XVIII. [RESERVED]
XIX. EARLY PURCHASE OPTION:
(a) Provided that the Lease has not been earlier terminated and provided further
that Lessee is not in default under the Lease or any other agreement between
Lessor and Lessee. Lessee may, UPON AT LEAST 30 DAYS BUT NO MORE THAN 270 DAYS
PRIOR WRITTEN NOTICE TO LESSOR OF LESSEE'S IRREVOCABLE ELECTION TO EXERCISE SUCH
OPTION, purchase all (but not less than all) of the Equipment listed and
described in any Schedule on any Rent Payment Date following the First
Termination Date as set forth in such Schedule, and prior to the date which is
the scheduled expiration of this Lease, (the "EARLY
5
<PAGE> 6
PURCHASE DATE") for a price equal to (i) the Termination Value (calculated as of
the Early Purchase Date) for the Equipment, and (ii) all rent and other sums due
and unpaid as of the Purchase Date (the "EARLY OPTION PRICE"), plus all
applicable sales taxes on an AS IS BASIS. (The purchase option granted by this
subsection shall be referred to herein as the "EARLY PURCHASE OPTION"). (b) If
Lessee exercises its Early Purchase Option with respect to the Equipment leased
hereunder, then on the Early Purchase Date, Lessee shall pay to Lessor any rent
and other sums due and unpaid on the Early Purchase Date and Lessee shall pay
the Early Option Price, plus all applicable sales taxes, to Lessor in cash.
XX. PURCHASE OPTION:
(a) So long as no default exists hereunder and the lease has not been earlier
terminated, Lessee may at lease expiration purchase all (but not less than all)
of the Equipment in any Schedule on an AS IS, WHERE IS BASIS for cash equal to
the amount indicated in such Schedule (the "OPTION PAYMENT"). The Option Payment
shall be due and payable in immediately available funds on the Expiration Date.
(b) Lessee shall be deemed to have waived this option unless it provides Lessor
with written notice of its irrevocable election to exercise the same not less
than 90 days prior to the Expiration Date.
XXI. MISCELLANEOUS:
(a) LESSEE HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS
LEASE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN LESSEE AND LESSOR
RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS,
AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN LESSEE AND LESSOR. The
scope of this waiver is intended to be all encompassing of any and all disputes
that may be filed in any court (including, without limitation, contract claims,
tort claims, breach of duty claims, and all other common law and statutory
claims). THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LEASE, ANY RELATED DOCUMENTS, OR
TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED
TRANSACTION. In the event of litigation, this Lease may be filed as a written
waiver of trial by jury. (b) Unless and until Lessee exercises its rights under
Section XIX above, nothing herein contained shall give or convey to Lessee any
right, title or interest in and to any Equipment except as a lessee. Any
cancellation or termination by Lessor, pursuant to the provision of this
Agreement, any Schedule, supplement or amendment hereto, or the lease of any
Equipment hereunder, shall not release Lessee from any then outstanding
obligations to Lessor hereunder. All Equipment shall at all times remain
personal property of Lessor regardless of the degree of its annexation to any
real property and shall not by reason of any installation in, or affixation to,
real or personal property become a part thereof. (c) Time is of the essence of
this Agreement. Lessor's failure at any time to require strict performance by
Lessee of any of the provisions hereof shall not waive or diminish Lessor's
right thereafter to demand strict compliance therewith. Lessee agrees, upon
Lessor's request, to execute any instrument necessary or expedient for filing,
recording or perfecting the interest of Lessor. All notices required to be given
hereunder shall be deemed adequately given if sent by registered or certified
mail to the addressee at its address stated herein, or at such other place as
such addressee may have designated in writing. This Agreement and any Schedule
and Annexes thereto constitute the entire agreement of the parties with respect
to the subject matter hereof. NO VARIATION OR MODIFICATION OF THIS AGREEMENT OR
ANY WAIVER OF ANY OF ITS PROVISIONS OR CONDITIONS, SHALL BE VALID UNLESS IN
WRITING AND SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE PARTIES HERETO.
JC/TA
- ----------------
initials
(d) In case of a failure of Lessee to comply with any provision of this
Agreement, Lessor shall have the right, but shall not be obligated to, effect
such compliance, in whole or in part; and all moneys spent and expenses and
obligations incurred or assumed by Lessor in effecting such compliance shall
constitute additional rent due to Lessor within five days after the date Lessor
sends notice to Lessee requesting payment. Lessor's effecting such compliance
shall not be a waiver of Lessee's default.
(e) Any rent or other amount not paid to Lessor when due hereunder shall bear
interest, both before and after any judgment or termination hereof, at the
lesser of eighteen percent per annum or the maximum rate allowed by law. Any
provisions in this Agreement and any Schedule which are in conflict with any
statute, law or applicable rule shall be deemed omitted, modified or altered to
conform thereto.
IN WITNESS WHEREOF, Lessee and Lessor have caused this Agreement to be executed
by their duly authorized representatives as of the date first above written.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL CORPORATION ACME TELEVISION, LLC
By: /s/ Jennifer Coyle By: /s/ Thomas Allen
------------------------------------- ----------------------------
Name: Jennifer A. Coyle Name: Thonmas Allen
----------------------------------- --------------------------
Title: Transaction & Syndication Manager Title: Exec. V.P.
---------------------------------- -------------------------
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEETS, STATEMENTS OF OPERATIONS AND MEMBERS' CAPITAL AND
STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30,
1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR ACME
TELEVISION.
</LEGEND>
<CIK> 0001049510
<NAME> Acme Television, LLC
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 1,886
<SECURITIES> 0
<RECEIVABLES> 9,269
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,222
<PP&E> 12,631
<DEPRECIATION> 0
<TOTAL-ASSETS> 287,687
<CURRENT-LIABILITIES> 29,170
<BONDS> 137,947
0
0
<COMMON> 0
<OTHER-SE> 78,805
<TOTAL-LIABILITY-AND-EQUITY> 287,687
<SALES> 0
<TOTAL-REVENUES> 19,327
<CGS> 0
<TOTAL-COSTS> 20,540
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (7,683)
<INCOME-PRETAX> (8,708)
<INCOME-TAX> 365
<INCOME-CONTINUING> (8,343)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,343)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEETS, STATEMENTS OF OPERATIONS AND MEMBERS' CAPITAL AND
STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30,
1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR ACME
INTERMEDIATE HOLDINGS.
</LEGEND>
<CIK> 0001049530
<NAME> Acme Intermediate Holdings, LLC
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 1,886
<SECURITIES> 0
<RECEIVABLES> 9,269
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,123
<PP&E> 12,631
<DEPRECIATION> 0
<TOTAL-ASSETS> 289,192
<CURRENT-LIABILITIES> 29,192
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 40,917
<TOTAL-LIABILITY-AND-EQUITY> 289,192
<SALES> 0
<TOTAL-REVENUES> 19,327
<CGS> 0
<TOTAL-COSTS> 20,540
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (10,194)
<INCOME-PRETAX> (11,219)
<INCOME-TAX> 365
<INCOME-CONTINUING> (10,854)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,854)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
